Comstock Inc (LODE) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Comstock Mining Announces Second Quarter 2014 Results and business update conference call. (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, John, and good morning, everyone. It's Corrado here, President and CEO of Comstock Mining. Welcome to our 2014 second-quarter conference call. I'm going to provide a brief summary of the information included in our press release from this morning and an overview of the financials that were filed on our Form 10-Q last night.

I'm pleased to say that this reporting cycle is our fastest to date, shaving off another seven days off of what was already an accelerated first-quarter filing. I mentioned last quarter that we would continue improving on the speed, relevance, and timeliness of our external reporting. And this not only improves the quality and the transparency of our communications; but, frankly, it is significantly reducing our both internal and external accounting and auditing costs, which is very important.

Based on what we've already achieved in the first and second quarter, in terms of these reductions, we're targeting over 50% reduction in our audit and audit-related fees from this year over last year; an important part of our cost reductions, and it's happening.

I'm also going to provide an update on the overall cost reduction effort, and our outlook for the remainder of 2014, as our cash and cost performance has really turned a corner this quarter, and positions us extremely well in terms of our performance going forward.

If you don't have a copy of today's release, you'll find a copy on our website at www.ComstockMining.com, under news/press-releases.

I'm also proud to say that we recently received a first-place Safety Award from the Nevada Mining Association. This isn't only a strong acknowledgment of our philosophy and our approach of Comstock's responsible mining, but it's also especially gratifying to our team, as the award pertains to our very first full year of production in 2013. As I see it and understand it, Barrick and Newmont were the only other winners in the medium mine operation category, which represents mine projects sized between 100 and 299 employees. And so it's an incredible achievement for our whole team, and really is reflective of the attitude and culture that we're trying to build with a quality system.

Before I move on, let me just remind you that, in addition to the outlook, I may make other forward-looking statements on the call. Any statement relating to matters that are not historical facts may constitute forward-looking statements. The statements are based on current expectations, and the statements are also subject to the same risks and uncertainties that could cause actual results to differ materially. These risks are, and always have been, detailed in the reports filed by the Company with the SEC. The risks are also identified in this morning's release. And all forward-looking statements made during this call are subject to those same risks, and other risks that we can't identify.

So with that, let me briefly overview the quarterly results. We achieved significant progress in four primary focus areas so far this year: first, lowering our cost; second, strengthening our balance sheet; third, enhancing our mine plan and operations, including the grades and the scheduling of all of that; and, fourth, expanding our land position. And I'll mention later, not only the actual expansion of the land, but the rezoning and the improvement of its character for more productive use, really has been tremendous so far this year.

Our cash costs of mining for the second quarter was below $850 an ounce, despite challenging strip ratios so far this year that we've been talking about. This bodes extremely well for our performance in the second half of this year, as our rate of production and our strip ratios continue to improve. The cash incurred during the quarter for our operation -- some of which is expense, some of which goes into inventory -- was at an all-time low for our operation. This is very important because we're operating and moving as much, or more, material in total as we ever have. So we're moving more material and we're spending less money, and we're being more productive overall.

We netted a small positive cash flow from operations this quarter against a mining revenue from the sale of golds totaling $6 million. This is probably the most important fact in our performance turning the corner from using cash in operations to generating cash from operations. And again, despite some challenging metrics in terms of the higher strip ratios. So we're very, very happy to not only turn that corner and position the Company for this kind of growth, but we're doing it with still a tremendous amount of opportunity for improvement.

Overall gold and silver shipments totaled 4,645 ounces of gold and 48,621 ounces of silver, respectively, in the second quarter; the silver netting us about $1 million in byproduct credits. The ounces were slightly higher than last quarter as we mined over 940,000 tons of total material.

Strip ratios have finally begun to decline in July, and we've laid out a production schedule for the next 12 months, and we have visibility to an continuously improving environment. There's variation in that as we go; but on average, and in total, we are moving into improvements.

On the grade perspective, gold and silver grades continued improving, and the weighted average for the second quarter was 0.034 ounces per ton gold, and 0.546 ounces per ton silver, as compared to the prior year, where it was 0.017 ounces per ton gold and 0.284 ounces per ton silver.

A couple of notable points there: the grades effectively doubled from last year to this year, in terms of average performance. That's outstanding. And the ratio of silver to gold is actually up higher than 10 to 1. We expected the ratio of silver to gold to be up higher, as the Lucerne patent and the Lucerne Mine area has some of the higher ratios of silver to gold. On average, it can be as high as 20 to 1 in our mine plan, and at certain points it could even be higher. But, overall, I think everybody understands our ratio is about 10 to 1. We're just working through an area where it's higher than that right now.

