Comstock Inc (LODE) 2011 Q4 法說會逐字稿

Good day, ladies and gentleman. Welcome to the Comstock Mining Announces 2011 Year-End Results and Business Update conference call. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Corrado De Gasperis. Please go ahead, sir.

Thank you, Jennifer. Good morning and afternoon, everyone, and welcome to our call. I'll provide you a brief summary of the information included in this morning's press release, just under 20 minutes. And if you didn't get today's press release, you'll find a copy on our website www.comstockmining.com under news/press releases. I also posted a blog last night that includes a short video of some of the construction activity happening at the mine site and some photos of our progress toward production that you might find interesting. The blog can be also found www.comstockmining.com/corporate/ceo-blog.

Please let me remind you that I may make some forward-looking statements on this call. Any statement relating to matters that are not historical facts may constitute forward-looking statements. These statements are based on current expectations, and those statements are subject to the same risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed by the Company with the SEC. Tomorrow we are scheduled to file our 10-K with the SEC as well. Those risks are also identified in this morning's press release, and all forward-looking statements made during this call are subject to such risks and other risks not identified by the Company.

All right, then. Let me begin with an update on production, including a brief update on our production team. But first, let me welcome Kimberly Shipley to the Comstock. Kim is a long-standing investor in LODE whose knowledge and passion for the Comstock many of you already know. She joins us as manager of Investor Relations. With all the activities planned for 2012, including the first part of the summer, she's a welcome addition to the team that will not only enhance our responsiveness to investors, but also proactively support building an even stronger shareholder base. I look forward to personally introducing her to many of you over the next few months, and her contact information is included at the end of today's release.

We also previously announced that Troy Hawkins joined the Company as Senior Mine Supervisor, most recently from Coeur Rochester. And Roger Santistevan joined as Senior Maintenance Manager, most recently from Allied Nevada at Hycroft. Hycroft has been one of the fastest-growing startups in Nevada over the past three years, and Roger was a key part of their success. Troy has also been part of two major successful surface mine startups -- including Coeur and Barrick -- as the Senior Mine Supervisor.

Both of these experienced guys have made immediate impacts on our project already. Troy is not only implementing the mine plan to start up production activities next month, but he is near complete in leading the hiring of the mine operations team.

We are hiring 20 mine and processing staff over the next two months in two phases. The first eight employees are scheduled to start on April 20 on the mine operations team, mainly representing new heavy equipment operators for our team. The next 12 employees in May will be hired for our processing operations, including crushing, blasting, and Merrill Crowe and metallurgical process staff. This will bring our total mining staff to about 45 people by the end of April, and nearly 60 by the end of May.

Roger, on the other hand, is primarily responsible for ensuring that the systems operate reliably by minimizing unplanned downtime and doing it in the most efficient manner. He's already implementing our maintenance plans and schedules. And he's just negotiated that all of our spare parts inventory for our Caterpillar fleet at the mines will be held on consignment, saving us a good bit of working capital dollars.

We've completed the soil sampling, also, for the mine. We've not encountered any actionable instances of mercury or lead in the mine, which is what we expected; but, nevertheless, fantastic news as, we were awaiting final clearance for production. Recall that mercury and lead were used by the old-timers on the Comstock between 1859 to about, I guess I'd say, 1910-ish. And because of the possibility that some of what they left behind in the soil could still exist at higher levels, we agreed last year, when we got our new exploration permits, to test the soil and clear any actionable levels of these contaminants.

So obviously, we are very, very happy that the testing is near complete. We decided to clear all the areas, including the mine and up at American Flat, both for reasons of safety and certainty for everyone. And once cleared, our mine operation team will commence preparing and shipping the surface mine. That's likely going to start here in late April. And these developments for us are extremely positive -- really not just for us, but the whole Comstock community.

We've also already cleared substantially all of the processing area at American flats, and that's allowed us to commence the earthwork for expanding the heap leach pad from its three existing cells to five. We are currently also installing the line foundation for our expanded Merrill Crowe facility. There's a picture of this on my blog today, and it shows, really, how much we're expanding the facility. It's actually expanding to about four times its original size, from 1200 square feet to well over 5000 square feet, when you include the two metallurgical labs.

