Comstock Inc (LODE) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Comstock Mining April 2018 Quarter 1 results. (Operator Instructions) As a reminder, this conference is being recorded, and it is now my pleasure to introduce your host, Mr. Corrado De Gasperis. Please go ahead.

Thank you, Savannah, and good morning, everyone. It's Corrado here with Comstock Mining. Welcome to our 2018 first quarter conference call.

We've completed our first quarter review with Deloitte & Touche just yesterday and filed our first quarter financial statements on Form 10-Q last night, and we released the summary of those results through our press release this morning. 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.

We will keep the same format for this call as we've done previously, starting with my prepared remarks and then taking as many questions as time allows whilst still trying to limit the call to an hour.

If you're unable to ask question on the call, we'll certainly be available this afternoon and throughout the remainder of the week for follow-up calls.

Before I begin, let me also say that any statements related to matters that are not purely historical facts can may very well constitute forward-looking statements. These statements are based on current expectations and are subject to the same risks and uncertainties that could actually result -- could cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed by the company and the SEC and in this morning's release, and all of those forward-looking statements made during this call are subject to the same and other risks that we can't identify.

Just briefly before I discuss our results and the strategic initiatives, let me welcome 2 new board members to our team. In February, Leo Drozdoff joined the board with an extensive Nevada mining industry resume, including a great engineering, legislation, environmental regulation, economic development and historical preservation background. It's just absolutely broad and outstanding.

He most recently had served as the Director of Nevada's Department of Conservation and Natural Resources, which is the entire spread for -- from 2010 to 2016, which was a cabinet member reporting to Nevada Governor, where he was really responsible for all of the mining, the environmental protection around the mining, water resources, forestry, state parks, state lands, and even Nevada State's historical preservation office. So we're thrilled not only with his background but his acumen and his role on our board.

In April, just recently, we welcomed also Del Marting to our board. Del has an extensive resume in mining, mine development, strategic and operational finance. He started his career with Amax, which is one of the largest molybdenum mines in the world, ultimately became part of Freeport-McMoRan, which is the largest molybdenum producer in the world. And he did everything from supervising production in one of their largest underground and open pit mines, as well as strategic planning, financial planning and ultimately coordinating all of their global finances in a centralized European location. He also ran a junior mining company in Nevada, got it opened, restarted and into production successfully and then took it public and sold it. He has a great financial and investment banking background and was a Navy veteran including service, I think, with a stint with SEAL Team Two with the U.S. Navy SEALs. So Del and Leo are just tremendous additions to our board and we're truly looking forward to what's in front of us.

Operationally, let me just acknowledge that we have continued reducing spending in all areas, and we've achieved or maintained record low operating expenses in essentially every category. We're not aware of any Nevada-based production-ready junior miner that has a lower overhead structure, but that doesn't mean we stop there. We are continuing, and even this month have continued to identify and reduce cost wherever we can effect change that allows us to keep our capabilities and do it more with less and more efficiently.

We're currently projecting our lowest operational spend rate that we've had which will actually result in a full $2 million reduction over 2017, so full 2018 over 2017 being a full $2 million lower. And that was before the benefits that we see coming in with the Tonogold agreement.

So, our spend plan shows a cash operating expense of $3.6 million, and the Tono agreement improves that position because it allows for specific reimbursements of certain operating expense, namely Lucerne-related costs for environmental management, environmental insurance, specific land claims and related costs and permitting fees, amongst others. We have that very specifically scheduled out in our agreement, and should result in a minimum of $1.2 million of cost reimbursement or cost reduction, if you will. These are reductions of our established Lucerne-based operating costs.

Some of the costs are seasonal, especially the land claim and permit renewals, so this reimbursement doesn't necessarily occur evenly every month. In fact, most of the reimbursement typically occurs in the third quarter months when we have land payment claims and permit renewals. Those are the types of things that have some of the higher obligations assigned to them. And so as we pay them, we're reimbursed effectively in the following month.

Those ultimate costs are part of -- for clarity, they're part of the $20 million investment that's required by Tono over the term of the option agreement and they're an important, relevant, directly related part of that. So it's all on -- it's all structured very nicely.