During the first six months we've poured 9,152 ounces of gold and 97,979 ounces of silver, averaging above the 10 to 1 that I just talked about, producing almost 100,000 ounces of silver in the first quarter. And that compares to 7,182 ounces of gold in the comparable period last year, and 58,591 ounces of silver in the comparable period. Overall, the 26% improvement in gold, 67% improvement in silver for the six months to date.

Our yields from gold and silver may be one of the best stories to date for us, in terms of performance. The gold and silver yields continued higher than originally expected. For 2013, we were averaging just a little over 68% in terms of the performance during the first quarter, and with some look-back, we updated our estimate to 74%. We reported that last quarter. I'm happy to say that -- and we saw this trend a bit at the end of last year, certainly during the first quarter, but we've updated that estimate to 76% now here in the second quarter. It's obviously good news for us now, but it's especially good in terms of our looking forward in terms of future production and future efficiencies.

We continuously run column tests and simulations of our heap leaching process and our metallurgy, on our own, on-site metallurgical laboratory facilities. And that is done not just to be able to best understand our performance and predict it; but obviously it gives us a strong ability to improve it, as we understand better and better the natures of our ores.

Switching to the cost profile, costs applicable to mining in the quarter were $5.5 million for the second quarter of this year as compared to $8.2 million for the second quarter of last year. That's a 33% decrease from year-on-year, resulting primarily from lower mining, lower equipment costs, lower mining costs, lower blasting costs, lower maintenance and related costs, and even material usages are starting to come down. This decrease, from our perspective, is a very apples-to-apples performance, as we mined almost the exact amount of total material this quarter versus the second quarter of last year.

Last year, we did about just under 950,000 tons in the quarter. This year, we did just under 950,000 tons in the quarter. Our strip ratio was better last year than this year, as I mentioned, but our grades were better this year than last year. So the net of performance is better, but we have a tremendous opportunity now to move forward with a better ratio of mining.

Operating expenses, excluding costs applicable to mining, totaled $3.8 million as compared to $4.4 million. That's a 14% increase comparably. Really what we're seeing in operating expenses is a meaningful reduction in the use of third parties. We had legal expenses associated with some of our external relations last year, including with the BLM. We've had a meaningful amount of positive external relation activities in our communities. Those are stable and reducing. And we look forward to even lower costs in terms of using any type of third-party contractor or consultant, now that the operations and the relations have reached the most stable mode, I would say, than we have ever been in.

Overall year-on-year, cost reductions achieved, when comparing full-year of last year to date, compared to full-year this year to date, is $3.3 million. We've targeted $10 million in total for this year; more than $6 million coming from mining; more than $3 million coming from administration and other operating expenses. But the run rate that we achieved in the second quarter is significantly higher than even the total amounts achieved to date. We're closing in on an $8 million annualized for the second quarter, and that really positions us to deliver the full cost savings that we've talked about for the calendar year, and a run rate coming out of the year that we expect will be even higher.

With the cash costs in the quarter being already below the $850, we're beyond confident that we will achieve the target of below $750 an ounce for this year. And the cash, as I mentioned, in operations -- we used $2.3 million of cash for the six months ended June 30, in operations. But considering $2.4 million of that was in the first quarter, we generated a positive $100,000 of cash from operations in this quarter in our cash flow statement. It's a direct result of these accelerated cost reductions and efficiencies that were experienced in the operation. It's obviously supported by the improving grade profile. And with higher gold prices and lower costs projected, we really see improved financial performance right from this point forward. Our cash at the end of June 30 was $12.2 million.

And so that summarizes, I would say, the most salient financial points. Before I turn to the outlook, let me provide you a current update on some of our permitting activities. They are ongoing, very positive, and very progressive. But during the second quarter, the Storey County Board of Commissioners unanimously approved some very important zoning changes on certain mining claims and other properties that we have located in the Lucerne area. This isn't so dramatic. Some of these zonings were spot zoning inconsistencies that frankly needed to just be cleaned up. We got the full approval to do that.

But this was a critical prerequisite for us proceeding with a request for an expanded special use permit that allows for our expansion to the east, and frankly allows for many, many more things than just that. Our view of this permit modification that we're currently going through is that it really is the last major permitting exercise in Storey County that positions us with the county for all the things that we want to collaborate and do, especially from a mining perspective, in Lucerne. The progress that we've made to date through a series of planning commission meetings has been outstanding.

