Comstock Inc.

Ladies and gentlemen, welcome to Comstock's second quarter 2024 results and business update. This is Trevor Brucato with RV Milestone Group, Comstock's U.S.-based investor relations firm. Comstock is listed on the NYSE American under the symbol L-O-D-E. Joining us today is the company's executive chairman and CEO, Corrado de Gasparis, and its COO, William McCarthy. Welcome. At the end of the prepared remarks, we'll be opening up to Q&A. We've received questions from registration, most of which have been addressed by today's announcements, but if any new questions surface throughout the presentation, please submit them in the Zoom Q&A module, and then we'll do our best to address them all. In the next day or so, we'll be opening up the surveying for Comstock's Q3 Stakeholder Perception Analysis Report. The final report will include trends on Comstock's perceived strengths, weaknesses, and milestones, and will be published shortly after the end of the quarter, ending in September. Your participation will be much appreciated as it will help strengthen Comstock's investor communications efforts, especially with all the recent accomplishments, and help guide the focus of our upcoming events. Please note today's presentation may contain forward-looking statements that are subject to risks and uncertainties that may be out of Comstock's control and should not be construed as a recommendation or a solicitation to buy or sell any security. For Comstock's full disclaimer, please visit their website at comstock.inc. Also, this presentation is being recorded today, August 8th, 2024, and will be made available on the company's website. Lastly, RB Milestone is not a registered investment advisor or broker dealer. For more information on us, please visit rbmilestone.com. And now it is my pleasure to turn it over to CompSoc Executive Chair and CEO, Grotto DeGasperis. Grotto, the stage is yours.

Thanks, Trevor. And hello, everyone. And welcome to our second quarter update. I'm sure you're going to like the substance of our update today as we've made tremendous amount of progress in all three of our businesses and at corporate, plus our strategic investments have really advanced their causes too. So there's quite a bit to update everybody on. We're going to ensure sufficient time for the Q&A session as well. So we have time to answer as many questions as possible. Let me start off by congratulating both Leon Ferrant and the GreenLine team for and Deep Prasad and the GEMMAT team for achieving the all-important milestone of commercial success in their respective companies. As you may have read, Greenline commissioned its first commercial battery remanufacturing operation in Atoka, Oklahoma, where I recently attended the ribbon-cutting, along with Leon, and a contingent of Oklahoma VIPs, including their governor, Kevin Stitt, as well as quite a few of Greenline's existing suppliers and potential customers. The Green Line system makes precursor cathode active materials, also known as PCAMs, as well as lithium carbonate from fully recycled batteries. And we are certainly not aware of anyone doing that effectively in the market yet today. So the Atoka operation will prove Green Lion's full technical and economic feasibility. And we understand that the resulting materials from their operations so far are showing extremely encouraging and very high battery-grade purities. So it does really seem to be coming all together for Green Lion. We're very pleased with that. Turning to GenMAT, as most of you already know, last year GenMAT developed and deployed its proprietary imaging satellite, the GenMAT-1, into orbit. In that process, they also had to develop encryption software for security. And ultimately, they had to develop an entire mission control software system for managing their own operations. What GMAT learned during this process is that this entire space industry is so nascent, so fragmented, that they really had to develop a lot of the satellite and supporting systems by themselves, which, by the way, is also one of the reasons why everything is taking so much longer than originally anticipated. But remarkably, now, the industry is asking if it can leverage GMAT's proprietary infrastructure for their needs. Accordingly, I'm just genuinely thrilled to report that GenMet just announced its first commercial customer agreement. It's very big, a very important milestone. With Geometric Energy Corporation for managing the assembly, launch, deployment, and the ongoing operations management of two new satellites, in addition to their own, what effectively will be a fully managed orbiting, I guess, constellation of satellites. These new customer satellites, one's called Astentis One and the other is called Noclip, will also generate additional recurring revenues for Genmat once they're successfully deployed and operating. Genmat now plans on adding more satellite customers to this emerging line of business and leveraging its proprietary mission control, proprietary remote sensing, and proprietary material science technology, and all the supporting expertise around all of those things to enable this rapidly growing segment of the space economy. So from my perspective, it's a huge congratulations to both teams and it's extremely gratifying for us here at Comstock to see these milestones achieved and as importantly, what they imply for the future growth of these two companies and our investments in them. Starting up a new co, especially one with brand new tech is not easy. It's not easy at all. So we're going to give big kudos to Deep and Leon and their teams. Okay, so just considering the breadth of the press releases from both this morning and this afternoon, including the announcement on the sale of our non-mining assets and the investments directly into our three businesses, I'm going to jump right into the overview of the entire $325 million that we announced this morning, while also updating you on each business as I go along. So let me start with the asset sales of $50 million. Then I'll move to and discuss the $275 million of direct investments into our three subs and the corporation. First, let me clarify that all the amounts that I'm referencing on this call are going to be in gross dollars. even though the ultimate proceeds will be net of some transaction fees, and we expect those to be about 3% or more, depending on which tranche of capital we're talking about. Speaking of net proceeds, though, we do not expect any material tax leakage from any of these transactions, primarily due to our existing NOLs, and we'll always work as smart as possible, as well as possible, to optimize our tax assets. So again, I'm referencing gross numbers just to keep it simple and clear as possible. I'm truly gratified to announce that we have secured a term sheet working with a U.S.