Comstock Inc (LODE) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Comstock Mining announces third quarter 2012 results and business update conference call. At this time, participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this call is being recorded. It is now my pleasure to introduce you to your host, Mr. Corrado De Gasperis. Please go ahead, Mr. De Gasperis.

Thank you, Naomi. Good morning and afternoon, everyone. My name is Corrado De Gasperis, President and CEO of Comstock Mining, and welcome to our call. I'll provide a brief summary of the information included in last weeks 10-Q and our recent press releases. If you don't have a copy of those releases, you'll find a copy on our website at www.comstockmining.com under news/press releases.

Please also remind you that I may make forward-looking statements on this call. Any statements 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 would cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed by the Company with the SEC and those risks are identified also in the press releases, and all forward-looking statements made during this call are subject to those same risks and other risks that we can't identify.

I'll now briefly review production, drilling, and mining development and wrap up with a few corporate highlights before we move on to Q&A. Regarding production, we began pouring gold and silver the last few days of September and we have been pouring since. Through the end of October, the Company shipped over 1,250 ounces of gold and over 14,800 ounces of silver.

In addition, we delivered 28 ounces of gold and 292 ounces of silver to the Northwest Territorial Mint in Dayton, Nevada to facilitate the minting of the commemorative bar celebrating the first pour. These bars are recently delivered to the owners and we've been getting just outstanding feedback on their quality. The dore bars are just beautiful. We recently -- I'm sorry, through early November, the combined sale of precious metals is nearly $3 million, including the commemorative dore bar sales.

Our third leach pad is now producing at the higher levels from the fresh ore that was delivered here in early November, combined with the continuing operation of our first two pads. We'll add new pads of ore at a rate of just about one new pad per month as we ramp up our higher run rates in the next few months.

We're currently mining and hauling at a rate of about 4,000 wet tons per day. This process is stable, currently averaging about 155 haul truckloads per day. We've also been crushing and stacking ore daily since we started the crushing system and look to stabilize the crushing and stacking at approximately 4,000 to 5,000 tons per day.

Overall, I think many of you know, these assets were designed and can produce over four times our current rate of production, with the crushing system showing the potential for almost 1,000 tons per hour. We've already now stacked over 210,000 tons of ore on the heap leach pad, delivering over 4,100 ounces of recoverable gold and over 40,000 ounces of recoverable silver to the heap leach pad.

Please remember that the material that we place on the heap leach pad after crushing remains under solution for as long as that pad is utilized. Throughout this period, the recovery of gold and silver continues, but the most effective economic recovery of the metals takes place between the first 45 to 60 days. The recovery of gold and silver from the first month represents only a portion of the overall expected recovery.

As most of you know, our plans have a leaching process building up to 20,000 gold equivalent ounces per annum. Our grades could vary anywhere from a run rate of between 17,000 and 24,000 per annum at any given point in the short term, but we're very confident with this start up that we will scale up to an average of 20,000 ounces with these tonnages. The rest of the quarter and the next are very important as we focus on stabilizing those rates and establishing a solid positive cash flow.

The Company anticipates its annual mining operating expenses, including all fixed and variable costs for mining, processing, mine administration, labor, and even royalties, of approximately $13.3 million per annum with that current production rate of about 1 million tons per annum. These numbers have remained solid throughout our ramp up.

We've had no major surprises in construction or operations during our march into production or in our costs as we stabilize them. Most all of the non-routine activities associated with construction and start up are now final or near final, improving the overall spend profile. These mining, processing and related costs don't include, however, corporate admin or other G&A costs and they don't include exploration.

So far there's been absolutely no disruption, congestion or problems with any of the hauling on the alternative haul route. In fact, certain haul days have significantly exceeded our daily objectives. I believe our best 10-hour day was a 180-truckload performance on that day. The extra trucking does result, as we've disclosed, in an increased cost of about $1.5 million to us for the first six months. We remain very confident that the BLM will permit our original off-road haul route in the next six months, fully eliminating this redundancy.