What most of you know, obviously, that last October, we announced this collaboration with Tonogold and Mark Ashley. We asked our shareholders to be a little patient, and I know that was difficult because the agreement has just absolutely outstanding objectives around the evaluating, drilling, developing and ultimately delivering a full economic feasibility on Lucerne Mine Project. With what we're experiencing is a -- is truly a most technical, highly competent and passionate, strategic mining partner.

Mark and I were extremely diligent when we established the initial agreement that brings this partner to us with strong technical expertise. We feel it's an extremely well-aligned arrangement where we're both exceptionally incented to advance Lucerne back into production.

Mark continues to personally oversee all of these efforts remarkably with fully engaged and support of his team, including his board, working directly with us to ensure the most productive and profitable mine plan and operation as possible. They're literally on-site today working with us, and they've been -- they've been very, very diligent in all the work that they've been doing.

They delivered clearly through the first phase of this agreement as we've operationalized the collaboration. I would say, just to give some color, we speak weekly, if not daily. We're collaborating through both direct discussions, our technical teams are working directly together, and even through our working technical committee that Mark heads up, we're moving forward.

They've already invested almost $1 million in that first 6-month period for rebuilding and reassessing the resource estimates, with really an exceptional focus on minable ounces and what would be minable ounces and ultimately establishing the proven and probable reserves, the mine plan and the production schedule for the Lucerne mine. Obviously, we've always been confident about Lucerne's potential but for those people betting against that Comstock Lucerne resource, I think you're going to be disappointed because the results are developing very, very nicely.

Tono themselves have publicly stated that they're targeting future operations that would provide annual gold production from 100% of the mine operation of at least 75,000 ounces of gold. We're excited about that. And also with cash operating costs to be under $800 an ounce. We're excited about that, too. There's still a lot of work to do but the parameters are coming together very clearly. The work is being done from the ground up and quality and diligence for us is much more important than speed, but I do believe they're moving as diligently and as expediently as possible.

Overall, the second and third phases of our agreement requires an additional $19 million to be invested in things like engineering, drilling, development and test work towards completing these technical and economically feasible assessments and ultimately the reports that go with that. If you break it down, that means there's a little over $6 million that would be required to be spent in the next 18 months, including it must be about $1 million that's been spent so far. And as I said, some of those amounts in next 18 months would be also the reimbursements to us.

So the second 18 months would then require a final $13 million, so, very productive, very focused work that continues on-site and off-site.

We would expect an updated resource report sponsored by and published through the coordination of Tono. There's still some work to do before they can get that 43-101 compliant technical report, but they are working diligently on it.

We have 3 other active strategic collaborations in progress that I'd like to give some color on, 2 of which we've publicly discussed and I'll give some color on right now. All of it is also squarely in the context of us advancing our other resource project, the Dayton feasibility work so that we could also publish and produce a stand-alone feasibility report on the Dayton.

As you recall last year, we had successfully completed some federally funded column tests of the Dayton mineralized materials through Cycladex Corp. Cycladex is a strategic investee. We own 10% of Cycladex. They work on and off our site developing their technology, attempting to provide faster and safer noncyanide leaching solutions. It's based on their patented cyclodextrin lixiviant. And when we did that work last year at similar crush sizes with column tests trying to stimulate our historical leachings, we were happy, we were surprised to get up to 85% yields on the gold.

Cycladex continues with their team working on the efficiency of their solution on our ores. This quarter, we completed a series of, I would say, prerequisite cyanide-based column tests really primarily for comparison purposes, of some of our higher-grade ores, higher-grade virgin ores coming from the Dayton Resource area, and we got some truly remarkable results.

We've always felt good about the Dayton yields, but these column simulations were based on ores obtained specifically from areas that are included in our resource -- Dayton Resource model. And specifically in some of the areas that have medium to higher ranges of gold grades like 0.02, 0.03 ounces of gold per ton on the low end and over -- or almost 0.05 ounces of gold on the higher end. These are exceptional grades for open-pit mine plans.

The cyanide columns we simulated leached incredibly fast, I mean, the gold leached quickly with recoveries that went up as high as 88%, and didn't go lower than 80%. So we were not only surprised at the high-low and the high-high, but also the speed at which they leach. I think cumulatively, they were done for only 60 days but we got most all of that in the first 45.

