Comstock Inc (LODE) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Comstock Mining Second Quarter 2017 Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Mr. Corrado De Gasperis. Please go ahead.

Thank you, Mariah, and good morning, everyone. It's Corrado here, and welcome to our 2017 Second Quarter Conference Call. We completed our second quarter review and filed our financial statements on Form 10-Q last night. This morning, we also released a summary of those results and selected strategic and financial highlights in that press release. If you haven't seen that press release, please go to our website at www.comstockmining.com under News/Press releases.

My comments today will briefly discuss results to-date and the good progress so far and strategic initiatives. We'll keep the same if not a briefer format for the call, and I will certainly be available for the Q&A after the prepared remarks. As always, any statements relating to matters that are not purely historical facts may constitute forward-looking statements. These forward-looking statements are based on current expectations and we 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 and also in this morning's release, and all the forward-looking statements made during this call are also subject to those same and other risks that we can't identify.

I am going to be very concise and brief with the prepared remarks this morning, just a minute or 2 on cost performance, and then a good update on the strategic activities and ventures and that will leave us some more time for Q&A.

First with cost. Our performance in the first half of this year does put us at an all-time low for our history as a fully permitted infrastructure junior mining company. And as we've discussed at the Annual Meeting, we are very focused on getting them even lower. We've given some guidance for the full year in the 10-Q, and the guidance for the run-rate is to about $1 million lower than what we're even experiencing for the full calendar year this year. Meaning that we expect to get our run-rate to below $3.5 million, and we're at that rate now, and we will continue that rate forward and we will keep working on it, lower.

G&A cost were record low of $1.6 million for the 6 months ended June 30, with a meaningful amount of those dollars shifting to a good amount of diligence on our joint venture work, a good amount of work on the collaboration, some of that's legal support. We did a tremendous amount of mineral land title work in the first 6 months of this year, including outside titlement that was in part due to our refinancing with just outstanding across-the-board results. We probably have one of the strongest, cleanest best land positions, especially for historic district but bar none.

Our real estate segment actually reflected a very positive results year-to-date, both positive cash flow and positive GAAP profits, including record low cost. This is true despite overall growing our land position and growing our footprint.

Environmental and reclamation costs were also at a record low. In this regard, we were slightly below -- 20-some-percent below the prior period, but we had a tremendous amount of activity in the first half of this year on just water mitigation and water management. So the good news is the costs are lower, the good news is about 1/3 of those costs are already eliminated and going lower. And I think the best news is we're fully safe and fully compliant with all of our environmental activities in all of our permits.

As I mentioned a little bit earlier, we've been spending a little bit more time transactionally. We've also been spending a little bit more time on the capital market front, that includes both updating our investors, targeting new investors and starting to gain some strong momentum with interest. I think that does reflect having put the restructuring and cost-reducing activities substantially behind us, that does reflect progress being made on finally moving our business model forward. But we're clearly getting good interest. It's not lock-in. It certainly hasn't happened overnight. It feels like we've been working at this almost 6 to 9 months, but we're clearly getting some traction. We have good liquidity certainly in our trading. The last 90 days has been remarkable. We ended the quarter with over $1 million of cash. I mentioned last quarter that we would expect to maintain at least $0.5 million of cash. We bumped that number up to at least $1 million. We really want to make sure that we have the wherewithal to accomplish everything that we're setting out to do. Bottom line, we have that financial wherewithal and everything that we're trying to do is very, very focused on being meaningfully accretive, largely accretive and it's starting to happen.

Let's shift over to those strategic activities. Let me first start with the Lucerne Mine project. This has been a sore spot for us over the last 18 months, but we spent the last few months advancing discussions on a mining joint venture for this project. We've done more than just discuss. We've been very productive in structuring an agreement. We've been very diligent in making sure that all of the assets for the Lucerne Mine project are enabled, entitled, properly established, positioned to do this. We're not negotiating economics in that regard, that's all done. But we're working very hard to ensure that the arrangement is protective of our investors, our assets and certainly, our potential partners. Personally, I'm confident that we'll have -- that we'll have the process resolved and announced, and I expect it to be this month. These transactions are certainly never-guaranteed business case. We've advanced conceptual mine planning. As I mentioned, we're relying the specific Lucerne assets into one project. And we -- we're most certainly positioned to accelerate the development. Some things have come out of this work that have been very positive all around and one way or another, we're focused on bringing our projects to a full feasibility study. That means establishing our mine plans, that means establishing proven and probable reserves, that means having real time lines. And this is 1 of the 3 ventures that we have that we're working on that, in progress.

The next one I'd like to talk about and let me stick with Lucerne on this discussion is that during the second quarter, we did sign and enter into a joint collaboration agreement. Frankly, just to see if we could extract more metal, primarily, silver from the existing heap leach pad. As you guys know, you guys and gals know that our leach pad has all of the Lucerne ore from the last 4 years of mining activity. We're currently running simulations with this partner on that material, using an alternative processing technology that's proprietary with this partner. It's not Cycladex. But I don't want to confuse the 2. This is a more advanced, established processing technology. It is not cyanide-based, but it is -- this is also a proven in different applications. And is most -- it's been designed and it's most effective for extracting silver. I think from our perspective, cyanide still leads the path in terms of gold extraction and the efficiency of extracting gold from ore, but we see somethings here that tell us that silver might be better.