To that exact point, last week we signed the memorandum of understanding with the BLM, defining the final scope and the remaining process steps associated with permitting our larger, more efficient right-of-way. This was a critical milestone and certainly demonstrates our very real progress in working with, together and forward, with the BLM. In the meantime, we continue working on optimizing the rest of the system and we're very happy to have stabilized all of our core production activities.

In terms of growing production, most immediately we need to obtain that new BLM right-of-way and we also need to expand our existing water control permit as these are the two factors currently limiting us to the 1 million ton per annum run rate.

We have commenced the engineering work to design and even further expand our heap leaching system which is the main prerequisite for modifying that water control permit. We also anticipate that permit will require about six months before it's completed and approved and once we obtain these two permits, we can increase our tonnages going forward, accordingly.

Now let's turn to exploration. In January of this year we launched our 2012, 2013 drilling program. The Company disclosed and anticipates about 300,000 feet of reverse circulation drilling and about 13,000 feet of core drilling at a total program cost of about $12 million over the full two-year life of that program. Let me just recap some of our outstanding exploration efforts that we've achieved year-to-date.

Following the initial successful drilling in Spring Valley in early January, when we hit significant mineralization on all 14 holes, the Company began definition drilling in the Lucerne Mine in March of this year. We drilled concurrently with the commencement of mine production.

The Lucerne Mine drilling was completed earlier this month with 236 reverse circulation holes, totaling almost 87,000 feet and 25 core holes, totaling over 6,000 feet. These results not only support the specific mining activity that's already under way, but we expect them to increase the initial mine of Lucerne by well over a year.

On an even more exciting note, we also recently announced the results of our step-out drilling on the east side of Lucerne. All 20 of those holes in the program hit lengthy intervals of significant mineralization. 14 of those 20 holes encountered multiple intervals of significant mineralization, totaling 150 feet or more, including 10 of the holes with contiguous mineralized intervals of a 100 feet or more. It's very difficult for us to exaggerate how excited we are about these results. Let me just comment on some of the highlights.

On Hole 5, we saw an assay of 1.693 ounces of gold per ton contained at a 20-foot interval, averaging 0.621 ounces of gold and 1.4 ounces of silver per ton. Hole 5 had significant mineralization totaling over 370 feet. Hole 12 included an assay of 1.589 ounces of gold and 6.5 ounces of silver per ton. All that contained in a 60-foot interval, averaging 0.187 ounces of gold and almost 3 ounces of silver per ton. The thicknesses of the grades are just great.

Hole 10 had an assay of 6 ounces of silver per ton contained in a 75-foot interval of silver of over 1.382 ounces of silver per ton. Hole 16 showed even higher grades of silver with an assay of 6.2 ounces of silver per ton, contained at 20-foot interval with 2.383 ounces of silver per ton. Hole 17 had significant mineralization in multiple zones of 320 feet, including contiguous mineralization of 220 feet. The thicknesses are just remarkable.

Hole 13 encountered total mineralization of 230 feet in multiple zones. Hole 15 encountered 290 feet in multiple zones. Hole 16 included 20 feet intervals of 0.18 ounces of gold and 2.38 ounces of silver per ton. It just goes on and on and on. We've published these results previously in two separate press releases, but when we look at them all in one place, it's just remarkable.

Hole 14, Hole 18, Hole 20, I'm not going to go through all of the numbers since all these assays are posted on our website. But I just wanted to give you a sense of the depth, the width, and the extent of the grades that we're hitting on the east side. We're very excited and looking forward to updating our next 43101 technical report. The report should be all completed here late in the fourth quarter of this year and will be published in early January. It will include all of the updates on the Lucerne Mine, including the broader Lucerne Resource from the east side that we just talked about.

As we think about it all, the east side results weren't only efficient, I mean all that coming just from 20 holes, but very productive and wonderfully high grading. There are some very interesting cross section allowances that are being developed by our geological team from these recent results.