So we constructed 6 columns. They were done in the same protocol and quality controls of all of our column tests. They were done on-site. They were our own lab results, but we decided that they were certainly -- they certainly exceeded our expectations, and we've put those yield curves in today's press release and in our 10-Q for all to be aware of.

From Cycladex's perspective, they've now processed our minerals from the Dayton area on multiple types of experiments. They've also experimented on over a dozen additional mines worldwide. I know they were in the Far East, they were in South America, constantly working on discovering a broader, potentially cheaper application of this technology when it compares to cyanide. We feel like the collaboration has been very effective. They're now working on a design phase of a scalable proof-of-concept I would call pilot plant. They might call it a process pilot plant, process plant, it's all the same thing. But with them getting to this stage, they're drawing a lot of independent investor interest, and we're happy to see that too because that provides for independent funding and we're, as I've said, a 10% owner of the company through our role in these earlier developments.

More recently -- and I did discuss this also last year, that over the course of the last 9 or 10 months, we've established really exceptional working relationships with Itronics, Inc. Itronics is based in Reno, and they're the proprietors of an existing technology for extracting precious metals, especially silver, from a multitude of sources, predominantly fluid-based sources but across the spectrum.

Itronics has funded the assessment of not only the efforts to extract residual silver from our existing leach pad, but also the effects of remediating our cost in that process. We've been working with them on this for quite a while, testing our samples from our silver and gold heap leach tailings. As most you know, our cyanide processes have historically had good recoveries, certainly in the 80s of percentages for gold and in the 50s of percentages for silver. And the recent column test we just mentioned showing even better potential.

But their leaching methods, their KAM-Thio leaching tests that were coordinated and paid by them and only performed in independent metallurgical labs have demonstrated to us that -- that there's a real effectiveness in recovering the residual silver. Certainly, the residual gold, some of the base metals.

And what's interesting is, as we've done that, we've also effectively neutralized the cyanide solution that was existing in those previously leached materials, which creates an extremely attractive environmental solution.

The other thing is that, we were surprised to find that during those tests, and while we were recovering the metals, the new KAM-Thio solution was being substantially regenerated during the extraction process. So anyone who's familiar with the cyanide process, cyanide evaporates and gets destroyed in the process, although there's always residual cyanide in the ore samples. You're constantly consuming it in the process. Although it's an overall and efficient means for processing, you're constantly consuming it. And so the consumption and the specific consumption of the materials used for extraction -- and there's a lot of materials that are available to extract gold and silver, it's just the consumption numbers are so high that they become noneconomic.

So what we learned is that this material is being regenerated during the process such that the consumption numbers were exceptionally low. Much lower than we thought. And those dramatically reduced consumptions creates a potentially compelling efficient economically viable solution. And so those test results showed us that the cyanide residuals on leached materials were being removed by the new process neutralizing it almost actually all the way to drinking water standards. It was incredible. The results dramatically, dramatically neutralized the cyanide well -- well, effectively extracting the residual metals while still showing some efficiency in the use. So it was all seemingly very good.

Now that result has allowed us to make the decision to move forward and really figure out the screening, like what level of economics or what this process would look like from beginning to end. So although all the pieces seem extremely attractive, obviously, we need to make sure the sum of the parts equals a holistic solution that works and then also that would be scalable.

So, we're going to do some more feasibility work that we will expect to finish in this quarter that will give us potentially a pretty dramatic view of an alternative process here that we are only interested in if it is more economically feasible, economically enhancing, probably needs to be materially economically enhancing, as well as environmentally friendly. So we're excited about the possibilities there.

And by the way, both of these activities, which are completely independent of each other, are -- have all been coordinated by us in a way that allows us to apply all of these possibilities to the feasibility of our Dayton Resource. So in other words, we're not blue-skying R&D for potential global applications in other business -- in other business roles. Obviously, that would be interesting and compelling to everybody but we're very focused on seeing -- how do they help us immediately. That doesn't preclude the bigger opportunities, but we just feel like if we can build and improve on-site, then yes, then maybe it's much more marketable beyond.

So we plan on publishing a stand-alone Dayton technical report this year. We already have sufficiency of data to update that technical report based on all of our conventional mining and processing technologies. All of our existing infrastructure and known costs and all the work that we've done since 2013. So we're very excited about that.

Parallel with that are these other activities that could effectively and meaningfully enhance that report or could result in separate enhancing reports. We'll see how that goes. But we'll have real updates coming within the next quarter.