We've extracted almost 60% of our silver from this pad with cyanide, which is probably at the highest end of almost all Nevada standards, but that still means that 40% of the metal that is still sitting residual in the pad. And so this project is really designed to see if we can get a meaningful amount of that silver out.

If it was successful, it means we'd be extracting silver again in the reasonably near future, but it's still being tested with our ores. It's being tested in the Reno area, both at independent labs and with our partner's process, and I look forward to giving you updates on that. That's a nice segue actually, into -- an update on Cycladex. We put out a very nice press release out a few weeks ago on the column test that Cycladex had run on site. As most of you already know, we're an investor in Cycladex, but we're also partnering on developing this non-cyanide based leaching process. We ran Cycladex materials against cyanide. So we really designed this test safely for ourselves, meaning we were paralleling cyanide with non-cyanide solutions and very interested in the results both ways. We actually felt pretty confident on what the cyanide results would look like. Because in 2011, we did a tremendous amount of column testing in Reno with Dayton material, and we yielded an average over 80%. We were very happy with that. But these columns came out 82% to 85% with cyanide for gold, which is outstanding. But in both cases, cyanide and non-cyanide, we had very, very fast yields. The 82% to 85% was a 25-day marker. The Cycladex numbers were closing in at 80% at that same 25 days. So very good.

In the silver's case, Cycladex performed better than cyanide. One thing that's very important to clarify here is that when it comes to yields and speed, we were reasonably confident that we would be getting these kind of results. It's still thrilling obviously to get them. But the science in terms of extraction has been known pretty well for a while. What we're really working on is the specific consumption of these materials in the process, meaning the less that gets consumed, the cheaper it is and the breakthrough here will be proving that it's cheaper. And we're running a series of tests with Cycladex now to do that. They've also brought in some of the world's largest material science companies, companies whose names would be recognized. And there is joint development activities going on. Testing and trialing different materials to see what's the cheapest, lowest consumptions could be.

We're very -- we're cautiously optimistic. I would say this has been a very safe investment for us. Because it's mainly been using federal funds to advance these different technologies, while we are providing the platform to do it most efficiently.

While I wrap that up, let me say that we're also working on 2 other ventures, they're smaller in nature, but not necessarily less exciting. In both cases, it would expand our mining potential, it would certainly reduce our cost and improve ultimately our land position. We expect that we should have some announcements coming with those by early September. So hopefully, so far I've given you 2 sort of perspectives, 2 sets of context on us. We're working extremely hard to have the lowest possible cost platform to be as efficient and not waste $1, and we're working effectively now in allocating our time away from blocking and tackling and very hard towards mine development, exploration, development, technologies that increase feasibility, economic feasibility and ultimately getting to those economic feasibilities for both our target mines, so that there is a prospect to mine going forward. We really enjoy doing that a lot more. And so let me close with the Dayton project. We have been working internally very hard to advance the Dayton Resources. We've been doing it frugally. We've been doing with our internal resources to put together a production-ready mine plan within 2 years. That means publishing proven and probable reserves, that means having production schedules, that means being ready to get back into production. That metallurgy work yielding 82% to 85% in just 25 days strongly enhances what we believe we already have, but we haven't stopped there. We've also developed some specific drill programs. These are new drill programs based on updated analysis of prior geophysical studies that we took in and correlated with surface testing that we did. We correlated with additional and new drilling. That had been done. And it resulted in a much stronger interpretation of the geology.

If you guys get a chance to, there is a figure in the press release as well as in the 10-Q. Page 19 of the 10-Q, which not only shows the geophysical scan that we published before, but it shows new interpretation of structures and veins that overlay on the Dayton Resource, but then extrapolate all the way down for about 1.5 mile into the Spring Valley. Conceptually, Spring Valley has always been a tremendous target for us, but technically now, we're really calibrating on some very specific targets and structures. That image also depicts half a dozen drill holes that have been put in to try to validate those interpretations with universal success across those drill holes. So, so far the geophysics, the interpretations and the limited drilling to-date really tells us this is a big target. Ultimately, we've already done economic shell and mine planning. We've disclosed in the 10-Q that we brought in SRK late last year and early this year to corroborate what we believe we already know. That corroboration was 100%. The economic shells and mine plans that we've already developed for the North Dayton have been reviewed to by third parties. What we're very interested in is doubling, tripling, quadrupling, quintupling that resource into a much, much bigger reserve. So that work is moving forward. We'll continue to give updates as we go. But in summary, just 2 or 3 points and we'll go to questions. We are marching towards Dayton feasibility come hell or high water to have these production plans ready to go. In 2 years, and we'll very likely start some of the permitting processes associated with Dayton later this year. Recall that the Lucerne project is fully permitted from every perspective. The Dayton project is permitted for exploration, drilling and development, but there would be the additional permits ultimately for production.