The new, expanded Merrill Crowe equipment is also ready for shipment once that line foundation is complete. We've also commenced construction of a new, 1 million gallon freshwater reservoir just north of our heap leach operation that will fill and replenish -- that we will fill and replenish from our own existing water well. This will ensure continuous efficient supply of our own water for both our commercial and firewater safety needs.

We now have received all major components of the crushing facility, including the wobbler feeder, the jaw, the cone crushers, the Super Stacker conveyors, and all the related components on our site. We are scheduled to commence ground preparations for installation of the crusher next week.

When you take the overall sequence, it includes completing the reservoir in the next few weeks and then commencing preparations stripping in the mine the last week of April/first week of May. And that's going to result in us building our [ORBA] for the crushing facility, which we are currently -- which we are concurrently expanding with the heap leach, and installing all of the two by the end of May. Once installed, we will commence crushing and stacking material on the heap. Once stacked, we'll commence -- once stacked, we'll commence processing with the expectation of pouring Dore within 50 to 60 days of stacking the first material.

We're really looking forward to the first pour of the summer. I mean you can take, by that summary, that there's a lot going on at the mine. And that's one of the reasons I posted the blog yesterday and included that small video clip, just to give you guys a better illustration or visual of what's happening.

We've also completed a financial analysis for the mine and anticipate annual operating expense, including mining processing and mine administration, and also including royalties, to total about $13 million per annum on a production schedule that commences at a rate of 1 million tons per annum. So this is consistent with what I've said over the last few months. I was talking about $12 million without royalties and just under $13 million with royalties. It's the same basis. So we're looking forward -- we're really, really looking forward to profitable operations starting this up summer.

Let me turn briefly to exploration and mine development and our future production growth potential. Most all of our current drilling is developmental, as we have such a strong mineral resource in the Lucerne and Dayton already. I won't be too redundant here in the resource, because we did talk about it in the last call. But I want to expand some of what we are actually doing now, and also provide a brief update on land purchases.

As most of you know, total gold equivalent an ounce has increased last year from 1.6 million to just under 3 million ounces. The Lucerne Resource Area alone increased by over 1 million ounces, to 2.3 million in 2011 from just about 1.2 million in 2010. And the Dayton increased from 200,000 ounces to over 500,000 ounces, with outstanding geology and mineral concentrations well-defined in both those areas.

Despite reporting those nearly 3 million ounces, we still feel that we are just scratching the surface of the Comstock. So in January we launched our 2012, 2013 drilling program. And the program anticipates about 300,000 feet of RC drilling and about 13,000 feet of core, and it's scheduled to last about 18 months. The program is really designed to ensure that we meet our goal, we are expanding our resource to at least 3.25 million gold equivalent ounces, but also to develop these two outstanding resource areas into two bigger mines.

So with that, we have really three significant objectives, specifically -- the development and infield drilling in Lucerne; the infill drilling in the Dayton; and right now, I would say, most likely in 2013, further exploration and development in Spring Valley, based on what we learned from our recent drilling. We've just completed some initial drilling in Spring Valley, mainly to verify the continuity of the robust Dayton geological model southward into the valley.

The geology team completed to core holes with depths of 800 feet each. And although we don't have the results back yet, the visual logging from a structural context looks very encouraging. We also encountered a number of instances of visible gold in the core. We'll likely announce these results, with an eye towards validating these structural connections between the Dayton and the Spring Valley. It's really what we are looking forward to.

Our primary drilling objective this year, however, is to complete the definition drilling in the Lucerne mine. The definition drilling in the Lucerne mine will allow us to optimize and expand the initial mine plan and extend its life. We currently have two RC drill rigs on the west side of the Lucerne. This will then continue with development and infill drilling on to the East-Side. Recall that the East-Side remains open geologically to the north, south, and, at greater depths, to the east.

This drilling will provide information needed to develop the ultimate mine plan for Lucerne. That mine plan will position the Company to complete an economic feasibility study and an initiate permitting for a much larger operation. We anticipate publishing our next technical report at the conclusion of these activities.

The infill drilling in Dayton will provide detailed information needed to create a preliminary mine plan. With that mine plan, the Company would begin the permitting process for the second mine. Of course, at this moment, we are only focused on starting up the first mine. We are planning to complete Lucerne and Dayton drilling by the end of this year.