Just switching and hopefully wrapping up on corporate. Yes, briefly on our asset sales, I'm certainly not going to recount all of the extraordinary economic activity that's happening here in Northern Nevada, but certainly in last January, there was a meaningful event when the Tahoe Reno Industrial Center announced that in 8 separate massive transactions, they had sold the remaining availability of all the parcels of land at the TRI Center to a major software company called BLOCKCHAINS, LLC. They didn't disclose the purchase price but it's known to be $100 million-plus, so it's pretty remarkable that, in addition to Tesla, and Google and Switch and Apple and Walmart, we now have not only BLOCKCHAINS' enterprises coming into the industrial park but hard money has been placed out to buy out the entire park. And so it's sold out in that context.

And it's hard to exaggerate what's happening there. As far as we're concerned, it was extremely supportive of our agreement to sell the Daney Ranch for $4 million. We're looking for that to be consummated here. There's still a possibility that it will be done here in the second quarter but it might be more likely to be July but it's coming very soon. That'll take our debt down even more, which I'll talk about in just a minute. But we also are active with inquiries across the board on our other nonmining properties, very active. So there's more to come there. But the macroeconomics just keep supporting higher and better values.

In January, we also moved forward on an agreement to acquire 25% of the membership interest of Pelen LLC, for $585,000. Pelen is the 100% owner of the historic Sutro Tunnel Company. The private lands and patented mining claims that are owned by Sutro that is owned by Pelen are primarily on Gold Hill, with some of them being important patented mining claims in the Lucerne area. There's actually over 200 acres of private lands between the patented mining claims, the town sites and steep lots in Gold Hill as well as the entire town of Sutro that we would put a value today on over $2.5 million, just justifying alone our 25% purchase.

But really, it was bigger than that. Pelen also owns this historic Sutro Tunnel. I mentioned the town of Sutro, but more importantly, the rights to the federal lands that cover over 5,000 acres on 1,000 feet of either side of the 6-mile Sutro Tunnel expanse, and actually the rights to the water that continues to stream out of that tunnel.

So we really feel that there's a huge potential for these properties as part of the Comstock district. They're an essential part of the Comstock district. We'll be in working with the majority owners on our mutual plans for optimizing, entitling and ultimately exploring and developing these rights as part of the broader Comstock strategy. We issued the shares for the purchase to Peter Leonard. Pete is an existing shareholder of ours and a long-standing advocate of our company and actually is a 4-generation direct descendant to the original mine manager and superintendent of the Sutro Tunnel Company. So we're happy to continue to have Pete's support on the Comstock without question. And even though the transaction hasn't fully consummated, we're the immediate proxy for the membership rights, so we're, as I said, already working productively with the majority owners. And we have a very long-standing relationship with them. They're also local-based in Carson City.

Including the Pelen purchase, the company's outstanding shares as of March 31 and today, for that matter, is 53.4 million. We did issue shares during the quarter and to raise $1.1 million in net proceeds before we had proximity and knew that the Tono exercise was known. Even though we expected they would, we really didn't know if Tono would exercise until very late March and frankly, even into the early part of April. We are obviously thrilled that they did.

We received $2 million in cash as part of Tono's exercise, and we paid down the prerequisite amount of the debenture, bringing that number now down to below $8 million. It's $7.92 million. If you couple that with the anticipated closing of the Daney Ranch, that would bring the principal balance down to $3.9 million upon closing that transaction. And as of March 31, we had cash and cash equivalents of $2 million on hand. Obviously, that number's higher after the Tono exercise, even despite the fact that most of those proceeds already and immediately went to pay down our debt.

I guess let me just close with a summary, of the following salient points, just as they relate to the outlook. Our net cash operating expenses -- number one, our net cash operating expenses now would be expected to be below $2.5 million for 2018, with a full year of Tono benefit obviously assumed in that 12-month number.

Our interest expense at the current debt levels would be $1.3 million but we're working hard to extinguish that number as soon as practicable and certainly hopefully before year-end.

Dayton will see an updated stand-alone technical report in 2018, as I said, using known proven processes. We expect to see a minimum starting value -- net present value, if you will, of that project, at $50 million, but would certainly expect with the activities that are ongoing, to increase that number to 9 figures-plus, as we grow the resource and grow the economic shell.