Lucerne is on the verge of a venture that could accelerate developments, validate reasonably quickly, proven and probable reserves within a year I think, and move us back toward production in a couple of years as well. Lucerne it has a double head to the coin. In one regard, it's fully permitted and could move a lot faster. But in another regard, it's bigger and more complex, and could take a little bit more development time. Certainly, the permitting side of that is not the risk. It's just the amount of time and diligence that we put into the development. Regardless, we see efficient paths to those proven and probable reserves really, frankly, with or without a partner. But in this context, we like the JV model. We have 2 other existing ventures in place, Cycladex and one other in the similar vein. The Cycladex to collaborate, enhance feasibility with potentially new business models emerging as well. In this case, it's -- we're being safe, right? We're doing this on our partners, some of our partners time. And if there's success, it applies directly to our mines. But if there's success, it could create new business models that will emerge well beyond our mines, truly killing 2, maybe in some cases 3 birds with 1 stone. We have those 2 other smaller JV potentials that I mentioned that we'll be talking about soon. And clearly, our time has been redeployed from more mundane activities that were necessary but not sufficient to activities that we believe will sufficient to deliver the value depicted in our plan. I really do appreciate the patience, but it is now happening. So I will leave my prepared remarks to that. Mariah, if you're there, could you please turn out to Q&A?

(Operator Instructions) We'll take our first question from Mike [Osweiler].

I'm an individual investor. I just had a quick question. Any word on when this joint venture partners going to be made public?

Yes. It would -- it really would be upon signing and closing the definitive agreements. We're under confidentiality. Frankly, as you know it's difficult sometimes to keep those confidentiality. So we've tried to be very prudent in disclosing what we can. Obviously, the risk of talking about it in advance if it doesn't happen, is that it doesn't happen. But these activities have been very, very collaborative, very productive. We feel like we're moving forward, regardless. So hopefully, it will be this month.

Hopefully this month. Okay. Great.

And we'll take the next question from Harvey Redco, private investor.

Can you give us a little update on what's happening with the stock? I'm noticing that just today's performance is already up to an excess of 13 million shares. Do you have any new institutional investors that are taking a look at the company?

Yes. I think that is for sure. We've -- it's always -- this is always a double-headed coin too, right? Liquidity is a very, very good thing. We certainly think from our investors perspective, it's a risk reducer. The more liquid the stock, the better for our investors. But liquidity also seems to beget liquidity. So the answer to your question it really wasn't until April that we were starting to target the update to our story. We didn't feel prior to then -- prior to the refinancing and getting out of that pretty difficult first quarter, that we weren't going to enough traction with the go-forward activities. We are absolutely aware of institutional investment, frankly, coast-to-coast, right? We have -- we see pockets on the East Coast, we see pockets on the West Coast. We haven't gotten some inquiries from some names that are gratifying, I guess, I would say. On the flip side is, there is obviously someone selling when someone is buying, right? And as we were marching below $0.15, I think I mentioned on the last call, there is a noose hanging in my closet, and I kept eyeing it, kill myself. But we kept the faith and we just kept marching forward. And I think for me the most important thing that the business model has good traction, the business model is moving forward, nowhere near as fast as we wanted to. We're trying to be diligent and patient, but we're also inpatient. We have a sense of urgency. So I think you'll see -- if you have record days, I don't expect you'll see that too often, right? But I think you've seen elevated level. I think it's here to stay. And I think we're working very, very hard on it. Maybe one other a bit of color. I've never had a lot of success working with third-party IR firms. But we've connected with 2 or 3 professionals that have really worked their asses off for us, communicating effectively the story even before it was gaining traction and setting a lot of foundation. So I don't think it's luck, I think it's a tremendously hard effort. It's a high maintenance effort. The -- when you're selling lands and paying off debt and trying to get traction with new technologies and developing exciting mines, it's -- it takes a little handholding, it takes a little explanation, but we're getting there. Our hope is in next 6 months, this thing simplifies dramatically and starts moving a lot faster. So that's a best I can offer right now. I'm sure people will be looking towards the filings in the next few weeks or so to see who is accumulating. And it's good. I think net-net, it's good.

Is the potential joining partner allowed to be purchasing in the open market or are they under a different agreement?

No, no, no. We're under -- anybody that has information that would be considered material, not public regardless of agreements can't be trading in stock. So we're not aware of any of that kind of stuff happening.

No, I'm referring to the joint minor partnership.

Yes. No, I wouldn't imagine at all. No.

Okay. Because it would seems like an opportunity, if there are going to be doing the digging that they know what the value of the stock is.

No. We're seeing it from institutional funds.

Okay. From the real estate standpoint and the water standpoint, how are...