Also recall that in mid-October, we elected to exercise our purchase option on our Dayton property, securing the four patented loan claims and town lots totaling 95 acres. These mineral claims, when considered with the previously acquired Dondero claims, are contiguous with the Spring Valley holding. We closed the transaction on that option in January. And then, just in March, we also purchased the Diez Senores patent on 18 acres that is directly adjacent to our Dayton claims, and much more thoroughly connects the Dayton with the Spring Valley.

Frankly, we rarely dictate the timing of these purchases. When a longtime owner like [Judy Brian] decides to sell her property and mineral rights, and they are adjacent to one of our best resources, we acquire it at a good price. This has really been one of our best, most competent areas of execution -- that is the consolidation of the Comstock. We are going to continue doing this, as appropriate, when these types of opportunities present themselves. One of our directors, Scott Jolcover, has really been sharper us in monitoring these strategic opportunities and ensuring that we capitalize on them.

Let me wrap it up with just a few corporate matters, and then we can turn it open to questions. Over the last 12 months of 2011, we used almost $21 million of cash for operating, investing, and financing activities. Specifically, we used just over $7 million for exploration and all the related mine development, and just over $8 million for the purchase of property, plant, and related equipment, including about $4 million for mining vehicles and equipment, $3 million for our processing facilities that we talked about, and $1 million for land and buildings.

We also used about $1 million for working capital and just over $3 million for general and administrative costs. During 2011, we also paid down $0.8 million of principal on debt. Our cash on hand at year-end totaled $9.2 million. In February, we raised another $15.3 million net through a public offering of common stock. Common shares outstanding today are 39,482,791. Preferred shares outstanding today are 58,981.

We have over $17 million of cash on hand, and the only financing that we haven't completed was our planned equipment financing that should be completed in April. This was originally planned for earlier this year, but I delayed it in lieu of the capital raise that we completed in February. This will further increase our cash position by $9 million to$10 million, as we go into production with an extremely strong balance sheet. Extremely strong.

In the last three months of 2012, significant expenditures included $2.2 million in capital -- again, primarily for the crusher, the Merrill Crowe, the heap leach, and the pond expansions that we just discussed. $1 million on the land purchases, substantially all of which was for exercising the Dayton option and the addition of the adjacent Diez Senores patent. $1 million for core and development drilling in the Lucerne and the first phase of core drilling in Spring Valley; and, to a lesser extent, included in that same $1 million, was all the environmental and engineering work associated with the broader soil sampling program -- and $750,000 for payroll. The company also increased its bonding in the first quarter of 2012 by $0.6 million, substantially all of which was for the production project.

There is a tremendous amount of well-coordinated, very well-disciplined project management occurring at the mines as we march here into production. Three of our Board Of Directors -- Bob Reseigh, Bill Nance, and Scott Jolcover -- are here today touring and inspecting our process.

Lastly, I guess I'm happy to report that the Company paid its first net proceeds tax of about $150,000 to the state of Nevada. Nevada requires that all producing mines estimate and pay a net proceeds tax annually and in advance. Because we are just starting up production, we are allowed some accurate, conservative judgment in estimating this amount. But this is a feel-good payment for us, as it signals production to all of our stakeholders. A part of these proceeds are past due to the county, and that's very well appreciated locally, as well. Nevada doesn't have any other form of state income tax on corporations.

Also, as of year end, the Company had federal net operating loss carryforwards of approximately $94.5 million. These federal NOLs gives us an outstanding cash tax profile as we lead into production.

All right. So just to summarize, and then we can take questions. We look forward to our first pour of the summer and the cash flow resulting from those operations very soon thereafter. In addition, completion of development drilling in Lucerne and Dayton this year positions us to start permitting the two-larger-mine plan. This provides significant production growth potential into the future, while expanding gold and silver resources for most of these areas now. There is a tremendous amount of positive activity throughout the system as we execute this list off into production.

So with that, Jennifer, can we open it back up for questions?

(Operator Instructions). Peter Massaniso.

Nice report. Question -- if I remember correctly, you're going to be operating at about a 20,000-ounce annual rate of production towards the end of this year, and 40,000 at the end of next year, if that's accurate. I was wondering how much additional capital will be required to ramp production that way?

Good question. Let me clarify one point. So we are starting production at 1 million tons, which reflects a one-shift, five-day week operation and is consistent or synonymous with about $13 million of annual operating expense. And that 1 million tons, from our grade profile, we look to yield about 20,000 gold equivalent ounces, that's correct. And the initial starting grades are on slightly the lower end, just because of the geometry of the block bottle. But ultimately, we'll evolve into the better-grade profile.