Lucerne should see a Tono-sponsored technical report. I'll leave it to them to provide good updates on the resource. Obviously, we're doing all that in collaboration. They're in the lead, though, and we respect that a lot. But updating the resource for certain and clearing a path for feasibility and ultimately production, we expect that the NPVs of these projects will already be starting in the 9 figures and just grow from there. So we're talking about dramatic valuations just coming from Lucerne and Dayton.

And as I mentioned with Dayton, there's a very strong effort to see enhanced feasibilities from these alternative processes. Our nonmining asset sales will dramatically reduce and certainly expected to eliminate our debt this year. That's another point in the outlook.

And we're working on another pretty interesting strategic venture that I can't talk about now but I fully expect we'll be covering during the annual meeting on May 31. Pretty certain that the May 31 meeting will be one of our best with a lot of detail, and a lot of business to be delved into. Our partners are planning to be there, so it'll be just a tremendous opportunity, not only to be updated, but to get to engage directly with some of these folks that are doing some of these incredible things.

So I will stop there. Savannah, if you don't mind, maybe we can just move right into questions.

(Operator Instructions) And we can take our first question from [Harvey Molca].

So what I'm seeing now is that we've increased our outstanding stock by 12%. Is that correct?

Yes.

You went from 47 million to 53 million.

Correct, yes, as of March 31st and as of today.

Okay and 688,000 of that was sold for cash at the market.

No. 4.5 million of that was sold at cash at the market. 688,000 was the final component with IAA. We finished the IAA off early in the quarter and because there was sort of a maintenance fee associated with that on a monthly basis, we -- once we completed it, we terminated it and closed it, so that's 100% behind us. Then we did 3.9 -- just a little under 4 million with Leviston during the quarter as well.

Was that a cash transaction?

Those were all cash transactions -- well, there was a small fee associated with the Leviston one upfront that was noncash, but the -- they were -- cumulatively, they were for proceeds of about a little over $1.1 million cash.

Which was what per share?

About $0.30 per share. I think that's shown in summary in Footnote 6 in the Q.

And then the Pelen, that was issued in stock, not in cash, correct...

Pelen is issued in stock and it's a little different in the sense that it's tied to a cash value. And depending on the share price, there actually could be a scenario where we get some shares or cash back, once the thing closes up, and it's expected to probably close up end of the third quarter, fourth quarter. I mentioned which is important for us, that we have proxy over the membership interest at day 1. So we're already working with the owners as if the property's ours and we're moving it forward. But the actual final title closure, et cetera, won't happen probably until the end of the third quarter, early fourth quarter. Those shares were -- it wouldn't be wrong to think of those shares as sort of put on deposit for the transaction.

And the shortfall? Because it looks like that the 588,000 was for 2.4, looks like $0.41 per share, so there's got to be a shortfall that we'll owe them more shares. Is that correct?

Yes, well we issued -- when we issued the shares, we tied it to the value. The shares, the day we issued them, were closer to where the share price is today. It was a little higher but it was closer to where the share price is today. On March 31, I think we were at pretty close to our lowest point, in terms of our share price. So we had to mark that down but it'll come right back up, I think, as the share price moves forward.

Okay, what's the relationship of Leviston Resources to the company?

It's almost identical to the relationship that we had with IAA. But they have a stronger institutional shareholder base associated with them so that we're constantly working on targeting new investors and bringing new investors into the story. But we do have a facility that allows us, more flexibly than the IAA facility, to pull equity, raise equity, issue shares for proceeds, if you will, with them at our discretion.

Is that their only position? Or is that just adding to their position?

That's their existing position and would add to their position.

Okay, Cycladex, do we anticipate seeing an income from them with our 10% ownership?

So we -- well, so a few things, right? Cycladex, stand-alone company, patented technology, working on many, many fronts to commercialize it, getting a lot of international interest. I would expect that we would see -- because they're still in a development stage, we would see more value appreciation from our ownership in them. But we also have exclusive -- not exclusive, we have a free and full right to use the technology on our property. So the benefit is, we have an ownership stake in whatever value they may accrue or accrete, but we also will have the free right -- the direct right use the technology for our properties.

So (inaudible) they will not be recipients of the minerals that are on our property.