Going forward, the drilling program has two significant continuing objectives. First, final in-field drilling in the Dayton area and second final step-out and in- field drilling. For Dayton, the drilling will provide the detailed information needed to create the preliminary mine plan for the proposed Dayton mine and with that plan, the Company will be able to complete its feasibility analysis which both together are prerequisite for us commencing the permitting for that second mine.

The in-field drilling for Lucerne, we will do essentially the same thing for an expanded Lucerne mine plan. It will position the Company to complete the broader economic feasibility study of which, of course, we already have a tremendous amount of information as we're already producing there, but those studies and those drillings are prerequisite really before any permitting of the expanded mine can even be foreseeable.

The overall course of the program will likely see three updates in technical reporting over the next 15 months, including the one that I just referred to. Following that one, most likely we'll see an update for the Dayton drilling in the middle part of next year and then the completion of all of the Lucerne drilling toward the latter part of next year. All of that work provides us with the road map for the two expanded mine plans and ultimately the potential for production plan that sees not 20,000 to 30,000 ounces a year, but 150,000 to 200,000 ounces of production per year.

Lastly, just turning to corporate. From the balance sheet perspective, cash and cash equivalents and available for sale securities on hand at the end of September was $3.9 million. In addition to that, our balance sheet saw inventories, stockpiles and mineralized materials on the balance sheet at the end of the third quarter, totaling about $4 million.

To date, we now have over 8.4 million of recoverable metal at today's gold and silver prices on the heap leach pad. This, again, represents over 4,100 ounces of recoverable gold and over 40,000 ounces of recoverable silver to the leach pad so far and those numbers will go up every day.

We also raised some additional capital last week. We drew down the remainder of our shelf registration statement with existing and new institutional and retail investors strongly over-subscribing the offering. We raised a net of $7.3 million through an underwritten public offering of just under 3.7 million shares. The Company now has just under -- I'm sorry just under 3.7 million shares, representing less than 3.5% of the outstanding equity of the Company. As of today, the Company now has just over 47.2 million common shares outstanding and 57.3 million of preferred stock.

The proceeds of the offering provides the working capital for our continued ramp up of production and also insures timely, if not accelerated, pursuit of the two previously discussed permitting activities that are required for production growth and the efficiencies that come with that right-of-way. That is, of course, the right-of-way with the BLM, and the related engineering and modifications of our water control permit. Those are the efforts that will contribute to not only the near term, but also the intermediate- and longer-term production growth.

We also realized and continue to realize a very meaningful and strong expansion of the investor interest in our Company, especially since September when we moved into full production activities, but it's coming, both across the United States and in Europe. We had a number of investors from the UK participate in investing in the Company for the first time.

And we also have a meaningful number of large institutional resource investors reaching out about scheduling site visits and visiting the mine now that we're into production. We feel that all of this bodes extremely well for strong capital appreciation as we ramp up and grow production here in the next 15 months.

The balance sheet overall is strong, not only in cash positioned for growth but also at September 30, we had over $8 million in current assets on the balance sheet. That excludes the money that was just raised, of course. Almost $21 million in essentially new property, plant and equipment and over $7.5 million in land and mineral rights. We feel that 2013 will be an outstanding year for gold and silver, but it may not be so outstanding for many of the junior producers.

In fact, when I was in San Francisco just this past Saturday at the hard asset conference, many of the industry experts were predicting some very difficult time for junior mining companies. One fellow was even saying that a majority of the junior exploration or non-producing mining companies on the TSX will most likely die within the next 15 months. The problem is that there's just too many unfunded difficult projects with low grade and no real feasible production prospects.

All of a sudden, there's a tremendous amount of focus, including from the Canadians, for near-term production in cash flow to invest in. The companies without that, they were saying at the conference, they will certainly struggle if not die over the next 12 to15 months. That said, they were talking only about investing in companies that have minerals, money and management. From our perspective, we feel extremely well-positioned and we're looking very much forward to ramping up this growth and this production here in the next month and throughout 2013.

So in closing, let me just say that we are focused in committed to stabilizing growing our cash flow while we continue to optimize our permitted footprint, expand our resource, establish mine plans for both expansions and develop the Comstock Lode in new, responsible ways that present incredible economic opportunities for all of us. I think with that point, Naomi, we should turn it to the Q&A.

