Comstock Resources, Inc.

Good morning, everyone. Welcome to our Zoom call today. I'm actually very excited about this update. There's been a tremendous amount of activity over the last six months for sure. And I'll provide a brief summary of the information that was included in our press release from this morning and from our quarterly report filed on Form 10Q last night. Those updates will include our progress on recent breakthroughs in lithium ion battery recycling and especially lithium extraction, cellulosic extraction for producing biofuels, and I'll also comment on the effective restart of our mercury remediation operations in the Philippines and also some promising developments coming online with Tonal Gold. I'll try to be brief in my prepared remarks and I'm really looking forward to the Q&A. If you don't have a copy of today's press release, you'll find a copy on our website at www.comstockmining.com by just clicking on the press release tab on the menu bar. Our Form 10-Q is also available via editor. on www.scc.gov. Please let me remind you that we will be making forward-looking statements on this call, including our prototype deployments of LIB crushing and lithium extraction technology and cellulose and carbon extraction technology and how this impacts our forward revenues and values. Any statements relating to matters that are not historical facts may constitute forward-looking statements. Our statements are based on current expectations and are subject to the same risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in previously reports filed by the company with the SEC and in this morning's press release. And all forward-looking statements made during this call are subject to those same and other risks that we cannot identify. Once we complete the prepared remarks, Zach will direct all questions zooming into us and I'll be happy to answer them. If you're not using Zoom, you can follow up with us after the call directly or via our website with any additional questions. So we've obviously been very active this year in building both an asset portfolio and an exceptional, exceptional senior management team, effectively killing two birds with one stone. Our balance sheet has increased to 100 million in net assets, tripling from last year end, and importantly, adding lithium extraction, cellulosic carbon and fuel extraction, and global engineering and manufacturing capabilities that places us in a leading position in each of our businesses. We've increased insider ownership as well to over 20%, fully aligning our team with all of our shareholders. Of course, it's not the size of the assets. It's what we can do with them. We've spent the last six months accelerating our plans for lithium recycling and cellulosic fuels with capabilities of each activity coming online in fully operational prototypes in the first and second quarters of 2022. We're going to talk more about that in a little bit. I'm going to take a few minutes to give you insights on each of these businesses and their developments, including some remarkable revenue and profit opportunities that are coming faster in 2022. Let me start with lithium ion battery metal recycling. You already know that our engineering team, led by Comstock's chief processing engineer, designed and we are now deploying a crushing and separating technology that would ultimately represent 100,000 ton per annum Steve Bautista, state of the art battery metal recycling facility in the tahoe Reno industrial Center right here in Nevada right here in story county Nevada what you may not know is that we believe we have the only system. that can safely crush charged batteries, meaning we do not need to discharge the batteries prior to crushing, and safely oxidizes out of those materials contaminants while preserving the lithium and minerals and producing the highest purity, black mass. This system is scheduled to be operational in Nevada in the second quarter of 2022. However, we have a full prototype of this same system arriving in our PSI labs in Wisconsin next month. This is a fully integrated 18 foot tall replica capable of crushing six tons per day and fully demonstrating this unique technology. We believe this will produce the highest purity, driest black mass in the world in just a few months for all to see and differentiating us in the market for what we can do. much more importantly, we are integrating our supercritical intellectual property, a process that will extract lithium, a lithium extraction system, if you will, that will follow right on from this crushing and separating system. That's being scheduled to arrive in March, again, in Wisconsin, that can extract substantially all of the lithium from the black mass at the front end of the process. I'm going to pause on this point because we don't see anybody in the market even attempting to do this. This enables an extremely profitable business even at low volumes. and a highly profitable one at higher volumes as we can sell lithium carbonate later this year just from this capability. Can't exaggerate the importance and the impact of this technology and how unique it is. Most of the processes that we see in the market today, most of the processes we see being proposed to come online in the market tomorrow destroy most, if not all, of the lithium content from this recycling process. For us, it's a remarkable breakthrough. We also believe we'll be able to extract graphite at the front end of this process, another breakthrough and another immediate revenue stream that would further purify the concentrated black mass. We're not as far along on the graphite extraction as we are with the lithium extraction, but it's coming from a known process that we feel very confident we'll be able to put in place. This again will result in much more pure and much more concentrated black mass, which we may actually need to call something other than black mass, maybe brown mass or gold mass or something. I don't know, but it's going to be extremely valuable. We've also positioned ourselves downstream from there. with both GreenLion, as everybody knows already, and