When you say that, let me clarify. They could, very well, a very specific outcome, one I think that they would hope for, is that they design a process facility using their technology that would be deemed feasible. And when I say that, I mean, by a third-party. And if they had a process facility that was deemed feasible by a third party, we would be very supportive of piloting that on our property with our ore. We would get the benefit of all that. And insofar as it comes to our ore and processing our ore and the profits related thereto, they would obviously get a huge benefit in full proof of concept with a fully operating pilot or a bigger facility, depending on what they wanted to do. So that opportunity exists for them -- us together as partners. And I think, in fairness, it's almost identical to the opportunity that is being created with Itronics. And the difference with the 2 relationships is just the manner in which we're collaborating. I would say Cycladex is -- they're a stand-alone company who is forging forward hard with a very specific goal that we're incredibly supportive of. We have a supporting role. In the Itronics case, we're really working -- technically our teams are working together more similar to what we're doing with Tonogold, right? So it's all positive, it's all good. It's just sort of the chosen modus that the partners pursue. So we're trying to position ourselves to get the maximum benefit in the -- and I'll use the term most sensitive capital way. In all these cases, we're not the deployers of the capital. We could be, we could be if we get to certain points in the relationship, right, with Itronics, for example. But right now, the partners are -- have been really putting all the capital forward in all cases.

And can you touch on Silver Springs ending?

Yes so -- yes, I said it a little bit on the call. But this -- the unexpected thing was with BLOCKCHAINS, LLC coming in and literally cornering the market on the industrial park. I mean they bought up all of the rest of the available acreages inside the Tahoe Reno Industrial Center. And the effect of that, I guess, coupled with USA Parkway being built, was that people then started to look on the periphery and north of and south of the park. I mean we almost immediately got like 3 inquiries on our industrial property by the airport in Silver Springs after the BLOCKCHAINS' announcement. There was also kind of a little funny article that Bloomberg ran, saying something like, Gold Miner looking to Bonanza from Google and Tesla's presence, and they showed like -- I think they showed Tesla's G4 landing on Silver Springs Airport which is adjacent to our industrial park. So we got a lot of good inquiry from that which has resulted in, sort of second phase diligence by some of these folks that are looking to step out and expand. Also, concurrent, like coincident, with all that happening, there were 20 -- there's 20,000 acres adjacent to the Tahoe Reno Industrial Center that is right in between our industrial park which is 90 acres, and the 80,000-acre industrial park. That property was zoned and planned by the owner, real estate developer out of Las Vegas, as a residential -- big residential development. The -- there was a succession of ownership from the father to the son, and the son saw all that was happening with Tahoe Reno Industrial center and about 1 year ago started making plans to rezone that residential acreage to industrial. And I can't remember if it was January or February, but in the first quarter, they got full approval from Lyon County to completely rezone that 20,000 acres to industrial. So when we say the industrial center is sold out, it's a correct -- it's technically a correct statement that Tahoe Reno Industrial Center has all of its property been purchased by the broker. But there's another 20,000 acres, literally adjacent to it, that comes right up to us -- comes right up to our property and now what we're seeing is all of the new companies that are prospecting-in are going south, right. And so that just draws everything right towards us in the airport. So we don't have any offers on the property but what we've heard through the brokers is that our water rights are especially interesting to folks, right? So people are probably looking at the industrial park and also looking at the water rights with and without the industrial park. In the meantime, there's at least 4 major developments, the industrial one, 2 residential ones, and a commercial downtown, that either has been approved -- the commercial downtown was approved by Lyon County and the 2 residential ones are in the queue for being approved. So there's -- if you were thinking of this growth as a line chart, we're right at the vector of the hockey stick. And I know that sounds promotional but just knowing what's in the queue, knowing what's being approved, and all of the properties that are mentioned have their allocations of water. One of the residential ones might not have enough but most of them, certainly we do, the airport, the industrial park, the commercial downtown, all have their water approved and allocated. We have excess water. So the people who have the wherewithal are moving and shaking in Silver Springs, and it's very exciting. We'll see what happens but I expect there'll be activity in the next 2 to 3 months that'll be very real. Our Daney Ranch, we have an agreement, we are monitoring it intimately like we're very close to the counterparty, and they're actively working on a USDA-sponsored loan, which sounds like it's going extremely well and the equity that comes with -- their project is about $15 million. $4 million of it is acquiring the ranch and having the foundation for the facility they look to develop. So it's contingent on them getting that. So the lead-time issue is simply tied to the financing, so we're looking good on that route. There has been some changes in USDA administration and it's kind of a unique facility. So it's taking a little bit longer but not in a negative way, like in a very positive way.