(Operator Instructions)

[Robert Shecker], he's a private investor.

Hi, Robert how are you?

Yes, fine, sir. I noticed in your third quarter results, there was an item there for $2.6 million for changes in the fair value of derivatives.

Yes, sir.

And I was just wondering since gold and silver had a terrific quarter, gold was up $160 and silver about $6, so perhaps you have some positions against those rising prices or can you explain that charge to me?

Absolutely. Thank you for the question.

Sure.

So first, there's really two components of the accounting that we have to do for derivative liabilities. One, which is coming very near to its end, is that the preferred stock that we have in our capital structure had some protection in terms of the annual dividends that were paid in the first three years and that additional dividend payment is actually accounted for as a derivative liability. The good news in that front is that we're almost -- we're into the third year for certain and so that number will go to zero in the course of the next 9 or 10 months, so that's one piece of it.

The second part of it, which relates more directly -- which relates really to the gold question, is that in July we did a $5 million loan that we effectively funded by selling about 3,700 ounces of gold forward at $1,600 an ounce for 2013, and so that is essentially the other material piece of the derivative liability accounting. So as gold prices go up, that number will look like a bigger liability. As gold numbers go down, that number will be smaller but the economic reality is that we're simply -- of the 20,000 ounces that we intend to produce and sell next year, 3,700 will effectively be sold at $1,600 because of that loan arrangement. And I think for all intents and purposes, that's it in a nutshell.

Well that's really good news.

Yes, we're not hedged against gold and obviously we're very bullish. I've been bullish but even at the hard asset conference over the weekend, fundamentally with the continued fiscal policies and continued fiscal problems, we see the trend staying very much on course for the metal being up.

So do I. Thank you so much.

Thank you, sir.

Thank you. [Tom Childs] and he is also a private investor.

Yes, Corrado, can you hear me?

Yes, Tom, how are you?

Very good. I met you last Summer in May with my wife and son. You treated us to a nice dinner just before a mine tour. I wanted to thank you for that.

Wonderful company at the hotel. Thank you.

So I know now that all of the activities on the West side of 341, and you've had terrific results on the East side of 341, and your plan is to obviously develop that. Can you talk about Route 341 and how that's going to be dealt with as you expand the Lucerne Mine to accommodate both East and West sides?

Yes, very good question. So yes, so we are engineered, developed, and mining on the West side of the state route. Our permitting activities with the state encompass both sides of the state route. The current permit with the county really just encompasses the current mine plan and there is a tremendous, tremendous amount of ore that also sits right underneath the state route. The state route is actually a private road and the road is owned by us and the road has been moved on multiple occasions actually for historical mining activities.

And so the highest preference that we currently have in our plan and that the county shares with us in terms of intent would be after some amount of mining on the West side that we would shift just a smaller portion of that road to the West, which would not only allow for the ore immediately beneath it but certainly the incredible discoveries that we keep having as we move East. So that's sort of the number one option. There are others that are being talked about, including by the State Department of Transportation, all favorable but I think that's, without having a final plan and without guaranteeing any end result of course, that's the current scenario that we're most planning for.

So are you -- when you talk about a shift of the highway, are you saying a couple hundred yards or the next canyon over?

No, no. There's a notion of the highway moving a few hundred yards and being very nicely landscaped into the sort of the wall of where we currently have the existing mining activities. The mine plan doesn't take out the wall of the mountain so it would very nicely nestle along that landscape if you will and in fact, that's exactly where the road was previously.

Okay, thank you very much.

Thank you, Tom.

Thank you. Jeff Wright, Global Hunter Securities.

Good morning, Corrado, how are you?

Good morning, Jeff, how are you?

Pretty good. So I did have a couple quick questions on the ramp up and recoveries. Can you touch on what you think the recoveries can get to after you've got a quarter to two quarters of production under your belt and what challenges have you guys seen with the heap leach or the miracle processing to date?