Yes, good. I went a little skinny in my prepared remarks there, so thanks for the question. Lot of activity happening. First and foremost, we've said about 18x since last year that this new USA Parkway was the critical catalyst. It was originally scheduled for December, but there was a lot of rumor mill that it was going to be done by the end of September. Last week, the Nevada Department of Transportation announced the ribbon cutting on August 28, with full open functionality on September 8. So we could not be happier with that project coming in literally a little bit ahead of schedule and presumably on budget for the state. When it's on time, it usually is on budget. They also completed already without fanfare or announcement, the roundabout right on Highway 50 that USA Parkway will connect into. That roundabout is in immediate proximity of our industrial property and our water rights. And it looks gorgeous, right? So the whole area is developing in a way that -- it's hard to say in a way that was expected. It's probably more appropriate to say in a way that everybody was crossing their fingers and holding their breath that it would. So kudos to the state for spending $88 million and committing another $45 million to expand Highway 50 up and down the corridor. That -- all of that touches our land and our dirt, so that couldn't be better. More immediately, got updates from our brokers last Friday. And there are multiple properties going into escrow around us, some smaller ones. And there are multiple parties diligencing our properties in our lands and areas immediately around our lands. Some of the properties that are going into escrow are fully functional. Some of the properties going into escrow do not have water rights, which is absolutely key for us. In addition, the 20,000-acre addendum to the industrial park. Most people are aware the industrial park is 80,000 acres in Storey County, Nevada. There's 20,000 adjacent acres right on the other side of the county line. Also in immediate proximity touching, literally USA Parkway goes right through it and in immediate proximity of our industrial land, and the developer is moving now just had sort of an all hands on planning commission, meeting in Lyon County to move that forward with industrial development. It would be impossible for me to exaggerate the amount of activity. Some people have asked, well, I haven't. We gotten offers on the land. I think it's fair to say not in the case of the water rights, but in the case of the land that we forward price these things to September. Our attitude was we know the property is going to be worth more when USA Parkway is running than it is today. And so if you look at the comps, we're right in line with Fernley and in Dayton. These are more established communities that already have these highway access. We priced more in line with those neighbors than our immediate center, but things are all moving up to that direction. We'll reassess it in September and see how things look, but we couldn't be more pleased with the economic activity around us. And so we're looking forward to getting some sales done. We're looking forward to being debt free.

The -- your printed remarks addressed Tesla and Apple.

Yes.

I thought that Google had picked up 1,300 acres as well, is that the case or?

Yes. Yes, it is. So there's probably 4 anchors, if you will, right? Tesla being ground zero. Tesla's news just keeps getting stronger. I mean, literally -- I think they've already moved from 6 million square feet to 8 million square feet, but they're literally talking plans now to have 3 floors then potentially 15 to 18 million square feet. I mean, it's hard to -- it's impossible to envision the facility, you have to come out and see it. But around that, you have Apple investing $1 billion in doubling the size of the existing data center. You have Switch, which has the largest cooperative data center in the world already established in there. And then Google purchased property for $30 million, that ranks it with Tesla and Switch in the top 3 landholders in that industrial parks. Now Google hasn't announced any plans, and it's not irrational to assume that like Apple and Switch, they're going to put a data center in there. But there's also been tremendous amount of rumor mill about their autonomous car research and development campus and where that's going to end up. So.

Has the Daneye ranch been offered to any of those 4 players?

So there has just recently been some dialogue between Tesla -- no, I wouldn't say with an agent of ours, but a very close relationship. And what we learned there is that, they're talking to a lot of people about getting their people housed. So that's happening. One of the people -- one of the developers in Silver Springs is looking at multiple different properties for start -- for starting to put up apartments homes, et cetera, in place. So those are the hubs, right? Carson, Dayton, Silver Springs and Fernley, are they going to be the 4 biggest beneficiaries of USA Parkway. Silver Springs is in the bull's eye and Dayton, where the Daney Ranch is, is just to the right. So again, I think it's a matter of time. We will get more proactive in reaching out. And we've just updated all the profiles. I don't think -- one thing with the ranch it's impossible to envision it. And so we just posted an aerial drone flyover of all of the homes on the ranch. I mean, there's 5 homes, right? All of the homes on the ranch, their internal, external views, the facilities. You can now get a pretty good understanding of it. Let's say, much better than before. And now we'll start to do targeted outreach. We always felt USA Parkway was the biggest catalyst and so now it's here.

We'll take our next question from David Brigham with Brigham & Associates.

I've been around these diggings long enough to remember when the stack was $3 or $4, so it's nice to see so much positive happening. And I'm curious why, could you explain then what you said before about that there's getting to be quite a subset of people who know about your company -- our company and its prospects. Do we suffer from a lack of exposure? Is it -- do we have plenty of exposure, I mean, after all if the stock price were higher that would give you an awful lot of options you don't have now. I guess what I'm saying is that if WikiLeaks by some quirk, were to get a hold of every single fact and figure about Comstock and publish it to the world, that wouldn't be a bad thing in our case, would it?