It's a meaningfully large change in terms of the footprint of what we'll be allowed to do. It has all the right controls in it to ensure that the expansions are done properly, the expansions are done methodically, are done safely. Yet at the same time, it really allows us to pursue all of the business objectives that we have in the area. So we're looking forward to that being completed here in the third quarter, which frankly, is slightly faster than we had internally on our schedule, and certainly well ahead of the immediate need to doing expansions.

But for us, it's critical that we have the right approvals in place even before we start deploying capital for things like engineering, for things like drilling. Even if we can anticipate them as probable, we like to be very disciplined in taking each step properly.

These re-zoned properties are situated, as I said, in Lucerne. They include areas that abut against the historic Justice and Keystone mining claims. They are very near and surrounding the historic Woodville Bonanza plains. And we're doing, as I'll mention in just a minute, some extensive geological expansion in advance of our drilling in specifically those areas, and especially in the Woodville area.

Earlier this year, I think all you know that the Lyon County Board of Commissioners similarly, unanimously, approved landmark zoning changes on certain of the Company's mining properties located down in the Dayton Resource Area. That's our second-largest classified gold and silver resource. We do not have a mine plan or established reserves in the Dayton area yet, but those zoning changes similarly freed up the path for us to make the required investments.

We're working much more closely with the community in terms of those plans. I think we'll see some level of collaborative mine planning; which, from my perspective, would be just outstanding, certainly outstanding from any progressive notion of our plans going forward.

The bottom line, I think, is all the zoning now in the Company's resource areas are zoned consistently with our goals and objectives. It really changes the position for us in terms of immediate expansion in Lucerne and future planning in Dayton. And I think that it's probably not well appreciated how significant the expansion of the overall land area has been, including in the American Flat area for processing, which this zoning or this permit amendment will cover all of, but makes it certain that all of the character of all of our land is proper for what we're trying to do.

So with that, moving to just a brief discussion on exploration. As we did discuss on our last call, we've targeted Lucerne East for our first recommencement of drilling. We do have plans in place from a Lucerne, Dayton, and Spring Valley perspective, but Lucerne will be first. Over the last three months, our geological team has been not only enhancing and improving the production schedule for the mine plan that we're currently implementing on the west, but they spent a tremendous amount of time developing expensive, detailed geological cross-sections and interpretations of both the southeastern portion of Lucerne, near the Donovan Hill, and I would say an equally extensive, detailed geological cross-sectional analysis of the historic Woodville area.

This is now expanded to the point where the interpretations, the cross-sections, the context that we have geologically are more than sufficient for finalizing engineered mine plans and expansions. We haven't done that piece yet; that will take months of work. But we probably have never had a more detailed, more documented, more intimate understanding of that resource. Well beyond -- well beyond, obviously qualifying for resource as we already have; and much, much closer to reserves and expansion of reserves.

So when you think about the work that's been done internally for geological assessment in engineering, and you think about the work that's done externally for expansion in permitting, we're really on the precip of the most significant expansion of both reserves for Lucerne and ultimately methodical expansion of operation.

So, anyone visiting our mines over the next few weeks or months -- and we have quite a few scheduled -- we're happy to share some of those assessments and drawings with you. It's really remarkable. It's exciting, to say the least.

So, just to be clear, we don't need any additional permits to do this drilling. But the way that our schedule is laid out, we want to finalize the amended permit, finalize the expansion, finalize these geological assessments, and then go into the most efficient and effective drilling on the east side of Lucerne that we possibly can.

Turning to outlook and to conclude, as we look forward, our cost reductions, as I said, are already taking effect and continuing now into the third quarter this year with additional actions. We still anticipate our annual expenses, including all mining and processing, to be less than $25 million. That's certain at this point, and a significant reduction over last year, certainly over the $6 million that we targeted. And we're going to try to do better than that. When coupled with the improved production, we're also certain we'll be delivering a cost of less than $750 an ounce. We're still targeting some operational, haulage, and other material use efficiencies for greater savings. And we're still targeting to achieve a 40,000 ounce run rate.

That run rate -- we're going to see improving cash, improving costs. It will take us a little bit longer to get to that highest run rate; but certainly, as we previously said, in the second half of this year. It doesn't seem that we'll need to come anywhere near producing 2 million tons to achieve those same ounces with these higher grades, and so that all plays into the efficiency.

So, in summary, the second quarter was a positive operating cash month for us. We look forward to continuing good and better grades, lower strip rations, lower overall costs, and generating positive cash overall. And our focus really has been solely on the things that contribute to that end.

So, John, with that, why don't we go on to questions?

(Operator Instructions). James Dell, Private Investor.

Listen, where are we at with the NEPA process for Dayton and Spring Valley?