So on the 98 acres, what are they asking for that?

So the property is listed, the 98 acres with a sufficient amount of water for a light industrial use, and that's variable, we listed it with 20-acre feet of water for 7 million, then there's an additional almost 200-acre feet, about 180-something, acre feet of water rights that are separately listed for about 4 million. So in total, 11 million. And my guess is that the buyer of the property will want more than 20 acres of water rights. They may want all of them. We don't think that there's any way you'd need all of them for the industrial park. Certainly, there are some applications that could/would but it's less likely. So 11 million total for those properties.

And we're saving enough water for our mining needs, correct?

Yes, so just as a side point, thank you for bringing that up. So the 2 basins that we're talking about, the Comstock is in 103 and Silver Springs is in 102. We have all the water rights we need and then some, for our mining operations and they're fully separate from these that we're talking about, which is a good thing, right? We have excess water. So bottom line, in Silver Springs, we'd have water for it but that's not currently on the plan but we have plenty of water for the Comstock. There's no issues there.

(Operator Instructions) We can go next to [Jon Way].

Sounds like you're busy up there.

Yes, it feels like a good busy. We've spent a lot of time reestablishing the platform but it feels like things are all forward-looking now which is funner and more valuable, hopefully, as we get some traction here.

If you go back to the clean tech kind of alternatives for the noncyanide and kind of like what are your real objectives with that and how much time are you having to spend with that? Or are these guys just on the property doing their own thing and reporting to you from time to time?

Yes, okay, that's a great question. So with Cycladex, it's more like that. Okay so, they give you good color, like they hire 2 of our former lab chemical engineer and metallurgists. So they're right on-site in that regard every day, working in the labs, crushing samples, testing materials. They also have an office in Carson City in the innovation lab. And they're -- but they've been to Nicaragua. They've been in some of the old Soviet provinces. They're really working the materials. I would say more independent of us, right? We get updates at our weekly meetings, on progress and whenever there's need for support, we're happy to provide it. So that I guess I'd say that's number one. With Itronics, it's off-site. All the work and all the samples have been going through independent laboratories. The testing has been sponsored by their metallurgical engineers, and the idea really is to see that their technology has been proven in other applications, so it's been used in extracting silver from fluid, it's been used for making fertilizer. It's been used for making electronic or recycling electronic scrap and mining from like circuit board kind of notions. But that concept is, could we together, could we together figure out a way to make it efficient, effective, practical on ore, right? On mineralized materials. And so it is kind of a -- it was a very different notion of application but for a very known and established technology. So because they knew it, they were willing to invest the initial amount of money and support to do all the testing. We were just providing, frankly for most intents and purposes, providing samples of our ores and analysis of our ores. But we feel like now, we're to the point where we could absolutely collaborate on a specific feasibility study, specifically on our ores. And so that won't -- because we have so much data, because so much of it was independently tested, I don't think it would be -- it's not a big effort to do what we would call screening-level economics, which essentially you lay out a concept of what the process looks like. You cost it all out, based on all the testing you've done. You test it to see if there's a fatal flaw. And then if it's not, you can move into a prefeasibility, which prefeasibility, it's pretty specific, right? Where you're talking about the absolute economics from beginning to end on this process working. It -- because it extracts substantially all of the metal which, in gold and silver terms, is a great thing. Sometimes in other terms like when you're getting zinc, copper, cobalt, sometimes lead, mercury, it's not the greatest thing, right? You have to deal with separating those metals, et cetera. But by doing that, you effectively detoxify your residual materials. I mean even if you were reprocessing leach materials or if you were processing virgin materials from scratch, you're going to end up with something that, not only is clean of the metal basis, but in the first scenario, neutralizes and destroys the cyanide complex, and the second scenario, doesn't use cyanide to begin with. You could have a breakthrough. So we're very keen on the notion of, if we can efficiently assess something that's a known science but -- and I say this very importantly, like the science of extraction is known, is good, it's effective but that doesn't mean it's efficient, right? If you really look at the landscape of competing technologies in clean tech, I mean, it's hard -- I'm sure there's some out there, but it's hard to find guys who have bad science. The ones that are making progress have good science, but good science is only a prerequisite. It's necessary, but not sufficient, right? Sufficiency comes from it actually being cheap, efficient, low cost. If we can do that part of it, which is not done yet, right? If we can do that part of it, we would have something special. Now the reason we're talking about it is because, when we were running through all the trials and we haven't done it in pilot scale, we haven't done it on a larger scale, but when we were running all the trials, there was a regeneration of the material. The main material used in the process that made its net consumption very low. If the net consumption is very low, you might have a competitor to cyanide. That's the one thing that -- you talk to 10 different companies, and they always dodge the question of efficiency and cost. They love telling you about, "I got 80%, I got 90%, I got 100% but it cost me more to get it than the value of it", right? So, anyway, that's...