No. Very good. It's a good point. Let me say this, I think there was disappointment last year, which was justified in terms of our development. We feel like we're getting it back on track very well now, but there were some disappointment last year. I think emerging from that we had to do some refinancing. I think there was probably some concerns about our balance sheet. And we just had to get through a couple of important things. We had to get through our restructuring and cost reduction. We had to. We had to refinance the existing debt and push it out 4 years. And then we got a little curveball thrown at us, not making excuses, but the weather was horrific in the first quarter. We really had to buckle down and fight through that. And we have a small team. So it's like a SEAL team, but it was working around-the-clock. And really since April, we feel like our activities have really started to be forward-looking, had really started to be productive. And I think that's first. So now that we've gotten that and that -- you can get that and not have the market respond to it, I think we're seeing the market respond to it. And to the earlier question, professionally, institutionally and then when you start to see real institutions coming in, in the way they are, then people will join in on that. We have started outreaching, but not certainly not on a global scale. But interestingly is we're getting inquiries from Canada, we're now getting some serious inquiries from Europe. We had an inquiry from China, which is outside of my head right now, but you never know. And so to the extent we have the capacity and we're feeling that we're getting it, we can start to get the message out in a much more constructive way and much more broadly. We've -- it's been harder prior to last 3 months. It's been a little better the last 3 months and I think it will just keep getting better. So the point is well taken, more to do there. I think it's important that the messaging is accurate, that sometimes -- the Comstock is famous for massive history. We want people to understand there is some real current -- there's some real modern stuff happening right now and it's positive. So we'll work on that more. We did add some resources to do that and we'll continue to, I guess, pound that pavement.

We'll take our next question from Thomas Ramirez, private investor. We'll take our next question from James Dell, private investor.

Corrado. Okay, listen. Could you -- you touched on a little bit, but are we getting any real nibbles on your industrial property?

Yes, we're getting real nibbles. I mean, there is 2 parties that had been doing diligence, it feels like a couple of weeks now, talking to County managers, checking permits, checking zoning. There's other developers that are just inquiring, and there's other developers that are inquiring, that are diligencing other properties around us. So it's important to balance it, like you'll have -- here in Reno, you have closings everyday, right? I mean, it's almost unbelievable. But -- and you're seeing that in Dayton and Fernley also. But in Silver Springs what you're seeing is a lot of diligence, a lot of sizing up, a lot of prospecting and comparing. And certainly, if you're just out to get land and a lot of it, like 50 acres or 100 acres, you can step out a bit and get it a little cheaper than what we're propositioning. But if you want to be central to the equation, we're one of the key properties. We're adjacent to an airport. One of our prospects met with the airport to talk about how you get through-the-fence access from our property to the airport. I mean, that kind of activity going on right now.

Good. All right. Next question. You didn't mention the Occidental a little, could you give us an update on what's going on up there?

Yes. So as a reminder, the Occidental and also formerly known as the Brunswick Lode is a 1.5 mile strike that has some 40-odd claims amongst it. Something like 34 unpatented claims and 6 patented claims or something very close to that. And we've been doing a bunch of historical work on it. In other words, trying to first leverage and catalog and make sure that we understand the history with a couple of meaningful findings. We've also been doing some work on the Sutro Tunnel Company, and we were collaborating some data, but Larry Martin, our Chief Geologist, identified a report when the Sutro Tunnel was coming underneath that Occidental Lode. And just another point of history, the Occidental had very, very minor amount of former workings. It stands parallel to the Comstock Lode. And historically, there might be 600 -- I mean, there is a time difference there between the Comstock Lodes, rocks and the Occidental, but it's not big. And they mined a couple of pods of very high grade, near surface, like 300 feet. And then there is a shaft or 2 like 500 feet, maybe 1 at 700 feet. I mean very, very light in any context of the lode, which was mined to 3,600, 3,700 feet. And so this work that we're doing includes surface mapping. It includes a collaborate, coordinating the prior workings, there is very few. But then we identified a report from the Sutro Tunnel development that had identified 50 feet of something like a quarter of an ounce per tonne, very high grade gold at about, I can't remember it's 1,200 or 1,300 feet something like that. And so that's stunning. 50 feet is stunning. It wasn't crystal clear on the continuity of the 50 feet, but it's -- if you -- if we put a drill hole anywhere with 50 feet of quarter of an ounce per tonne, I'll pass out. Like, you'll have to revive me. So they haven't mined really in any way past 350 feet, couple shafts, a little bit deeper. But at 1,200 feet from some corroborating evidence, there is a high-grade vein. So we'd love to put some drill holes in the Occidental. What we're talking about with our geology team is that when we're ready to mobilize some drilling on the Dayton would be ready to have, let's say, half a dozen surgical holes. That's a bad term because nothing is surgical really, but as precise as we could get the most amount of data from based on what we could learn to-date. So that's really the update. It's not -- it's not a lot of attention compared to the Dayton and the Spring Valley work, but there is absolutely nothing that we know and certainly, a lot that we do know that suggest that the Occidental could be as important as a target as the Dayton and Spring Valley combined. They're both very long known minerals strike clean, that we've consolidated the entire package on.

Okay. Now in previous conversations, we talked about a joint venture possibility up there. Were any discussions ongoing or are they terminated or what?

Yes. No, we had a couple of, I would say, smaller partners make inquiries. Nothing has been terminated. I just think that they've been lower priority and then not sort of facilitated in the same light, but they're still there and they're certainly feasible, but no real update there. Nothing has happened in the last 3 months.

We'll take our next question from Lawrence Danny, private investor.

So for clarity purposes, this hypothetical joint venture, are they -- other than adding some financing and helping out with that, are they like more expert at extracting resource or are they not a middleman that's something that you guys couldn't do yourself? Is it more efficient to have them? Are they bringing something to the table that you couldn't?