Oh, good question. There's two answers to that. I forgot to mention when I was giving the permit update, we're about two or three months away from the environmental assessment that we currently have ongoing with the BLM to have our expanded haul road. I actually left that out of my prepared remarks, so thank you for saying that. I know that's not your specific question yet, but let me just complete that thought. We are looking towards November/December to have that finalized, and that will authorize the expanded and dedicated haulage for us, which will result in an additional production efficiencies.

The broader question on the federal permitting for the district is still a little premature. We have to do some of the drilling that I just referred to on the east side. Most all of the drilling that we've targeted on the east side is on private land. There is some amount that will be on federal land. And then from that result and that information -- and I would expect that to be, obviously since it's already July, that drilling would be done closer to the end of this year -- we then would have the information that we would need to contemplate the feasibility or the foreseeability of a plan of operations.

And so, I guess answering your question specifically, the soonest that we could foresee doing that would be the end of this year or the very beginning of next year. It's a very important objective for us to get to that point. And so, from my perspective, the permitting that we're doing in Storey County is paramount. The EA with the BLM that's going on right now is progressing very, very well, without a lot of management's time and attention. I think we're moving into the final phases, frankly. And then after the Lucerne permitting is done and some of that drilling is under our belt, the attention will focus to that objective.

So, all the things that we're doing contribute to getting to that point. But I think the last big piece would be assessing those results to drilling, assessing the potential plan of operations, and then making that go or no-go decision.

Okay. So basically, from what I can interpret, you still need to get some more information from your drilling and so forth in the Dayton and Spring Valley areas before you actually step forward with inaugurating the environmental impact statement process, is that correct?

Yes, and I would even segment that a little bit, since the substantial majority of the information I think that would be relevant is Lucerne-based. Dayton is all private, and Spring Valley does have some federal claims, but still probably a step further out in terms of that. I don't see a connection there between Lucerne and Spring Valley. So it's just a question of, I would say, the drilling that we have most immediately targeted for Lucerne.

Right. Now, your Dayton you said is a private property. Is there haul road in place that's going to go through federal land to get to your processing plant? Or are you going to set up another plant in Dayton?

Yes, so the Dayton, from a resource perspective, is all private. The American Flat operating area is all on private land. With extensive and private expansions, there are private connectivities between the two, but not that we've fully established yet. And there are also some federal parcels in between the two. So, that's a question -- I don't think that's a question of if; I think it's a question of exactly how.

Well, exactly. That's what I'm saying.

Yes. So, yes, to the extent that it would (multiple speakers).

In other words, you've got to establish whatever you are going to do with Dayton, whether you are going to set up another production (multiple speakers).

Right. So that's a good point. The extent that we are assessing the district-wide plan, Dayton as a standalone operation is private, and that gives us multiple non-federal alternatives. But if there is deemed the best synergy with American Flat, then there's -- I can envision in my head already, non-federal alternatives. But if the federal alternative is one that we deem would be most foreseeable, most practical, most efficient -- all those words -- then it would be part of the broader plan of operations.

And it's important to say that, as I just said, there's a handful of non-federal alternatives, but we still don't even know what the mine plan is for Dayton, or what the components of all that would be. So, there is still -- I'm not saying those are big or Herculean obstacles; we just don't know them yet.

Okay. Thank you very much. Keep working.

Stephen Shipman, Century Management.

Two questions, Corrado. In layman's terms -- the first one is, in layman's terms, can you walk us through how you are getting from roughly 423 ounces a week now, or this past quarter, to about 750 ounces in the fourth quarter?

Yes, absolutely. It's really, simply the product now of the progression of the mine plan. And so we've completed mining the northern extremity of the Keystone. In fact, we've already fully restored and reclaimed that area of the mine, which was outstanding. We've completed the mining in the Hartford and the Billy the Kid, and we are transitioning now down into the base of the Lucerne. And so the remaining production schedule that we certainly for the next 12 months really reflects a picture of a lower strip ratios, continued good grade; and, all other things being equal, just increasing the rate of ore.

And what I can say, I guess this is the silver lining in the high burden that we've been working through, if we're doing 1 million tons in a quarter and the ratio is, let me say, extremely, like 800 to 150 -- 800 being waste, 150 being ore; and that shifts to 600 to 350 or 300, we have achieved it. So, it's much more a function now of progressing to the better part of the mine plan. Previously that was what we needed to do, but we also needed to reduce our cost. We also needed to complete some of those extremities. We also needed to get some of the reclamation started.