And then, on that same one-shift operation, we believe that the throughput will grow to about 1.25 million to 1.3 million tons, which we feel confident, given the grade profile, will move the yield up to closer to 30,000 ounces. Now, we are still on one shift. So the notion of doing more than that is more than feasible. But our current production plant looks to stabilize at those levels on one shift.

Now to your question -- the infrastructure that we are building really is designed -- and obviously, if we are only starting off on one shift, it's designed to handle 2.5 to 3 times more. And most of the internal planning that we've talked about really is looking to target a 3 million to 4 million-type kind of operation, which we want to engineer. So, most of the infrastructure that we have is already in place to accommodate it. What we would have to spend would be a bit more money -- let's start with about $8 million to $10 million for an expanded or new -- I'm sorry, heap leach pad to handle the capacity of the larger operation.

And then we would also have to expand at the rolling stock fleet -- you know, literally adding trucks, et cetera, and just expand the infrastructure of the road a bit. So that's the main component -- it's not the complete and total answer, but it's near it. And what it says is that for very, very little capital, the Lucerne mine can expand into a very, very robust operation -- a very profitable operation.

Just one follow-up. So, ramping from 1 million tons a year at Lucerne to, I think you said, 3 million to 4 million tons a year -- does your current permit, permit that?

No. It's a very good question. What we are currently working on with intense focus is starting at 1 million tons and then evolving it to 1.25 million, 1.3 million -- all on the same shift. Because the throughput that results -- the higher ounces, obviously -- that results from that, leverages almost the identical fixed cost base. There are some even minor changes that would need to be made to some of these the existing permits to even get up to those levels. But there's really no obstacle for that.

To get to the larger, ultimate mine plan, really we have a number of things that have to happen. First, all of the remaining drilling has to be done. The mine plan has to be developed, and then we have to do the feasibility study around that expansion, and then permit against all that information. And that's why we were so keen to accelerate the development drilling for Lucerne this year, so that by the end of the year, we would be in a position to do the things that I just talked about.

Jeff Wright.

So I had two questions. First, can you address the strip ratio at Lucerne?

Absolutely. The mine plan that we are implementing this year begins with a strip ratio of actually less than 1 to 1. It goes down to almost about .75 to 1, which is obviously very, very favorable. The reason for that is the mineralization is right at surface, and it is a previously mined area that we are starting in. If you look over the life of about five to six years in optimal scenario, that ratio will creep up to about 1.8 to 1, and then work its way back down to closer to 1 to 1. So on average, I think 1.5 to 1 is sort of a linear average. It's probably less than that, but it does peak up to about 1.8, 1.9 to 1 sort of at a peak production point. It's all very manageable in tonnage for us within this one-shift operation.

Okay. But you think we could use .75 to 1 for years -- say, after the first six months -- through years four or five. Correct?

I would say .75, .8 for the first 12 months. And then for the intervening two years, they would be closer to 1.5 to 1, right? And then sort of leveling back. When I mentioned the peak, it doesn't stay at that peak for that long.

Okay. Okay. That's good to know. Then a second question -- maybe I missed part of the last question. Adding a second shift -- what would the timeline be to adding the second shift again?

It's not an onerous step. I think that from our perspective, the staffing is literally about 8 to 10 people for the mine operation. So for us, it's not an onerous step. The real prerequisite would be permitting the higher tonnage level. And that would require -- most of our state permits are already up to a level of 1.5 million tons a year. And so we are just tweaking our county permit to synchronize with that.

We would then have to go back and expand to the higher level to accommodate the notion of doing, let's say, a 2 million to 2.5 million tons. So it's not something that has a long lead time in the sense of our engineering, our planning. But it has somewhat of a longer lead time in terms of the state modifications that would be required. So we wouldn't really see that happening before, I would say, the end of 2013. I think the first year and a half of operation here is going to be maximizing -- you know, really maximizing the throughput from the one shift.

And then it's a curious question, because do we then expand into two shifts with -- we'll really have no obstacles to do that -- or will we then be closer to a position of expanding to a larger mine operation? So I think that, either way, you would foresee two shifts in 2014, or maybe something bigger.

Okay. And to your point, that would be an amendment to the state permits and the county permits. That's not a new permitting process, correct?