Yes. So our prerequisites are strong mining competency. So the executive and/or executives have long experience in both open pit and underground mining because Lucerne is -- still has the potential for both possibilities, that's sort of number one box to check. A strong mine [indiscernible]. Number two, certainly part of it is the -- being able to bring the capital to the table to make those investments. And three, is a very, very strong -- and maybe three is a subset of one, but a very, very strong notion of economics feasibility, right? Really understanding the economic variables. And so I think I'm not objective, right? But I think, ultimately, we can do it just as well ourselves. We would need some additional mining competencies brought in. And we would then need to put all the risk capital forward. I think that this presents an opportunity to grow the project, accelerate the project, economically enhance the returns in a safer way, right? So when you put all those in the bucket, we say to ourselves, "Could we do it all? Yes." "Could we do it all safer? No." Like, so meaning when I say safe I don't mean MSHA, right ? I mean, deploying the at-risk capital, evaluating fully and dedicating real-time the economic assessments, the iterations, the engineering. So if there was a dedicated technical economic resource, we think it's a win-win. We think it will create more value faster. So -- but I think it is important to say, we're not -- we're not -- it's not all or nothing here, right? There is other potential partners. There is the potential of doing it on our own. It could take longer. It's all good, it's all debatable, but the good news is that, we're spending a tremendous amount of time on how to move the asset forward, right? And so it's creating actionable alternatives, right? One could be a really launching venture that just moves everything forward fast and strong. And then that might enable us to do other things faster and strong like the Dayton or the Occidental. So it truly becomes a win-win for all value creation when assessed against time. So we're trying to -- everything we're looking at frankly, regardless of that project has to strengthen the balance sheet, strengthen the liquidity, strengthen the value, increase the management competency to get it done, right? So we're not in that context, we're -- everything we're doing is to strengthen and accrete not weaken and dilute. So I feel very good that the sum total of our energy is going to yield results. Exactly how it's coming, but it's going to yield results. We just have -- we fixed the focus to the right thing.

We'll take the next question from George Melas with MKH Management.

Just 2 quick follow-up questions. On the possible Lucerne joint venture, can you sort of touch a little bit? I don't know to what extent you are able to, but can you touch on some of the hurdles to getting to a deal with a JV partner there? And then the second question is you've reduced cost to extremely low levels, but how are you going to plan -- how are you planning to fund your expenses in the second half of '17 and in '18?

Very good. Thank you, sir. So let me start with the first question. So I think -- I think that what I feel good about in terms of the discussions to-date is that they've been very collaborative. I think the structure, the design, the procedures, we haven't just -- we haven't just worked on an option to maybe earn in. We've literally thought through what it looks like at the beginning and what it looks like at the end. In that context, we've kind of foresee even procedural things, like how you budget and allocate capital with a partner, those things all have been defined. So we've got a lot of definition in what we put together so far. Both parties have, in my opinion, been just as focused on ensuring the success of the partnership then ensuring the success of the partner, that's the meaningful comment. And in that regard to answer your question, we're both trying to make sure that the enterprises are protected, that the assets are protected. So we just have 1 or 2 items remaining in context to our debt and in context to our structure, that are -- where both parties really want to make sure that it's set up for success. And so I don't want to minimize the fact that we have a couple of items that we're just trying to finish off, don't want to minimize that because they are important, but the spirit of what's trying to be done is for the longer-term success, which is what makes me optimistic. So I'll be working on that this afternoon, tomorrow, next week. And hopefully, to a good outcome. I don't think I can say much more than that, George.

In terms of the cost structure, I wouldn't say extremely low. I would say that we've gotten very low, right? My intent was to have the lowest possible cost where we could maintain our permitted footprint, maintain our transactional activities and even do internal exploration and development as you've seen us progressing, these important but sort of maybe more focused points on the Dayton and the Lucerne. Extremely low would be care and maintenance mode, we wouldn't be able to get anything done. So there's 2 messages there. We could go lower, but there would be some implications. How we fund it? Really, we have access to the equity markets. We sell -- it turns our stomach to sell equity at these levels. I think it's important to address though that we said on last call and I'll say in this call, we want to maintain a safe, minimum amount of cash on hand. The lower the cost, the longer lead time that provides us. Ideally, it bridges us very efficiently to these land sales. And I believe when these ventures get consummated and these land sales gets consummated, we're looking at an entirely different equity picture. And that we could beneficially -- Lucerne would then be taken care of, we would efficiently look to move Dayton forward. The beauty with Dayton is it doesn't require a lot of capital. But the skinny answer is right now until we're a cash producing entity, we would rely more on equity. We want to eliminate the debt, we want to sell the non-mining lands, fund this thing to move forward efficiently. We're not far. The difference I think between us and almost every other exploration play is that a lot of these exploration plays, they're very exciting. The Nevada properties are very prospective, great place to be. But you're 7, 8, 10 years away from proven and probable reserves, permits in production. When you can be 2 years away, it's not only obvious we're strong for returns, but much, much less capital. So we're going to think of this the most efficient, the most critical chain to permitting Dayton and then the most efficient way to proving reserves for Dayton and Lucerne. And I hope that that will -- and I know, relative to the other gold plays out there, that'll be tremendous value creation. If you just look at the comps, it can get us to hundreds of millions of dollars of value well on our way to our goal. And then some small amount of equity can move these things into production. So I'd axe the current plan when you have proven and probable reserves, when you have a production schedule, then all sorts of safe financing opens up, right? You can debt finance cash flow, right? Debt financing not cash flow tends to be riskier. In our case, we have very valuable lands that take care of that. So I don't know, is that a good answer, right? We're going to have to raise some amount of equity, but we're not looking to do deals. We're not looking to complicate the structure, right? We want it to be very simple, very clean, very efficient and only as if needed. So we've been doing that the last few months, and we've gotten through an interest payment, which was fantastic. And we've got a good buffer. And now, it should be very safe as we move forward. I'm going to focus as much, if not most of my time on these land sales as I am on the ventures to move forward only because of how important it is to the balance sheet and the company's value.