Great. Thanks for the question. So first on the recoveries, the initial sequences of ore that we're bringing to the pad are averaging about -- in the metallurgy -- are averaging about 70% for the gold and 50% for the silver. So far we have not had any operational issues at all. In fact, I would say two positive things, solution breakthrough for each of the three pads that we've put online has been less than 10 days and in some cases even much quicker than that. I think one was six day solution breakthrough so we're having very, very good fluid flow through the heap leaches and despite them being the first three pads without being put under leach.

The third pad which is now under leach is meaningfully larger than the first two. The first two averaged about 50,000 tons each. The last one was about 70,000 tons, and I mentioned to you that we have already over 210,000 on the pad so that fourth pad is actually forming up very, very well as we speak. The rate will be about something less than but about one pad being brought under drip and under leach per month.

From recovery standpoint, everything seems to be on plan except that we are getting a higher rate of silver, so we haven't done -- it's still too early in the process to have reconciliations of the ultimate yields, but the silver, it seems to be leaching higher so that's been very positive. Our resource that we've been pulling from has about -- it's not too far off from the average of the entire resource, maybe a little bit higher than 10 ounces of silver for every ounce of gold, closer to, let's say, to about 11 ounces of silver for every ounce of gold in terms of what we're extracting.

But what's odd is we're leaching about 11 ounces of silver for every ounce of gold and so far the gold quantities seem okay. So the initial presumption is that we're leaching a little higher in terms of silver. So we'll have to -- we're keeping a close eye on that as we get sufficient data reconciliation and it could also be the rate at which silver is leaching versus gold versus the absolute yield. So unfortunately, my answer to your question is the best of our knowledge right now, about 70% gold and probably a little higher than 50% silver.

Thanks, one last question. You mentioned working with the BLM on the permitting for the right-of-way road.

Yes.

That's just basically amending the existing permits, correct? You don't have to do any additional environmental or any other studies that I'm aware of, correct?

Actually, we are. I'm really glad you asked the question because it was one of the developments that I wanted to speak to and didn't say so specifically. So we do have an existing right-of-way which we're not using right now because of the issues that we ran into earlier this year with the BLM. They did grant us a second right-of-way which is the one that we're currently using and requires some amount of trafficking and hauling on the state route. But what we've actually concluded to do with them now and what we've signed the memorandum of understanding for scoping with them now is to actually permit over the existing right-of-way that we have, a much bigger, much wider, more robust right-of-way and so there's three implications of that.

One is that we do have some environmental and biological studies to complete. We've done some cultural studies already. Those were prerequisite to the scoping of the MOU, so those are done. The MOU is done and now we'll get into those other studies and processes. It actually presented an opportunity for us to expand the scope of the studies broader in case there's other federal permitting that might become foreseeable and practical to us as we go forward. We'll sort of kill two birds with one stone.

And then lastly, for lack of a more technical term, the fatter right-of-way, the bigger road will allow much more productivity for us, so we won't only grab the efficiency of eliminating the redundancy of being on the state route but we'll also have much more throughput in terms of haulage back and forth from the mine. So it's a better, longer term answer for us. It will take a little bit longer to do that, just a few months, which is why we're still talking about six months to go but I think the end result will be much, much better for us.

Okay, so when you say six months, we should anticipate that the studies would be completed in Q2 and you would submit everything to BLM late Q2, early Q3 next year?

No, no so the process that's laid out in the MOU is that scoping has been complete and now we'll do kickoff meetings literally next week and then there will be public processes that will occur in the first quarter and it will all drive towards, and if you give a little buffer for Thanksgiving and Christmas, it will all drive towards permitting probably late in the second quarter.

Okay, so Q2, great. Thanks for the clarification.

Thank you, Jeff.

Thank you. Bill Gibson, Legend Merchant.

Hi, Corrado.

Hi, Bill.

Can you talk briefly about Spring Valley and then went into the drill results on East of the East side? Does that same trend continue into Spring Valley?