So I feel like the runway now in front of us is almost slowly -- I'm sorry, almost solely the optimization of that mine plan, and the implementation of those better aspects of the mine plan. I will admit even personally that it's been frustrating working through some of these extremities and working through some of these higher strip ratios. There are still aspects of the mine, just because of its nature, it's true nature, that we'll still have higher strip ratios. But on average, we're going to be dropping it meaningfully. Meaningfully -- by magnitudes.

And so that's really way out in front of us. Having said all of that, we're not satisfied yet with the efficiencies that are much, much better. We're not satisfied yet with the cycle times. In certain areas, they are improving dramatically; in others, we have a meaningful opportunity to do more. So I think that we're going to meet our expectation in terms of the rate of ore and ounces. I think we're going to exceed our expectations in terms of the efficiencies and productivities that can go along with it.

Great. And if we were to look at that mine plan, or your business plans, 12 months forward -- so now we're looking at 4Q 2015 instead of 2014 -- what run rate would you expect then?

Yes, so that's a great -- thank you for asking the question that way. Our view is that -- two answers to that. One is that if we stay on our schedule and ahead of the needed schedule with the permit expansion, there are opportunities that where we can start better optimizing even the existing mine plan.

So, said a different way, the existing mine plan for the West stands alone. But if we were able to expand the permit timely, we can start integrating schedules to the east, into the existing schedule. And rather than thinking as the mine as a Western component and Eastern component which are separate -- that's never been the reality -- we'll actually start evolving it to the east and integrating both optimal ore rates, but also efficiencies in design and logistics.

Those will even be further enhanced by the new haul road, where the possibility of going from a 40,000 ounce rate to a higher rate will be right in front of us. Ultimately, I'm starting to migrate my thinking from tons to ounces to throughput. And there are scenarios where even at a 35,000 or 40,000 rate, we're making a lot more money than scenarios where we're at a 50,000 rate.

So, the answer to your question is it can be much higher, 50% higher. And my view is I want to ensure that the cash flow is 50% higher. We're happy if the ounce rate is higher. We'd love for the ton rate to be lower. And one of the things we're seeing clearly, which is only a slight modification from prior discussions, is that obviously we have the capacity to double the rate of tons and double the throughput, all things considered. We have scenarios where we don't have to meaningfully increase the tons, and we can more than double the throughput. So, it's starting to become a more sophisticated view of cash generation, sustaining it, and growth, than just tons. Or ounces, for that matter.

So I think directionally, that's my answer. It could be much higher; 50% higher, certainly. But I don't have the final production schedules and the mine plans to give really specific guidance.

Sure. When do you think your comfort level will be, time-wise, that as we work through the rest of this year, that you can start allocating the excess cash into additional exploration? Is that (multiple speakers)?

We're going to know a lot in September. We're going to know a lot in September. And so the work that's been done internally, both in terms of stabilizing the West, improving the West -- optimizing maybe is the word for the West -- but now extending those structures. They are the same and related geological structures to the East. We've made two significant forays east: one around Donovan Hill, and all that area that frankly sits above the chute zone structurally; and then over up to the north of that, to the Woodville area, the Woodville Bonanza area. And the cross-sections and the structures and the genealogies are tremendously exciting.

And it's probably important to highlight that. We know we have resource there. We drilled it; it's measured; it's indicated; and it's inferred. And that's an asset. We have it. But now as we start to really build out the cross-sections, the structures -- not to a depth of validating that they are there, but to a depth of formulating the mine plan for extraction -- it's looking better and better to the east.

I don't want to overstate that. I don't think I could overstate it from a geological excitement, but from a still a lot of work to do, I think one of the things we really have matured on is anybody can engineer and economic shelf and tell you you have feasibility, and a lot of people can engineer a very good mine plan that you could actually mine profitably. But we have matured into understanding what some of the specific obstacles are.

In an epithermal district, we've taken on the challenges of actually mining some of what I would say are the most narrow and difficult aspects on the west. It was almost like -- it was on-the-job training, not in a negative way. Because we were doing -- we were learning and exploiting that geology as we hoped to, but we just created stronger and stronger competencies to start figuring out even better ways to access it as we move east.

When we move east, though, it's not a continuation of the same narrow, challenging mine. You get some expansion. You get some space. And that will allow us more opportunities, let's say, more variables for optimization. So, and I made the point purposely that when folks come to visit the mine, we're really in a position to share this stuff. Individually and stand-alone, there's no problems with us sharing the details. But I think it really enhances people's understanding of the geology.