just recently entering into a collaboration agreement with Aqua Metals using this highly pure mass for developing clean, high quality metals downstream like cobalt and nickel that strengthens and expands our downstream product line potential and ultimately will include all of lithium carbonate, graphite, nickel, cobalt, manganese, et cetera. And hopefully soon with GreenLion, co-precipitated cathode materials. I do not see anybody better positioned technologically or operationally than we are in the battery metal recycling space. Lastly, we've also secured a nearly 200-acre storage site for our batteries in close proximity to the Winneco facility that opens the door for us to finalize agreements and start receiving and storing lithium-ion battery materials in Nevada. We're already receiving John Kane- lithium ion battery materials in Wisconsin on a smaller scale, of course, to operate in our prototype, but this was an important step in our plan and it's getting done, there is still a lot of work to do and we're fully dedicated and we're getting it done. Let me just close on lithium battery recycling by saying that we can showcase crushing and separating in Q1. We can showcase lithium extraction in Q2, and everyone's going to take notice and it's going to be very different. For us, it's the most meaningful milestone for you all to track in terms of this business's progress. Secondly, let me turn to cellulosic fuels and I appreciate that this is a new discussion and that we just fully acquired plain sight innovations, less than two months ago. But we already have our first biofuel facility target and expected to scale up with an initial capacity exceeding 330,000 tons per year of forestry waste. over its first years of operation as it extracts and refines carbon neutral woody biomass into ethanol, biodiesels, and marine fuels. I need to pause on this and explain that this business will be the biggest business in our portfolio. It's what I've personally been spending the last 90 days immersing myself in. And it will be by far the largest business in our portfolio and in the most nearest term. As big as Lineco's potential is, and it is, cellulosic fuels and the associated byproducts that come from it are significantly bigger. Our carbon neutral biofuel designs are remarkably scalable. We can make very small facilities. We can make 16 million gallon per year facilities. We can make 100 million gallon per year of facilities. The tech is proven. However, we recently had a breakthrough in the speed of the extraction process, literally tripling the speed of converting woody biomass into cellulose and ethanol. We literally take dead wood like sawdust and chips and produce an entire suite of bioproducts. Incredibly, for every gallon of ethanol that we can produce, we can also produce a half a gallon of alternative biofuels coming from lignin, the lignin in the wood, like biodiesel. or marine fuels or bio gasoline, meaning that a 16 million gallon facility would actually produce 24 million gallons of saleable materials. A 32 million gallon facility would produce 48 million gallons of saleable materials. This breakthrough in speed at which we can process is being extrapolated and engineered out through the entire representative footprint of our first facility, which is planned to be located in Minnesota. This is the business where the feedstock is abundant, it's cheap, and the decarbonizing impact is massive. The market is seemingly unlimited, although we've defined the market to be about 16 billion gallons of cellulosic fuel per year, wherein no one is providing a single gallon today. Remarkably, We've now actually been approached by two major counterparties to purchase from us engineering and construction services for deploying the same cellulosic extraction technology for paper products, pulp and paper products, and also ethanol production, where it's already proven for significant revenues and profits for Comstock. More will be coming in this area of, I guess, what I'll call clean technology-based sales and services from our model. But it's coming very soon. It's coming early in 2022. And all of this was enabled by the acquisition of Plainsight Innovations and its intellectual property and the engineering and manufacturing capabilities of RPS, Renewable Process Solutions. I mean, the fact that we can engineer and manufacture this tech that will both be showcased in Wisconsin next quarter. Let me make a clarifying point on that. I already mentioned that we're gonna have lithium crushing, lithium battery crushing, lithium battery separating, and lithium carbonate extraction showcased in Wisconsin. But I didn't mention that we're also going to be able to showcase the same extraction capabilities of woody biomass into cellulose in both cases with large-scale prototypes. So we'll be able to do that next quarter. And it's foundational to creating these revenue and profit streams that I'm talking about. We're nearly complete in integrating all of these businesses and plans into one Comstock system. We're one company, Comstock, with all of these capabilities. And that's really what we've been doing for the past six months. And unfortunately, and I'm sorry why we've been so quiet, you know, for the last three or four. Let me spend a few minutes on the mining activities before we go to Q&A, first with MCU and then with Comstock. With MCU, we were paused due to requiring an additional permit for selling the sand and gravel. So we got up and running in the Philippines. We had all of our permits for setting up the camp and deploying the equipment and processing. But unfortunately, we didn't have the permit to actually allow us to sell the sand and gravel. And that resulted in downtime for us between April and August. But our JV has secured that permit. We are now fully resumed operations. We are processing clean materials. And we're starting to sell the resulted sand and gravel. The delays are very disappointing. You know, as we are still resident and established in the lower part of the Nabok River in Philippines, where we've been seeing very low mercury and