Is everything all just from the leach pad? All the columns or are they going into the mine...

So just to compare and contrast, for Cycladex, they've been -- we've been using Dayton ore the whole time. So it's -- if you want to call it a virgin ore, the tested in mine and materials that we have good history on. With Itronics, all of the initial testing we've done from samples on the leach pad, and with really surprising results. And so we just recently delivered virgin ore samples from the Dayton because we don't see anything in the battery of tests on the previously processed ore that's -- that indicates it wouldn't work on virgin ore. Having said that, you could argue it's a lot harder to do on previously processed ore because there's so much less gold and silver content in there to begin with because we've already processed it the first time. So in reprocessing, the benefits are certainly the value of the metals that you can get out. But it also ties to lowering your reclamation cost and maybe even eliminating some of your reclamation cost, and capital cost for leaching. If it works straight out, the process will look different than a leach pad. So that's what we're looking to study right now. Is there a better, faster, cheaper way to do it with these materials? We think there's a good possibility that there is.

How are you going to monetize the relationship with Itronics?

So we'll come up with an agreement. Certainly, we're doing this much more collaboratively with them. Certainly, the -- if it works, the existing mines on the Comstock will benefit directly, but we're working on that second phase right now. It's working very well but we don't -- we're still too early, like I think the screening level of economic work is a pretty important variable before we even know if we have something to move forward with but we're getting very close.

One last thing, kind of a real simple question. You always talk about gold equivalent, and what is the ratio of the silver to gold there on the property? I mean, I happen to believe that it's almost going catch -- it will catch up the ratio.

Yes, so there is on -- there's 2 answers -- 2 different answers, right? One is, on our property, and this is holding true with all the work that Tono was doing with Lucerne and certainly all the experience that we've already have with Lucerne. It's over 10:1. So we have at least 10 ounces of silver in our resource estimates for every ounce of gold. So that's a straight out answer. On the gold equivalent question, it's just stunning that silver is trading at values that are 1/80 of gold, meaning gold to silver value is 80:1. And most people would expect that number certainly to be less than 60:1. The famous discussion is always that it was historically 16:1. Well, if you get anywhere near 60, which is a -- most people think is a normal or high number, not a low number, silver's going up much faster than gold. Now I'm not saying that I predict that per se. I think gold has a long way to go up too considering what's going on with money. But silver's ratio to it is clearly handicapped. I don't -- no, I think if you're -- if you are one of the people that focus on that ratio, and there are a lot of people that do, you'd say silver's going to move faster than gold.

(inaudible)

Yes, yes. And we have a lot of it.

Thank you. And the time allotted for questions and answers has come to a close. I'd like now to turn the call back over to Mr. De Gasperis for closing remarks.

Thank you, Savannah. Well, folks, thank you for your time, thank you for your questions. I do really encourage anyone that can, to come out and visit us. May 31, is the annual meeting. It's going to be held at the hotel, the Gold Hill Hotel, right on the Comstock. And a lot of the stuff that we've introduced here will be -- can be discussed, covered, touched, debated and I think it's going to be a great meeting. So I look forward to all that. And anyone who has any follow-up questions, please don't hesitate to reach out to Zac or I at your convenience. Thank you.

And this does conclude today's call. Thank you, everyone, for your participation. You may disconnect at any time, and have a great day.