And then ultimately, to that earlier question, it will all come together. And I believe that just getting the expansion of the permit in Storey County, and just progressing towards the broader engineered mine plan to include the east, will allow us to record significant amounts of reserves, which I know a portion of the investment community is very keen to see. We're tracking toward that again at the end of this year, beginning of next year. It's going to be very tightly in that timeframe. So then we will be looking forward more than 12 months, and that's what I'm really looking forward to.

And final question. Corrado, can you see any need for additional capital raise?

No, we are in a good position to -- generating cash from ops. We've got good cash position on the balance sheet. We're being very, very judicious in the allocation. Very, very careful. I think that the care is just being extremely prudent.

In other words, we're using logical sequences to not only determine the best use, but also when to deploy it most safely. And that's, I think, our recipe for sustaining all this and moving it the way we're going. I think that by -- and this is a great example of it. We already have the drill holes identified for the East. And I think that, on a stand-alone basis, that would rate as a fantastic program with great returns in terms of increasing the ounces in the ground and improving our mine planning ability.

But the work that's just been done in the last two or three months just laser-sharpens where and how we'd best like to drill, and where and how it would give us the most immediate mineable ounces following that drilling, and then getting the permit. We are already permitted to drill, but we're not permitted to mine. So, theoretically, we wouldn't want to spend money in the ground until we're certain that we could progress it. And so we're being very, very, very extreme in that sequence of diligencing. And I think that's the way to not only to get the best return on capital, but to preserve it, and ensure we don't do anything that's inefficient.

In drilling, the dollars are high, and we've never been complacent about it. We've always had good productivity. But what I'm seeing is that good can become really, really good. Really, really good can become great. So that's what we're positioning ourselves for.

Okay, thanks a lot, Corrado.

Lawrence Demy, Private Investor.

I have several questions, but I'll try to limit it. I've got my tax hat on this morning. I'm a CPA, obviously. Are you guys looking into the qualified domestic production activities deduction, and the R&D tax credits? Even though you are not net profitable, are you generating these things for carryforward purposes?

Yes, so we haven't -- I'm very, very familiar with the R&D tax credit. And the beauty on the R&D tax credit side of it is the required documentation for obtaining that credit, and the variables needed for that credit we have in place, almost inherently because of the extreme requirements of our technical reporting. Anything that we've done that qualifies as experimentation and new research we can get for. We'll have to document and apply for that in a separate way. Not only has it been a priority as to your point that we're not currently in a net taxpaying position, but that doesn't mean there isn't ultimately some value there. I'm not sure yet what percentage of the actual development that we're doing will qualify, but I'm certain that just by the nature of some of it, that it will.

And to your second area, we just commissioned the project, and, to be frank, it's in part because of our ability to shorten the cycle times on the closing cycle. We freed up meaningful capacity of a couple of our financial managers so that the shift will be from closing, reporting, Sarbanes-Oxley; and last, the listing compliance, which we now have strong handle on and are doing fast, to planning and analysis for other opportunities. Both in terms of ensuring that we're planning the right amount of net proceeds taxes locally, which is cash taxes that we'll actually start to pay in the second half of this year, per our business plan.

And then starting to look at some of the opportunities for incentives -- there's some incentives for building an expansion that we're eligible. There's some incentives for job training and hiring that we're eligible; and then some of the bigger, broader ones that you referred to. We have a mini project called BIG where we're looking at business incentive grants and tax credits a little bit more holistically. It's not a big, big project, but it's one that just requires some dedicated focus.

As a separate aside, we're also looking at now -- because we got our 501(c)(3) status for our foundation -- we're looking at opportunities for grants that wouldn't impact the mine company, but would certainly impact some of the foundation's work for restoration and preservation. Which does impact the mining company, because anything that enhances the land and the land value certainly benefits that largest landowner. So, it's all connected; it's not something that we've had as a priority, obviously. But it's something that we're now going to at least do a hard assessment of what the opportunities are.

Sounds good. And what about those commemoratives that you sold out of? Are you going to go back to producing those soon?

Yes. We were driving towards an announcement in advance of this call. But I would say, stay tuned for an announcement within the next week. We've secured the supply chain in terms of ensuring that we could provide 100% certified pure Comstock silver commemoratives. We're looking at gold as well, but we are going to meaningfully with silver. We have a design for the Nevada 150 commemorative. It will have some aspects of the state reflected, and some aspects of the mining company reflected, essentially commemorating the Comstock Lode's role in Nevada becoming a state and celebrating its 150th.