-based globally positioned private equity group led by SBC Commerce LLC. SBC represents significant capital that we have validated, and it works and runs a global network of private equity professionals and funds. We worked very hard to diligence, validate and structure this capital to ensure execution and minimize dilution while maximizing the value for all of our shareholders. There's a number of ways we could have gone with this, but we spent a lot of time thinking about what unlocked the most value and what advanced the business in the most expedient way. And I'm absolutely thrilled at the progress and I'm absolutely dedicated to the outcomes. SBC also has expertise across a number of industry sectors, especially in oil and gas and biofuels. But all this started over a year ago with discussions directly around our properties in Silver Springs and the Sierra Springs Opportunity Zone Fund, also known generally in our circles as SSOF, with their main principal, Lori Sosa, and some of her associates at SBC's off-market real estate group. They truly have deep expertise in arranging the development of not so ordinary real estate and major real estate development projects, which is exactly what our properties and positions in Silver Springs represent. We've conducted extensive due diligence on SBC Commerce over the past several months. There are specific funding sources for SBC's investment in our business. I've met with the principals and directly engaged those funding sources and interacted with them directly and extensively during this whole process. I personally believe we have found a long-term capital partner that'll transcend this transaction for many years to come. So accordingly, this week we signed a term sheet for selling Comstock's non-mining land in Silver Springs. That's our 98 acres of industrial land. That's our 160 acres of commercial land, plus certain associated water rights for $50 million. We expect to recognize a gain of about $40 million on this transactional loan And again, with our existing NOLs and some tax planning, expect that this gain will be well covered in terms of us not incurring, not paying any cash taxes. These proceeds will extinguish all of our debt, as well as certain other obligations, and mostly be available to ensure that we're funded for all of our corporate development activities without having to sell more stock. The agreement contemplates a $5 million non-refundable deposit on the land, and that's expected within two weeks or sooner. And we look to close that transaction within 60 to 75 days. Before turning to the businesses, let me just address the liquidity and dilution head on. As I just said, we've pained in how we structured these transactions. We were being lobbied to do leverage buyouts, and we weren't interested in that. We were interested in doing what maximized the value, what maximized the speed of the creation of new value, and what minimized the dilution. Between certain other minor asset sales and the $3 million in equity by SBC directly into the corporation, our cash position is stable. But it's about to become very robust. While our outstanding shares are now over 175 million, the SBC equity placement will bring that number to about 183 million. And depending on where the converts end up, we're likely to finish right around or a little bit over 200 million shares. Frankly, our business plans have always supported the goal of creating multi-billions of dollars in value. And now we're starting to get a little bit of a sneak peek of the reality of that. And I'll break it down by business for each one of them in just a few minutes. But a $200 million share flow, starting with about a half a billion dollars of valuation, is a solid starting capital base for us and supports our efforts for attracting more institutional investors and providing and ensuring liquidity for those who require it. Let me turn to the other $275 million now in investments. And again, one of the most meaningful aspects of this work, of these commitments, of what we were able to negotiate and agree on were the business valuations. Pre-money valuations negotiated for just our three businesses alone totaled just under half a billion dollars. And I must say, represents a very strong outcome because it recognizes real value for existing investors today in the form of cash and capitalizes our ability to deliver and exponentially grow that value so that we can deliver remarkable future returns for all of our existing and new shareholders. Let's break the numbers down one at a time. Let's start with Comstock Metals. And as I said, I'm going to give you a little update for each business. There's a lot of update here. So metals, mining, fuels, starting with metals. This is our recycling business where we just proved we can recover and reuse 100% of the solar panel materials recycled, including surprisingly, joyfully, very high grades of silver. We've agreed to issue 20% of the equity from our recycling subsidiary, Comstock Metals Corporation, to SBC for $22 million. This reflects a pre-money valuation of $88 million or $110 million host money. That commitment alone enables us to accelerate the site selection and deployment of three industry-scale facilities right along the California and Arizona borders and ensures that we fortify our early mover advantage and positions ourselves to capture the majority of these projected end-of-life panels over the next five years. Each one of our facilities can handle 100,000 tons of primarily industrial use panels. And these panels, unlike the smaller ones used in residential applications, tend to weigh about 60 pounds each. That means that 100,000 