Yes. Thank you for the question, Bill. In January and February, primarily because we were waiting to clear some of the prerequisites to get back into drilling in Lucerne, we did 14 reverse circulation holes in the Spring Valley and just as importantly, we did two core holes averaging about 700 feet a piece and the entire objective of those two core holes was to validate structurally that the Spring Valley is just a direct extension of the Dayton structure.

Spring Valley is where we have the least amount of geological data. We have a discovery hole there, 38 feet from the surface and in 2009, hitting high grade ore right below some of the sediment. We've had some geophysical scanning which, for all intents and purposes, shows us the continued sort of mineralized trend coming down from Lucerne through Dayton and right into Spring Valley, but we didn't really have real substantive core samples to validate that's the same structure. So everything that we've analyzed to date tells us that it is, which is very, very exciting for us.

It really -- there's a really meaningful stair step down when you go from the geological data and the number of holes that we have in Lucerne then down to Dayton, which is significantly less than Lucerne, then down to the Spring Valley. But when you think that Lucerne itself has already validated over 2.3 million gold equivalent ounces, none of those numbers including the update that's forthcoming here based on what we just talked about; and that the Dayton so far has only validated 0.5 million ounces and Spring Valley has none; and you have it in your mind that structurally, it's at one interconnected mineralized trend and that none of what we've learned in the Dayton, both near surface and at depth and structurally; and none of what we've learned at Spring Valley, both near surface at depth and structurally, indicates there's any differences.

So for us it's -- we're very, very excited about ultimately getting the Spring Valley but it will be a challenge for us just to finish the Lucerne and the Dayton in 2013 and I mean it being a challenge because both of those resources are still open on three sides and at depth. So from my view, we said it sort of this way before, we feel like we're just scratching the surface and these 20 holes in the East side, I don't think got much of a reaction from people. I don't know, probably because it was right around the Presidential election or something but the results are just outstanding. And to your question, we think that most of the center South of the Comstock is completely undiscovered country.

Good. Thanks, Corrado.

Thank you, Bill.

Thank you. [Alan Balanowski], he is also from personal investments.

Good morning. I have two quick questions. The first of all, will you be selling more bars? And my second question is why was the IPO lower than the current market value?

Okay, thank you for both those questions, Alan. In terms of the bars, we sent over the button. The first pour had three bars and a button. The button was less than 300 ounces, as I'd mentioned earlier and for our estimate, for our estimate of how many bars the mint could print, we sold out in like four days. I just recently learned that they were able to squeeze out like 18 or 19 more than they thought. We really weren't very hung up on it because all of the excess material gets remelted so there's absolutely no loss of metal in that process, but I'm saying publicly on the phone here that we have a few more that people are already clambering for.

I really didn't know how the dore would mint. I was personally a little bit concerned. They're just beautiful and we're getting absolutely fantastic feedback from almost everybody at how nice they look, so I suspect we'll very quickly here sell out the rest of those bars. If anyone is interested just send me an e-mail and I'll give you the back door link to the ordering process, but I suspect they will be gone pretty quick here.

In terms of the offering, we did it, there was a lot of volatility in the market, its been very, very difficult. We've always priced our deals at or very, very near the market price and we always, in addition to that, look to place it with only the absolute best investors so I think that did occur this time and we could not feel better about the types of funds that showed an interest and I would say two things about that. Both in terms of institutions that already were familiar with the story that chose to invest and also, new institutions that got familiar with the story and in both of those categories, we are talking about the types of investors that could invest a tremendously larger amount and would want to invest a larger amount as we progress.

So we feel that being re-rated, if you will, as a junior producer is not a magical event. It occurs as you get the traction and you put good weeks and months and quarters of production and cash flow behind you but also that you have keen investors who frankly see the opportunity becoming larger and larger as that cash flow becomes larger obviously, but also as it derisks the profile. So we feel like we're in a really strong foundational position, just ourselves, just for what we're trying to accomplish and what we're focused on. I would just expand that to my sort of closing comments is that with some foresight and starting now with some hindsight, I think we're going to have as an industry segment, an extremely challenging 12 months in terms of access to capital and frankly, as a company, we're happy to have that behind us.