We're going to be -- we just announced, and we're going to be announcing more broadly, a fundraiser for the foundation that will be a portrait. And I'm stunned by this, but essentially every living governor, the full Nevada delegation in terms of our senators -- Harry Reid and Dean Heller; Mark Amodei, our Congressman; and other notable, important people have agreed to pose in a portrait -- in fact, have all posed in this portrait commemorating the Nevada 150. It's going to be -- the portrait is going to be entitled Nine Cheers for the Silver State. It's going to raise well over six figures for the foundation, but it's also going to co-promote this silver coin or this silver commemorative, if you will.

And so people will be able to buy the commemorative in conjunction with this portrait that we're selling 150 of them, not coincidentally. And then they will come with a commemorative, but you can also buy the commemorative separately. I'm sure after this call I'm going to get yelled at for letting that cat out of the bag before the official announcement went out, but I don't think it's that fatal to anybody.

Well, thank you for all your hard work and dedication. You're doing great. Thanks.

John Leonard, Singular Research.

First off, congrats on a great quarter and continued progress.

Thank you.

A few questions first. Is the next 43-101 report still expected to be released in the first quarter of 2015? I think this would be a fairly significant catalyst, as it would be more formal, and a visible sign of your continued resource growth.

Yes. There's no question that our next technical report will be in that timeframe, and there's no question in my mind that it will reflect significant resource growth. To the earlier caller -- and there is a question on this one, but we're pushing -- if we get these permit expansions and if we can get some of these deeper assessments done, I think it might reflect more than just a resource expansion and actually solidify the strong reserve profile and outlook for Lucerne.

So, yes, I agree with you wholeheartedly. And I think we're pushing for an even more complete update. But a resource update in itself would -- agree would be extremely material, and important to highlight.

Okay, great, thanks. Then the second question is, can you provide some additional color on when you expect to reach that 40,000 ounce run rate; and, by extension, the $750 ounce cash cost? I know you just mentioned you expect that in the second half of this year. So are we looking at a late 3Q event? Or should we consider this a 4Q event?

I think it's a fourth-quarter event. Let me put three objectives in the same sentence. I think from our perspective, number-one, absolutely most critical -- get to full positive cash generation. Number two, get those costs below, and well below $750 an ounce. And I'd like to say that I believe both of those objectives will be achieved before hitting 40,000 ounces, based on the performance that we've had, and what we're seeing now. And then the 40,000 will follow, and that's the one that we have -- the control that we have over that one, if I could say it, barely, is the faster we can get through the mine plan.

That one is more dependent on getting to the aspect of the mine, where the grade and the strip ratio profile are such that we're there. So, yes, I would say fourth quarter; for our plan, it's right where it is. But I'd like to achieve those financial objectives, and I believe that we will, before we get there. And then it would just improve as we grow that revenue line.

Okay, great, thanks. That's all I have. And, again, congrats on the quarter.

Thanks, John.

(Operator Instructions). Robert Shecker, Private Investor.

I was just thinking what you thought on that gold to silver ratio, silver being 63 -- or gold being 63 times the price of silver. I think that's a bit out of line; what are your thoughts on that?

I think its way out of line. I think silver has been oversold, well beyond gold. I think that silver's potential for recovery is higher than gold. I believe that the minority of the financial community that's been saying that gold is fundamentally is oversold, that gold in financial markets and currency and monetary policy activities are supportive of gold, are starting to prove right. I think that there's still a lot to see in that regard, and I'm not calling gold price for the second half of the year. But certainly I think there's a shift in sentiment. It's not a full shift. It's a beginning of a shift, whereas in December and January, everybody was absolutely negative on gold and silver especially, and now there's a shift and a stabilization.

I think that from a silver perspective, which is particularly important to us, we are now moving -- now that we have secured the supply chain that we can certify our own metal -- a new business objective of ours is selling the highest percentage of our silver possible in other than spot rate bullion.

So I believe that silver will recover faster. To your question, I don't know exactly when. I don't think 65 ratios are going to be sustainable in the market sentiment, but I think that we're going to move faster to get more for our silver than maybe even the market. So, we're bullish on silver, and we're more bullish on what we're going to do with our silver, if that's a fair way to answer the question.

Yes, thank you so much. Appreciate that.

Jack Albright, Private Investor.

I just want to thank you, and Comstock Mining and yourself, for the wonderful convention you had for us. You were very informative and very good.

I appreciate you coming. We had a very large crowd at the annual meeting this year, well over 50 people, maybe even 70 or more. We had Storey County come and speak about -- not Comstock Mining, per se -- but about what they're doing as a county and as a community. And it's very exciting; it's very partnering; it's very supportive; and it was a pleasure to have you there, Jack.

Well, thank you. My wife enjoyed that train ride. As a matter of fact, she had the opportunity to sit with your wife. And my wife said your wife was very informative. More so about (multiple speakers).