gold contents. The good news is our machine is operating. The good news is the government is testing daily. the mercury contents in the materials. The good news is the contents are de minimis and clean so that we're able to sell the sand and gravel. Now we're fully permitted to do so. So the system works, the operation's up and running, and we're moving forward. We're also testing upriver where we expect to see more mercury and gold content from all the artisanal and small scale mining that occurred upriver and hopefully and finally establish a meaningful revenue stream that will grow as we see the increases in the mercury and the gold. Operationally, as I said, everything's in place and operating. We have extracted gold, just not very much. And we're now starting to sell the sand and gravel. Government's fully supporting us, and we have an extremely low overhead. profile. So the business is very efficient. We just need to see more mercury and more gold. So the prospects for the future outstanding as we see it. Let me touch base on the Comstock and in that context, Tono Gold. Tono is clearly going through some changes and there's probably not too many specifics that we can share now. But what I can tell you is they are deeply into an internal transition that's going to result in a remarkably stronger and highly qualified and very reputable mining and leadership team, both directors and officers with strong capital commitments coming together and the ability to advance all of their exploration and development plans. They have drafted a technical report on the northern part of the district. It is in final draft form. We are reviewing it, including the lists are mine and then also finishing up their financial audits, all of which should result in getting their plan. You know very, very strongly back on track, and I would say even even better than originally anticipated we're working with them towards a very positive outcome and we expect it to all be completed before the end of the year. We are also advancing our technical reporting for the Dayton Spring Valley Complex. We have had two dedicated geologists, including our chief geologist, Larry Martin, junior geologist, and then our chief mining engineer, Mike Norrid, and we look forward to both Tono and Comstock's technical reports coming together, being available. My goodness, it's like with inflation surging and gold up $100 an ounce in just the past 30 days, shooting up, last I checked, past 1850 this morning and climbing. These are very important and I would say, you know, although delayed, very timely indicators of our assets and their underlying gold and silver value. The bottom line is that our money and our commitments are where our mouths are, as we have directly linked all of our performance targets, as you know, with the goal of delivering the first half a billion dollars in share value. We're saying at least $12 a share to all of our performance objectives. We're now obviously recessing those values as each one of our businesses can exceed multiples of these amounts. As we build and grow them, we're really looking at something exponentially larger in terms of growth and in terms of any of the targets that we've sent. Regardless, because our significant insider ownership greater than 20% and because our comp other than that is structured such that if the shareholders are not rewarded, then neither are we. It's 100% performance-based. We're really positioned for everyone to succeed here as we go forward. I'm not opposed to any questions in the Q&A, be it related to any of the activities, GMAT or otherwise. I'll turn it over to Zach to start feeding me in those questions.

Randall Difuntorum, All right, thank you corrado our first question is there seems to be other firms working on lithium extraction in the Nevada area as well. Randall Difuntorum, and probably recycling to they seem to be trying to source use batteries at this time, how does comstock compare in the time to significant commercialization. Other than timing, what other differentiating factors are there relative to these competitors?

Outstanding. Thanks, Zach. So in terms of differentiation, let me say first that we have a fully state of the art 136,000 square foot battery metal recycling facility. As far as we understand it, we're the most advanced in terms of the existing facilities that are in the ground and the permit applications that have been submitted. Number one. Number two, we don't see anybody in the industry looking to crush materials that are charged and in a dry state. That results in the purest, least contaminated black mass with the highest value of minerals residual, including lithium. Thirdly, we have the ability to extract lithium almost instantaneously using our super critical intellectual property and process at the very front end of the process. We don't believe anyone's even talking about extracting lithium at the front end of the process. Most of the processes are designed to produce minerals such as cobalt, such as John Kane- nickel such as manganese with with meaningful losses in lithium and graphite. John Kane- Our ability to extract lithium and hopefully graphite at the funding process totally differentiates us not just in terms of process, but in terms of value in the market. John Kane- What it also enables, and this is very important, is a profitable endeavor, even with very low volumes of lithium ion batteries. There is no expert in the market that is predicting anything other than a tsunami of lithium ion batteries coming out of the market. It's obvious. What's not as obvious is the timing, right? The tsunami is not coming in 2022 or 2023. It's coming much later, but it's coming. If you have the ability to produce a relatively low amount of battery feedstock profitably enabled John Kane- By tracking lithium in our case, then you have a sustainable business that's going to explode at some point. John Kane- If you talk to any of the experts McKinsey. John Kane- The mineral industries as a whole, the associations. John Kane- The explosion is coming and we're going to be best positioned for it.