No. You'd have to amend water pollution control; you'd have to amend the county special-use, those kinds of things.

Sounds good. Okay. Thanks a lot.

[Carl Frankson].

A question regarding -- I'm kind of viewing the Company now, going forward, on kind of two fronts. Obviously, the mining part, which is exciting, and future announcements on production will be forthcoming. How about the -- can you give us some idea of what kind of announcements we can look forward to on the exploration drilling program? I think you just mentioned Spring Valley. You're not going to be updating your 43-101, I believe, for some time. Is there some kind of regular announcements you'll be having on drill results?

Yes. Thank you for the question, and it allows me to clarify a point. Because I think there's been a lot of discussion about us finishing the drilling on the East-Side and then finishing the drilling on the Dayton. For certain, our objective is to try to do that this year. The -- what we are currently drilling on right now, which may or may not have been clear in my prepared remarks, are that we still have some drilling to do on the west side. And that's because, after finishing all the work that we did last year, we identified some additional opportunity to the north and to the south with the Justice patent. So we are doing that drilling right now.

So I would -- to circle back to your question, I would expect some reasonably near-term results for Spring Valley. You know, we are experiencing a meaningful delay in the turnaround time from the Assay Labs out of Reno. I think that when we first started, Larry was getting 10- to 12-day responses. We saw that creep up over two weeks at the end of the last program. In some cases, it was three. And right now we are actually over 30 days, in terms of the responsiveness. So there will be a little bit more of a delay in terms of getting out. But our philosophy on reporting those results as soon as we have them, with context, is still intact.

So I think that in the reasonably near-term -- and to be specific with Spring Valley, we submitted all of the core results for one hole. We have not submitted all of the core results for the second hole. And we submitted RC results for about 14 holes. So when we have that data back, I think that we'll have some very interesting -- I hope that the geologists will have some very interesting sort of interpretation. And I mentioned, it's with an eye toward connectivity between the Dayton and the Spring Valley.

On the second point, we are just finalizing our schedules for the Lucerne drilling beyond the west side. But it would be, probably, three or four months -- maybe right after the excitement of the first pour in production occurs, where we'll have some results back for Lucerne; and then, subsequent to that, for the Dayton. That should -- you know, it's a little bit of a loose overview, but I think that should result in a technical report before the end of this year, which will be quite compelling.

And with Spring Valley, what I was saying in my remarks -- you know, we initially had some aspirations to get our schedule, our sequences, to do that after Dayton. But I think the most likely scenario, with the additional drilling that we are doing on the west side right now, is that we wouldn't get back to the Spring Valley probably until the beginning of 2013. Obviously, the results that come back and the interpretations thereto will enable us to design much more specific drill programs. So we look forward to good results from Spring Valley from this initial phase, but most likely, it will be 2013 before we get back into it. But it is part of the 2012, 2013, 18-month program.

Good. And, you kind of touched on it -- what was your rough timeframe on a 43-101 update?

Before the end of the year.

Before the end of the year?

I would say fourth quarter.

Okay, great. Thank you.

(Operator Instructions). James Peck.

We've talked before. We were kidding about -- I said it was more fun to just have a pick and a shovel and go after it back in the 1840s. And you commented that, without permits, they had their own permits because they used a lot of shooting. (multiple speakers)

40% of the residents of Virginia City died a violent death back then, either through mining or through shooting each other.

Yes, yes. Well, that's quite interesting, and we hope that doesn't happen again.

For sure.

Real excited about seeing that -- well, I've always asked, when are you going to quit drilling and start digging? And it sounds like that's going to be around my birthday, in June. So, looking forward to that.

Well, let me say that we haven't quit drilling, but it's certain --

Oh, I understand.

Oh no, but it's certain, every hole we are drilling right now -- and I explained this a little bit -- every hole that we are drilling right now directly supports production. But we -- until we were able to do the soil sampling and clear the Lucerne to let us get back in there, we kept two rigs busy in the Spring Valley, which will give us invaluable information for future planning. And it was only a total of 16 holes. But what's exciting about our drilling is that -- as it all is developmental, and as it all relates to a future production -- it's still all massively, significantly expanding the resource, because we are so open in both the Lucerne and Dayton, and I said it on a number of occasions.