tons per year, one facility alone, can handle 3.3 million panels per year in a market projecting to be 10 times that size by 2030. This recycling system was designed for scale. This is Fortunato's baby, designed for scale. And I really don't believe there's anything like it in the market today. Our system is designed to process one panel in less than eight seconds. That's over seven panels a minute. And with almost 450,000 minutes in a 300-day year, that's over 3.3 million panels a year. And remarkably, as big as that number is, that only equates to about 20 trucks a day. So logistically, it's easily manageable for such a big machine. with room for even more capacity. And that's why we keep referring to these things as industry scale. We don't see anybody else out there that has the ability to ramp up the way that we're about to. As the end of life waste materializes and makes this new market, we can add even more capacity to the existing network of facilities. The plan on funding metals is really going to be in two tranches with the first 10 million planned this month. That'll allow us to initiate all the remaining activities around the build out of our first industry scale facility and the remaining 12 million within 90 days, which will fund the acceleration of site selections, permits and build outs of facility number two and facility number three. Look, we discussed the metals business plan and financial model many months ago. But just to repeat it, we see annual revenues increasing to $150 million within four years, cash profit margins of more than 80%. And an NPV of about a quarter of a billion dollars. And that's just three facilities. That's just three sites. That's a minority market share, less than 30% based on where we see the market going and no perpetuity assumptions. In other words, we just cut it off and said, how much money can we make? It's truly robust and we'll most certainly do better, but it's a remarkable thing that we've established here. And I guess it's also important to add that we did record revenue this quarter. And we did as of last week. No, as of this week. Ship our first reusable materials out the door. I posted the pictures on Twitter today. So both revenue on the front end and revenue on the back end, which is truly outstanding, and it's all happening today. Genman announces its first customer. Greenline commissions its first machine. And it's producing high purity materials, no less. And our very own recycling business is now receiving and shipping from an entirely new supply chain. All right, so let me move on to mining. And then I'm going to cover fuels. For mining, we have separately advanced our monetization plans for the northern part of the district, primarily in Story County. including those northern targets that are currently under lease. To be clear, we've been trying to sell those assets because the southern part of the district has emerged as a much more production-ready gold and silver resource. And with an updated mine plan at $2,300 gold, I know we're at like $2,425 today, up $40 today, but at $2,300 gold, Our day-end resource presents almost a quarter of a billion dollars of pre-tax net cash flow over a six-year mine life. And that discounts to over $100 million in net present value. People are wondering how I was able to get these capital commitments. It's the substance of the business plan that we've been working our asses off to pull together. These updated plans, and yeah, with a little friendly help from the gold and silver prices in this case, enabled us to secure $50 million in commitments for 40% of these mining interests. That will allow us to expand the resource, acquire some incremental lands in and around the property, finalize a mine plan, deploy infrastructure. And within four years, deliver an incredibly valuable, as I said, six-year mine life that generates about $250,000 in net cash flows. And that net cash flows after all the investment, cap, et cetera, to build out that mine and get it up and running. And it also presents an opportunity to design a reclamation and restoration plan that could leave the community in calm stock. with an incredibly valuable series of sustainable property developments. We still have more work to do on this part. It wasn't even relevant to getting the capital commitment, but this part could actually double the value of everything we're doing, especially when we think about what's happening with property values all across Northern Nevada. So look, we've always been bullish on gold and silver, and we're absolutely thrilled that these commitments can enable our plans now. The 40% represents a $75 million pre-money valuation and $125 million post-money valuation. So an incredible deal indeed for all of our shareholders. Last, and certainly not least, possibly most, let's wrap up my prepared remarks before we go to Q&A with our fuels business. We've advanced our discussion with strategic partners and our ongoing due diligence and our ongoing trials and our resulting oil samples that we've been sending out to our customers. They've been shipped, they're being analyzed, and it's really to great effect. Great effect in terms of what our customers are appreciating and how far they're advancing their work and what they get and what they see and what they like. But also in terms of our extended trials, our extended work ended up resulting in much, much higher yields than we even originally communicated as 100 gasoline gallon equivalents. This was our hope all along, of course, but it's always great when you can get that validation and get that outcome. But we finalized the full business and financial plan based on 100 gasoline gallon equivalents. And that plan includes building a profitable, commercial scale demonstration facility. It's going to be sized for 50,000 dry tons of woody biomass per year. That'll only produce about 5 million gasoline gallon equivalents per year. But then that enables us, just like we did with metals, to move forward and build three more industry scale facilities and finance those facilities. A big part of lining up a capital partner wasn't 325 million. It was ensuring that we had the capital resources behind us when we're deploying industry scale facilities. And industry scale facilities in this case is up to 1 million dry tons of woody mass per year. That's over 100 plus million gasoline gallon equivalents of fuel per year from one facility. The $200 million commitment is the direct subsidiary, the direct subsidiary that is Comstock Fuels Corporation, for 40% of that entity represents a $300 million pre-money valuation and a $500 million post-money valuation. You can imagine the amount of work that we've been enthralled in over the last three or four months. Our financial models are robust here. That's how we got the approvals. That's how we got the commitments. But it still assumes we're only producing 100 GGEs per ton. And in that model, from just these three industries field facilities alone, we generate an NPV of nearly $1 billion. Three facilities. Somebody asked me, well, how many facilities could the US market handle? 