My wife said the same thing. That's funny that you mentioned that. And for everyone on the call, after our annual meeting agenda, a large group of people, including our wives, took the V&T railroad from Virginia City all the way around American Flats. And not only do you get a bird's eye view of the entire mining operation, but you get to ride on a late-1800 steam engine, and it was spectacular.

It was, and we enjoyed that. Okay, and get to the good stuff now, I think that the last caller asked you the same question in a roundabout way about public offering. Do you expect any in the future?

I'm sorry. Say that again, Jack?

Public offering.

No, we have no plans. I think someone asked that question. We're in a good cash position. We're moving positive cash from operations and improving from here forward, so no plans for that.

Okay. I know you compare Comstock Mining with Newmont Mining quite a bit. Newmont Mining is quite high in their stock, the latest $25. How can you compare your stock with them? Are there any particular reason to do?

Yes, no, just one, just one. We wouldn't otherwise compare ourselves to them. But the Nevada Mining Association announced Safety Awards for all categories of miners -- small, medium, and large. And we were -- there were only three winners in the medium category for first place. And I didn't mention this earlier, but the award for first place was because we had no reportable injuries. And so Newmont and Barrick have many, many projects, as you can imagine, but they have one each in our size category where they also had no reportable injuries. So, from an industry perspective, I'm proud to be in that category and that company when it comes to safety. Otherwise, I don't have a lot of basis for comparing us to those guys. They are much bigger and global.

That's definitely true. I just wanted to wanted to get -- bring it up several times. So, not today, but in the past. When do you estimate -- without going into too much of (technical difficulty) forward statement -- when do you think the stock would reach $2 or above?

I think we should be there now.

This should be at (laughter).

I think from a company performance, I think you are going to see some meaningful catalysts in September, both with our permit expansions and our financial performance. I think you're going to see catalysts after September with our drilling and resource expansion. And to John's comment earlier, I think in the first quarter you're going to see updated resource reporting, and potentially even reserves expanding that will be very, very strong catalysts and just compel us well beyond those numbers.

So, without predicting a price and a timeframe, certainly between now and January and February we're going to have a lot of news flow and a lot of performance to be talking about. So I hope that bodes well for that question.

Well, I hope so, too. Okay, well, that's pretty much all I really had to say. But there is one other comment my wife wanted me to ask you. When we took that train ride, she could not see a whole lot of activity down at the mine, mostly talking about big trucks moving around.

Yes.

That concerned her, because other mines we went through (technical difficulty) in the past, it's noisy; trucks moving back and forth, and things happening. But we didn't see too much of that.

Yes, yes. That's an easy answer, though. That's an easy answer. So let me answer it, hitting all three phases of our production. So, the Merrill-Crowe facility -- which you would have saw from the train -- runs 24 by 7, and it's silent. It's just the fluid flowing through the heap leach and into the ponds. And you can rest assured we are running 24 by 7 processing ore, and we're pouring every single week. So that's for sure.

The crusher, by design, is oversized. We didn't want to ever have our system be constrained by our crusher. And the good news there, and part of the reason we're able to save costs over the last six months, is that we only need to run the crusher three days a week to keep up with the ore rate from the mine. And so I'm sure that -- I'm not sure, to be honest, if it was running or not, that day. Because even the crusher, from the train, wouldn't be something you could hear very well, but you'd be able to see us loading the hopper.

Third, and the most significant answer to your question, is we've had days where because of the strip ratio, the 90% or 80% of the hauling and mining was contained to the actual pit. So if you are driving American Flats on a different day, you could see a truck coming up the way every two minutes with ore. On that day, they may have been hustling and bustling in the mine, not at the facility. So you don't have anything -- you can assure her that we are running full. It just depends on what type of activity we're doing on what day.

Well, the pour ratio was great (multiple speakers).

Yes.

Obviously, her concern about where the trucks (multiple speakers).

Yes, yes. They were -- there's no question they were in the mine, and just less frequently coming up to the crusher on that day. But we've had days where it's the exact opposite.

Okay. I'll tell her that. Okay, well, like I said, we really enjoyed our visit there, and we thank you very much for doing a great job.

Same here, Jack. Thank you very much.

Okay, have a great day.

Mr. De Gasperis, we have no further questions at this time.

All right, all. Thank you so much for the interest. Thank you for the attention, and I look forward to seeing quite a few of you. I know we have some major institutions scheduled to come and visit here in July and in August. And we're looking forward to continuing on the financial improvement, the mine plan, and talking to you again in the third quarter. Thank you all.

Ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation. You may now disconnect your lines, and have a great day.