We'll take the next question from Jordan (inaudible), private investor.

This could be a 1 part question or a 3 depending on how you answer the first one. But what I'm curious of is in terms of the joint ventures, would you be able to release whether or not these companies are privately held or publicly traded?

So we have a bucket of both. We have a couple of publics, and 2 publics, 3 privates, right? So it's a hodgepodge. I know that doesn't help you, but I can't really disclose you there.

Yes, would able to tell you what exchanges they're traded on?

I don't know. I think they're all U.K. I don't know.

Okay. I'm just trying to squeeze out any type of information we can on it, but -- okay. Well, I appreciate it. Keep up the good work.

No problem. Thank you very much.

We'll take our next question Carl Frankson, private investor.

Corrado, I almost hesitated to ask this question because it's irrelevant and I'm almost embarrassed to ask it because I'm a long-time investor. As a matter of fact, on my desk I brought up a couple of the ingots from the first dore pour on September 9, 2012.

I love that.

And as I say, maybe it's advancing age, but my memory is kind of deserts me a little bit. We went through the infrastructure, we had the equipment, we opened the mine, we've got the ingots from the first pour. The infrastructure, we changed the roads, we've got the people, the machinery. And 5 years later, we're not producing any gold at all. And I hear things like 2 years for the Lucerne and stuff like that. Again, it's not a quarterly question, it's kind of a historical question. And I should know the answer, I'm afraid I don't. What happened?

No, it's a great question. So it's really Lucerne, right? And let's just reiterate. The infrastructure is in place, the equipment is in place, the -- even the BOM right away, roads in place, et cetera. The -- we started mining, we mined extracted ore from September 2012. Actually, from August 2012, we started extracting the ore all the way until September of 2015. And then we processed right to December '16, getting 90% yields on the gold and 60% yields on the silver. And that did completely enabled the county to give us a landmark expansion of our permit suite. We mined right up to the permit boundary on everything that we did and then we got massive expansion on our permits. And for the sake of history, right? I made the decision to try to thread the needle and transition that open pit mine into an underground mine, because we were literally seemingly arm's length from this high-grade corridor. And that was more complex and more difficult than we expected it would be. It also though built 2 major underground tunnels that position us remarkably well for the next round of drilling and development. But we pushed ourselves hard to make that transition and strained our capital resources to do it. And really, there's 2 questions here. And I give you -- if we're going to continue the Lucerne as an underground development, which is a possibility, There is complex network of high-grade ore body down there that could take a couple of years of drilling and development, with the not certain outcome. I think you certainly will get a mine plan, but to what extent and what length is not certain. In the process of what we've been doing lately, we've also reassessed just extending and expanding the surface mine, which is much more feasible when it comes to the ore body, and again, it varies depending on different price points. We're remarkably at almost $1,300 goal despite all-time high in the equity market. So something very positive in my opinion is happening with the precious metal that still isn't obvious. So the answer to the question is Lucerne is fully permitted, fully infrastructured. And depending on how you want to optimize the next phase of mining, it could be almost immediate, it could be within a year or it could be in the underground scenario, 2 to 3 years. So there -- the first phase was successful in terms of proving a number of critical variables from ore to metallurgy, to grade to strip ratio, but we didn't have the expanse of permitting to extend it. And if you were going to go from a surface perspective, you would also still need some federal permitting. So there is a number of possibilities that will take some very important engineering and studying to do, which is what this venture is sort of designed to do. But it's there, right? It's just how. I think it's a question of how you do it and the resources you put into how you do it. With the Dayton, we have an economic shell that is very, very near surface, much higher grades than even Lucerne was before, just as good or better metallurgy all on private land. And there's really a short path there, 2 to 2.5 years max to get that into production. The debate is, do you put that into production or do you extend it to its larger potential in the Southern part of the Dayton and all the way in the Spring Valley. And most arguments would say, that's not a difficult thing to try to do, let's drill down and expand. So we were putting our calories into defining the ore body, defining the characteristics so that you could efficiently drill out Dayton the way that we originally did Lucerne. I mean when we first drilled out Lucerne, we got over a 1 million ounces that measured and indicated heading to 1.5 million pretty quickly. And there isn't necessarily a reason we couldn't do the exact same thing, extending the Dayton Resource out. So I think the notion of just taking the existing mine and expanding it was oversimplified. And I think that's the sort of the wall we ran into. The ore is there, the resource is there. Many people outside of the organization are excited about it. We are, but it's just going to take a little more work. The right context of is, if you were looking at a brownfield or even a greenfield, you're going to be 7 to 10 years away from getting those reserves proven and ready to go. 2 years -- 2 to 3 years, relative to 0, sucks. But 2 to 3 years given the way we've entitled the entire district, the footprint, the zoning the permits really is a low-risk, low-cost path to proceed. And some of these other things we're working on could really juiced up economics for us even better. So I'm not trying -- I hope I'm not sounding like I'm making excuses. I am just trying to explain that the idea of the initial mine expanding sort of seamlessly into the larger mine, it wasn't flawed, it was just more -- it's just going to require much more than we originally thought, I guess, is the short answer.