16 billion gallons of advanced renewable fuels. That's 160 of these facilities. We're talking about building three to start. with nearly a $1 billion NPV, if we throw in our plans for licensing more facilities, which we absolutely want to do, the NPV quickly jumps over 1.5 on its way to 2 billion. It's an incredibly robust plan. $150 million of that $200 million investment is dedicated to the deployment of that first facility. That includes site selection, final engineering, permitting, construction, and operating the first facility. We already have multiple sites in our crosshairs. We have multiple feedstock contracts in our crosshairs, and we've got offtake contracts in our crosshairs. We're pulling it all together. As you read in our press release, we've now validated higher yields, not 100 GGEs, But 125 GGEs from a ton of wood, that's done. Signed, sealed, delivered. All that testing was done with our strategic partner in Oklahoma, in Tulsa. And we couldn't be happier. But we're also in the final stages of securing what some are calling a bolt-on technology. Something very different than our core tech, our core IP. It's a gas-to-liquids technology. but they've perfected the ability, TRL-9, to capture our own carbon dioxide emissions from our own facilities, convert that gas to liquid, convert that liquid into directly sustainable aviation fuel, pushing our yields up another 25 GGEs to 150 GGEs per ton, and ultimately lowering our CI score. So, At 100 GGEs, we were fond of highlighting to most of the people that were engaged in the industry, and it was very effective, that we're double our next competitor at 100 GGEs. Think about it. 150 GGEs, a 50% increase from an already profitable model and an already commanding lead. But we're not stopping there. There's another 50 million of capital That we dedicated to the development by our own innovations team that will increase our yields even further, lower our cost dramatically, lower our CapEx, and improve already leading CI scores. With the ultimate goal, as you heard me say before, of achieving cost parity with petroleum. We didn't need that to finance the business. We didn't need that to finance the first facility. We're already past what we needed to do that, and we're going for more. Look, we understand that cost parity with petroleum is a real stretch goal. But the plans to get there have already been developed. It's going to require real innovations. It can't be done today. But we've designed the experiments for those innovations already, and we didn't do it alone. We're doing it with extraordinary partners. And if successful, positions us to truly, practically, and sustainably, effectively decarbonize mobility. We'll share more about those innovation plans and our partners once all the agreements and the communications are finalized amongst all the relevant parties. Those things are happening in parallel now. By getting the committed financing, we can start moving forward on facility number one. But those other development activities are far advanced in terms of their design and their approvals. So as we sit here today, we're already as a company in a whole new state of reality. And I'm not obsessed or upset if people believe it or not. We're not here to promote and we're not here to persuade. We're here to communicate effectively. And then we're here to deliver substance. Cash comes in the bank, projects get started, people monitor our success, we gain a strong following. Our goal is precise. We're accelerating the commercialization of these technologies. These are hard impacting technologies. These are huge and sophisticated markets. None of this work is easy or is it a layup, but we're starting to form a track record. None of these outcomes are luck. They're all hard plan, hard work, sustainably engineered, And our shareholders and broader pool now of investors are going to start seeing a powerful trend coming from this whole ecosystem, from this whole innovation process, from the Comstock system. And what we're working on is one of the most meaningful challenges facing the world. And in many ways, we're just getting started to tackle it. I also appreciate that all of this update was dense. With a lot of information, you know, I hopefully came across concise and it came across clear. And I'm sure you can all imagine we've been heads down and focused. I'm personally thrilled with the commitments that we've secured and what's in store for us tomorrow, next week, next month, next year. And our teams are just as dedicated and just as focused. When I'm off securing capital, they're off securing feedstock. David was in, well, I'm not going to tell you where he was. He was in multiple states over the last six weeks. And we're thrilled at what we're able to see and what we're able to secure. So anyway, I'm going to pause there. Hope that was a good overview. With that, Trevor, I know we've got a lot of questions. We're very keen to jump in.

Certainly do. And thank you, Corrado. Exciting update there. We will now open it up to questions submitted in the Q&A module and those submitted during the registration. Since there were a lot of important updates to absorb across the businesses, I'll try to keep the questions categorized by topic. And we'll probably kick off here with SBC. So could you provide some more background on SBC and why you guys ended up going with them?