What I think is most remarkable -- and Larry's going to kill me when I say this again -- but when we first set the goal of 3.25 million, I would say that we were -- we didn't have anywhere near as much data as we have today. But it was a diligent stretch objective. What's really remarkable is that we almost have 3 million gold equivalent ounces just in the Dayton and Lucerne alone. That's what's making us feel so excited about the ultimate potential of what the Comstock still bears. And it's a lot.

It sounds wonderful. I am one of the small-town investors that have followed this for about five years. And I'm just looking at the charts right now, as far as the stock concern amounts. And other than a big blurb in 2008, it's stayed right along the same. You had all kinds of wonderful announcements in your announcement today, and I see the value of the stock has gone up $0.02.

Yes. I think that -- I'm glad you brought that up, too. From a value perspective, you can do a whole bunch of different analyses. But when you think about the ounces that we have, we look like we are treated very much as an average exploration company. And we're nowhere near an average exploration company. But more ironically, we are just a few months away from being a production company. So I understand, A., the paradigm about getting the Comstock back into production versus the legacy. And I also understand the reality of how difficult it is to get into production. So you'll have those weights on the value, but when we are in production, we should be in a very different place.

That was my question. Do you expect the value of the stock to accelerate when you start in production?

I expect -- you know, I will say two things. We have a really, really solid shareholder base. It's improved -- in 2010, and here in 2012, significantly. We have a high number of investors like yourself, which we covet -- thousands of them. But we are now also building a nucleus of very, very diligent institutional funds who do their homework, take one step at a time. But these are people who have invested $2 million to $5 million, who wouldn't have problems just investing $15 million to $20 million to $30 million. So I'd like to think that it's up to us to deliver what we said we were going to do, stay on track, right? It's complex project management, so every once in a while you have a setback.

For example, our original plan had well water coming straight from the wells that was sufficient to handle the operation. We have more than enough water, right, and more than enough welling potential. But within our permitted limits, the wells that we drilled were borderline. So we built a freshwater reservoir, and now we can replenish all the water that we need. So you'll get one step backwards, two steps forward on occasion. But when you have a dedicated team like this one that solves the problems, you get there. And we're going to get there.

Sounds great. How's the little hotel working out for you?

It's good. We are hosting a lot of business there, but there's a fantastic chef that was hired -- I don't know how we did it. They was a fantastic chef that was hired about three or four months ago. Really, it was just before the winter season, which is usually dead, and now it's going viral. And people from all over Virginia City, Carson City, Reno, are all coming to the hotel for dinner, and it's pretty vibrant.

Well, I'm going to try to sneak out and just see what's happening out there sometime this summer.

You will not -- I'll say this as strong as I could say anything. You have dinner at that restaurant, and you will absolutely not be disappointed. You'll come back very quickly.

Well, if you're not in production, I'm going to bring my shovel.

Yes. Bring -- don't bring a gun.

No!

[Jack Albright].

My wife had a question she wanted to ask. She wanted to know if you're in the real estate business or the mine business.

That's a good question. The two are very difficult for us to separate, but let me answer it very sincerely. We are the largest claim holder in the Comstock. We now have over 6400 acres, and we believe that the land is precious in two regards. One, it's ridiculously loaded with gold and silver. Secondly, though, it's precious in a natural, historical way. And our Chairman cares very much about that, and our Board and our management team cares very much about that.

I think she were referring to the buildings you've been buying.

Right, right. So I was just about to get to that. So when buildings, let's say, like the Gold Hill Hotel or like some of the -- there's a few residential properties that we bought, or even the Cabin in the Sky -- we don't ever buy anything on speculation. We buy them because, A., either we need the space, the space is very productive for us to use, or in a third case, that some of these properties -- some of this land represents a buffer around what we are doing.

So for us, we don't look to buy them; we don't aggressively go out and try to buy them. But when opportunities open up and come up, then we capitalize on them. So I would -- I guess I have to say honestly say both. We are doing both. But it's all toward the nucleus of really maximizing what we are trying to do here on the Comstock. And we mean that in terms of economics and profit. We don't see any conflict between the proper treatment enhancement, restoration of the natural history of the Comstock, with the highly profitable operation of the mine.

Okay. Well, that kind of answered the question, I believe.