Thank you very much.

Thank you, Alan.

Thank you. [Jack Albright], he is a private investor.

Good morning, Corrado.

Good morning, Jack, how are you?

Just fine. You answered most of my questions so far. I have one. When you move the state route, how is that going to impact moving the ore?

Well I don't think -- so the answer to that question fundamentally lies with the mine plan. Let me say that the initial mine, by design, was intended to be at least four years long. We don't necessarily plan to operate it for four years and in fact, now with the recent drilling results, we're sure that it's going to be well over five years, if not six years of mine life. Again, not that, that's our intention to mine it that long but that is what exists on the West side and very, very shallow scope of a pit.

Ultimately, there is already two to three times that amount of ore sitting under the road and just to the East of that. And so what we would really like to do is get the rest of that in field drilling in Lucerne and then engineer, if you will, the smartest expansion, the smartest evolution, the smartest phasing which minimizes disruption but optimizes our access to the ore. So the real answer to your question is we don't really know yet, but we don't see that moving of the asphalt or relocation, if you will, of the road would have any negative effect on any of the ore. All it's going to do is allow us more efficient access to it.

Okay, sounds like you guys are on top of everything. It sounds great.

And one thing, Jack, too. This is what I was trying to say at my first point. I don't think that moving the road is a near term event. We still have a lot of drilling. We still have a lot of engineering and then we still have a lot of mine life before we even get to that point. It's really a more intermediate few years away kind of thing.

It seems like you were having quite a bit of trouble with the town people on that highway and the road and the BLM and everything. I just wondered if moving that road is going to impact any problem with the towns.

No, its been probably one of the more discussed -- even though it's still so far away and not certain -- it's been one of the more discussed, openly discussed. It was referred to I think in our very first technical report, so I think it's a known entity in the sense that it's possible so it's not really created any agita locally.

My other question is about the Gold Hill Hotel. We never hear too much about the financial status of that.

Yes, the hotel is improving meaningfully. It's very, very small in the grand scheme of everything that we're talking about, but the revenue in year to year comparisons and recently has been up. The expenses are down. It's going now into the cold season so the hours are retracted, the staffing is retracted and we're going through the planning process for it but for most intents and purposes, it's stable.

For local engagement, its been outstanding for us. We get a lot of visitation and a lot of intention from important people because of that venue, I think, rather than having many cases rather than having a 35 minute meeting in the mine office, we have two to three hour sessions in the great room there, and it's a relatively small building. It only has about 12 rooms in it.

Right. We stay there, had a wonderful trip. Okay, so you're thinking you're profitable and not a loss then?

The last 12 months it operated at a small loss. Our attitude is to insure and work very hard so that it's breakeven, because it's just a tremendous focal point for not just us really, for the whole community.

Okay, well thank you very much. One question, did you receive my package?

It's sitting right on my desk. It's outstanding. I'll have to call you later to thank you specifically for that.

I just want to make sure you received it.

I'm looking right at it.

Well you guys keep up the good work.

Thanks, Jack. Thank you so much. Bye-bye.

Goodbye.

Thank you.

(Operator Instructions)

J Gunn, RockPort Global Advisors.

Great. Corrado --

J, how are you?

Good. Do you believe the recent election results will have or have had any impact on the Company?

Good question. I knew politics were going to creep into this, J, sooner or later. So on a national scale, let me just comment very briefly. I think everybody is of like mind. The results really gives more certainty that from a monetary policy standpoint, we're going to get a lot more the same. We don't need to talk much more about that now with the federal deficit remaining at $100 billion a month and well over $16 trillion in total, so I think for sure, that's one of the reasons that we would be bullish in gold.