We'll take the next question from Derek Smith, private investor.

Can you just tell me -- give us some color on this, the AMT program or the ATMX using ATM program?

So the -- well, yes, so we have both American Mining & Tunneling is one and then the equity is the other, which one were you referring to?

Yes, the ATM, I'm sorry, at the market.

Yes. So we have -- we actually have 2 facilities that we have in place. One that's been in place for over a year that we didn't use hardly at all in 2016 and one that we put place in April, and they're really designed to allow us to safely access equity as we need it. With the land sales coming up, we don't really want to -- certainly, don't want to raise. We prefer not to raise any equity at these levels but we certainly don't want to raise a lot of equity or do a structure transaction. So these facilities just give us more efficient access. The one that's been in place for over a year is structured by design, not to ever trade more than 9% of any days volume. It's very light in terms of its implication and use. With these higher volumes, obviously, it could be more effective in some cases. But that's really in a nutshell. We have 1 with a $5 million facility, 1 started off as a $3.25 million facility. So they are not huge. I mean, that's not small to us, but we just wanted to, as a public company, make sure that we had the tools in place. Such that we never did have any kind of a gun to our head.

Has there any been -- ever been any discussions about approaching private investors for loans to the company?

So we have $10.7 million 4-year loan to the company, it's secured by our assets and as we sell those non-mining assets, we hope to fully pay that off. When we have mine plans and production schedule, I think that financing becomes a very nice alternative for us. But right now, we're not in the mood to increase our debt, we're in the mood to pay off our debt and get ourselves funded to production. So yes is the answer, but depending on the circumstances and the time, we'll have to wait what's best and safest for us to get there.

And just lastly then, who makes the decision on what company you use to exercise the ATM offerings?

We did a tremendous amount of diligence on that and we probably talked to everyone and everyone's mother. Frankly, we're not fans of the conventional facilities that we see out there or even the banks that use them, even the better banks who claim to use them better. What we've tried to structure is something that is -- can be trust where we use very likely or we're placing stock into an investor funds that we know. The biggest negative in my opinion is, you never -- you don't know where stock is going. Really, if you look at our history, the one thing that we've done a good job in is the institutions that we've been able to bring and hold in, especially our top 10. So we probably have an unusual amount of attention to -- first of all, we had a lot of resistance to the even the notion, but ultimately, if we challenge a couple of assumptions about knowing where the stock goes first and secondly, how it's effectively used. If we could control those things then we thought it was a good addition to the toolbox, not to be used lightly only -- not to be used loosely only as needed for the current circumstance. A recent circumstance unfortunately, because we had a cash interest payment due July 1. We had to use them more than we would've liked to at lower share prices. But again, we're trying to bridge to a much different place, and I feel like we're on the right path to getting there.

I mean, just FYI, I mean IAA Financial, is that still the group that you use and Levinson, I think, it is resources?

Yes. IAA has been -- IAA is sort of the parent structure. We use a very specific broker that's been with the company for over 8 years, probably knows us better than anyone that I know and is incredibly trustworthy. So they're not -- they use a NFS infrastructure, Fidelity infrastructure. It's very professional activity. They are not -- in that case, it's a very light use, they're not market makers per se, the way that you would think Levinson is the firm and professionals that we've used to identify good long-term resource investors. And we're very pleased with that as well. So it's a lot on the line...

I just noticed, because I see the price that you guys got was -- I mean, maybe if I missing -- I don't know if I'm reading it correctly, but it was $0.155 or what have you. I mean that seems like on the low end of the range, but it is what it is. But...

There's not -- it's more just the timing of the market, which as I said, was unfortunate because we had an interest payment coming up, then it was the cost of these facilities. These facilities are probably the most efficient facilities in the market in terms of cost of using them. So thank you.

Thank you, ladies and gentlemen. The time allotted for question and answers has come to a close. I would now like to turn the call back to Mr. De Gasperis for closing remarks.

Thank you, Mariah. Hey, everyone. Thank you for the call. I'm fine with taking the full hour. We went just slightly over. It's very important for us that there's full transparency, that there's full understanding. I'd ask you all to read the 10-Q and if you have any other questions, please don't hesitate to circle back and ask. Also, please be on the lookout of us getting some of these things over the finish line, announced sooner rather than later. Thank you all for your time.

And this concludes today's call. Thank you for your participation. You may now disconnect.