Yes. It's a little different. But it's important, for who we are and what we're doing, that we do that. And we do it very carefully, and I mean that in terms of -- you know, we don't want to waste money. As I mentioned earlier, we can't always dictate when some of these opportunities come up, but we also do it in a way that -- you know, we are not pushing anybody out or around. We feel we completely cohabitate with all the activities on the Comstock. We care about it, so if these things come up, we will usually capitalize on them.

On the old Crown Point mill, there was an article in the newspaper about that. You think you could buy that and restore it or keep it? It would be a shame to have that dismantled.

Yes, good question. So the Crown Point Mill is one of the, I would say, three most robust mills on the Comstock, right? We have the Crown Point Mill, we have the Donovan Mill -- which is under one of our director's control -- and we have the Dayton, which is under our control. Then you also have the Yellow Jacket and the New York, which have remnants in the [con collar]. So there's a number of structures -- I think you're referring to the Mitchell family publishing in the local newspaper that they might be interested in selling some of the components of that mill. And that mill actually is one of the most -- best-restored from an internal perspective.

So we don't have any specific plans relating to the Crown Point Mill, but we have reached out, and we do speak occasionally with the Mitchell family. They are very, very good friends of the Company. I think they are stockholders. And they care about the Comstock. So I think that whatever they end up doing, they will be careful about it. And certainly, no one wants to see any of the history, even if it's internal equipment, lost.

Okay. I read an article in the newspaper of a no-dig area. Is that going to affect you any?

I didn't understand you. Can you repeat that?

The no-dig area?

Oh, yes. So you're referring to -- the Storey County, right now, is working on a mining ordinance, which is very important. It's actually the last of many ordinances that they have revisited and revised, and the mining one is most important. In fact, the County Planning Commission emphasizes the importance of protecting not just mining rights, but all resource- or service-related rights across the county -- be it agriculture, forestry, or otherwise.

Something very thoughtful is happening at the county right now, where they are looking at the various industries, like mining across, the county. They're looking at the economic possibilities; they are looking at the property rights and existing opportunities, but they are also looking at the historic district and the preservation of the view shed in Virginia City. And (technical difficulty) coincidentally, it works out -- and they do need to be careful. And I think they are being very careful and very diligent with certain other people's property rights. I know that they are, because they are talking to everybody, and they are surveying, and they are walking the property.

So I kudo that. But from our perspective, we have been on record many times saying that most of the Northern Extension and Northern Territory, and even northern Occidental, in our technical report, has geology that dips down and is primarily underground target. What we understand from the ordinance is that the view shed strongly encourages underground mining within those parameters.

So I guess you can call it a no-open-pit or a no-surface zone. I wouldn't call it a no-dig zone, because underground mining is strongly encouraged in that area. And then outside that area, they encourage all appropriate activities, including surface mining. So we think what's happening is thoughtful. We think it will make the people, including us in the Gold Hill Hotel, that live in Gold Hill and Virginia City, much more confident and relaxed. And we don't really think there's a big negative implication to it, as long as they continue to do it as thoughtfully and is carefully as they have so far. Now, I know there's other people who have single mining claims or just a few claims, and I know they've been talking to the county, too. So hopefully it ends up to be a very smart ordinance by this county.

Do you think in the future when you go underground, do you think there will be any problem with the townspeople? I know there's a lot of opposition for mine.

I'm going to tell you, and this is as sincere as I can be, I have not had one person ever come to me and say, we are against underground mining. I just -- I have not. I think most of the Comstock feels that underground mining is the legacy, is the history. And they are strongly supporting it.

Will there be any concern about blasting? You've got cave-ins on the old mines and things like this when you go underground.

No -- well, I mean, it's a little bit of a futuristic concept, but just on the point of blasting, the county just held an open workshop last month and brought in some extraordinary people in the industry -- fiber tech and blasting companies, and educated all of the Planning Commission and all of the residents that attended, and us, on the absolute safeness and a minimal disruption that comes from mine blasting.

The disruption and the wavelength can be as thin as a piece of paper, in a well-designed, well controlled operation, and that's what we expect to have happen. So Virginia City, in itself, has that legacy of all the underground mines -- that's a different discussion that I -- you know, it's not -- those are really not most of our properties up into the city. So I don't know the answer to the ultimate question.

Okay. Well, I have two more questions. They are going to be fast ones. The stock price -- I know you covered stocks pretty good just a little bits ago. Can you speculate how much they might go up, or would you even want to?