But maybe more importantly, locally, we saw county commissioners come up for election in both counties, both Storey and Lyon County and it was very interesting to watch because the sentiment in some of the polling that we were able to get access to suggested strongly that, and this is I'm sure not going to be a surprise to anybody, that if you were pro jobs and pro economic development and very importantly, pro mining, that you'd get re-elected was pretty much the message in the polls and although that sounds like an obvious for Nevada, it's not necessarily so obvious for this region in terms of mining. So it was very, very encouraging for us to see that and we thought it was outstanding. And in terms of the results of the election, we could not be happier with the local commissioners that won, all very supportive of business and all very supportive of our activity.

There was actually a very funny quote that I was just reading yesterday, there's the television, a political television show here called Nevada Newsmakers. It's run by Sam Shad, and it's probably the most watched political show. It's kind of like Larry King on CNN for just Nevada and Sam is phenomenal but he was interviewing the new commissioner, Lance Gilman from Storey County and the quote says, and this is not a forward-looking statement nor is it my statement, okay? This was Lance Gilman saying, I actually heard there's probably 9 million ounces of gold up there. With the new election and with Obama now in place, I think gold is probably going through the roof. And Mr. Gilman goes on to say that with Comstock Mining just outside of Virginia City, we're really seeing a situation that could turn the Comstock load back into one of the richest places on earth.

Now, putting aside all the promotional points, the real point I'm making is we have a new, brand new Storey County commissioner who couldn't be more excited and supportive about what we're going into. So I think, from my perspective, there was never any kind of material concern but it was an incredible resounding validation of our type of project and what we're trying to do here.

Great. Thanks.

Thank you, J. I should probably add that just this past Tuesday, the Storey County commissioners, the existing commissioners were just asked to validate the special use permit amendment that our planning commission approved back in August and there was a three to nothing unanimous vote in support of that amendment, so that's just very much a continuation of what we've been experiencing with this great county over the last number of years.

Thank you. [Mark Purette], and he is a private investor.

Hello, Corrado. It's [Mark Peterzach]. Could you speak to the large drop in the share price in the days prior to the announcement of the public offering and the growing interest, short interest in your stock?

Yes, I can in part, Mark, thank you very much for the question. I think that from my perspective, we had a very good, I would say, momentum that was in the stock leading up to the first pour, not perfectly but it did coincide with the post, the last post Bernanke comments on announcing QE3 and the resulting run up of gold to almost $1,800.

The first pour, we thought was just an absolutely fantastic objective and set the stage for more but there seemed to be, from that point forward, some loss of momentum that I believe did also coincide with the gold price sort of retracting back down. But I think there was more of an evolution in September and in October of this increasing skepticism about junior companies that aren't producing positive cash flow and certainly the junior exploration folks, the market has been very, very tough on those people. I think probably people are watching balance sheets and performance, even more closely than they have before. I think there's a strong sentiment about poor project management in the industry and I think there's very, very high liquidity fears and so I think that there is no precise answer, but we definitely saw a trend that affected us if not even more in that month of October, sort of down if you will.

I really can't speak to the day or two before, it was very disappointing to us. We are proud and happy that there is such strong and immediate access if needed to capital, we believe that now we have a very, very strong balance sheet. We don't see it impairing in any way, shape or form the value creation that we have to take. We think that and we intended the dilution to be minimal. We kept it small, it was a little higher than it could have been with better pricing but going into the holidays and going into the very aggressive ramp up and frankly, having signed up the MOU with the BLM, at least we knew it was imminent.

We felt it was critical to just put the capital raise behind us and march forward, I think similar to what happened last February and I think it's going to bode very, very well for us moving forward. But I don't know specifically about the days before. I do know the short interest was growing for a period, it's not in any way, shape or form monumental or necessarily even concerning. In part, it's a little annoying but in part, it does speak to some of the sentiment in the market. There is pervasive fear of liquidity and capital resources and from what we heard at the conference, it's only going to get tougher.

Okay, thank you.

Thank you, Mark. Thank you very much.

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

Well I'd just like to summarize by thanking everybody for the interest. We have well over and usually do, 100 participants on the call. I wish all of you a very safe and Happy Thanksgiving and please feel free, if you have any follow-ups or if there's something we missed, don't hesitate to call myself, Kim Shipley, we're always happy to answer any questions. Thank you so much.

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.