I prefer not to. I will say this -- when you look at the value of companies that have 3 million, 4 million, 5 million ounces; when you look at the value of those companies that are in production, and you look at the value of companies like Frontier Gold that Newmont purchased, the numbers are staggering. So if you do that kind of work, we all feel strongly that the prospect of the ultimate value of the Company is high. We have to deliver those things that we just talked about. And we are doing that. We feel good about it; the market is the market. So we try not to comment on that.

I feel much, much better since we had this talk. You know, you've got an excellent website, but it has been kind of lax over the past several months.

Yes. We just tired -- I just mentioned we hired some additional resources in Investor Relations. And we're -- not only are we working very hard now to update, but we've got a lot going up onto update with. So the data -- you should see a lot more content and I think a lot more visual coming onto the website over the next few months. The website gets a tremendous number of hits. We are in the millions, which is incredible for our size company.

It's a good, excellent website. Probably one of the best mining websites out there, to be truthful with you. I haven't been up there too much lately, so that kind of had people -- it had me worried, I should say. My last question is going to be, are you going to have a stockholder meeting this year?

We plan to, yes. We don't have the date nailed down yet. Tomorrow we have a meeting with our Company to try to make the day. We were trying to hold off, actually, pinning the date down, so that we can have closer probability to the first pour. But we're getting to the point where, from a legal perspective, we've got to pin it down. So the likelihood of those two events happening at the same time are probably lower now. But we are going to have at least one, probably two exciting meetings here this summer.

So you don't have a --

I don't have the date yet, Jake. As soon as we have it, we'll announce it.

Okay.

All right, sir. Are you a Nevadan?

No, no. I'm actually in Utah. I was born and raised in Las Vegas, we live in Utah now.

All right.

But I love the Comstock. I always have, ever since I was a little kid.

Outstanding. I love the call -- thank you for calling.

Anthony Cambero.

My question is, when do you guys think you'll be operating cash flow positive and then free cash flow positive -- two separate things. And then, how low do you see cash getting? What do you think the watermark is?

I don't see it getting below $8 million. I think that we'll be cash from ops two months after the operation. Because it's a one-shift operation, and we are starting at 1 million tons. So the sooner we stabilize the yields coming out the other side, the sooner that will happen. And I think that when we get to 14,000, 15,000 ounce run rate, we are going to be able to cover everything that we want to do from an exploration standpoint.

And then as you would look to expand the mine -- you talked about earlier maybe getting a bigger heap leach or what have you -- would you fund that with internally generated cash or, potentially, debt? Or would you do an equity raise at that point to fund it?

Based on the (technical difficulty), we would fund it from cash and/or equipment financing, which is very attractive to do. The heap leach is not so much equipment, so it would be (multiple speakers) cash. But just to make another point there, our existing heap leach that we operated in 2005, 2006, had three cells. We are currently expanding to the fourth and fifth cell. And we have already designated the property for the sixth and seventh cell, and we have more property. So it's not a foregone conclusion how much we can expand this one.

So our first objective will be, just keep expanding this one as much as we are allowed to, from an engineering and property border perspective. And then -- well, well before that's done, we'll start laying out the plans for what would be next. We would like to have not only the drilling from the East-Side and the Dayton done, but we'd like to do a bit of extra metallurgy on the East-Side and the Spring Valley. And then that will tell us what would be optimal to go forward from there.

Do you see any circumstance under which you would look to raise equity again?

Not today. I sense some fatigue on the equity raise that we did last time. I think that some people were surprised, and we tried to clarify what and why our rationale was for that. And, hopefully, that's clearer. But right now, with the equipment financing that we are doing, we are going into production with a very robust balance sheet. And with a $13 million almost essentially fixed operating expense profile for that one shift operation, we need to be making cash flow from this machine, and that should take care of everything else.

Terrific. Well, keep up the great work. I look forward to the first pour. Thanks.

There are no further questions at this time. Please continue.

All right, Jennifer. Well, thank you so much, everyone, for listening to the call. I'm going to start some outreach with Kimberly to reach out and just follow up with some of our shareholders, and maybe even meet some over the next few weeks. But please don't hesitate to call us directly if you have any follow-up questions that you'd like us to handle with you. Have a great day, and we look forward to speaking to you soon. Bye-bye.

Ladies and gentlemen, this concludes the conference call for today. You may now disconnect, and have a great day.