Comstock Inc (LODE) 2020 Q1 法說會逐字稿

Good day. Welcome to the Comstock Mining Q1 Update Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Corrado de Gasperis. Please go ahead, sir.

Thank you, Eduardo, and good morning, everyone. Corrado De Gasperis here, CEO of Comstock Mining, on the line with Zach Spencer, our Director of External Relations and new Treasurer, with us today. We welcome you to Comstock's First quarter 2020 Conference Call. I will provide a brief summary of the information that included from our press release from this morning, including progress on our strategic initiatives. If you don't have a copy of today's release, you will find a copy on our new website at www.comstockmining.com. And please just click on the press releases but in the main menu bar. We will have our quarterly report on Form 10-Q filed today, and we've also included the basic financial statements with the press release just for your convenience. We actually had 1 of our fastest, best scheduled and coordinated closings this quarter despite everyone working remotely. The full report actually being completed over a week ago, but we've been working exceptionally well with our team and the Deloitte team. Everyone working collaboratively with a disciplined schedule. And based on everything that we were able to do this cycle, we expect faster reporting going forward regardless of the distancing measures required by COVID-19.

Please also let me remind you that we will make forward-looking statements on this call, including an update on our 2020 outlook, but any statements relating to matters that are not historical facts may also constitute and would constitute forward-looking statements. These statements are based on current expectations and are subject to the same risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in previous reports filed by the company with the SEC and in this morning's press release, and all forward-looking statements during this call are subject to those same and other risks that we cannot identify.

Okay. Let's move on to the update. We have now really and fully repositioned the company for precious metal based growth. The activities we're going to be talking about now have really substantially all shifted to these initiatives. And in 2020, we're just driving gold and silver developments with an extreme focus towards our goal. Our goal is to grow our intrinsic value to $500 million, $500 million. We want to say that strongly, with $120 million of that targeted and identified in the shorter term and 500 the total larger number in the -- and longer-term by implementing the plans that develop our precious metal resources and commercialize the cash-generating gold and silver processing technologies that we've put in place. That means Lucerne. That means Dayton. That means the claims north of Lucerne and South of Dayton. That means the Mercury cleanup initiative, MCU. And that means completing and monetizing our nonstrategic assets to fund that growth.

Starting with Lucerne, as you know, we have partnered with Tonogold. They have reworked the Lucerne resource estimate, and they are not updating that estimate based on the higher gold prices, and it's compelling. Also expanding some of the Clean Groupings East of Lucerne in a geographically adjacent area that represents essentially the southern extensions of the oxidant load. So they're working with Lucerne, and they've now expanded and better interconnected was there right up north into the Occidental Lode. The Lucerne and those eastern extensions with the Occidental actually combine 2 surface minable resources, the Lucerne mine and resource that's east of the Lucerne line. And again, combined, they are very compelling. Tono has also planned a well-conceived and expand drill program that includes these eastern extensions and the accidental load and much more. And they've already received permits for commencing some of that drilling in Storey County. They've lined up the capital and, with our full support, are finalizing the selection of their drilling partner. We expect the tone will be commencing drilling this summer, possibly as early as June on some remarkably high-grade targets.

We've not only established a million value in our target list for Lucerne at $25 million, but we're projecting an additional $35 million from the leases, from the reimbursements, from the royalties that would come from the surface mine groupings. As I mentioned, we have royalties. We have a sustained 1.5% NSR royalty on all of the Storey County Mineral claims, not just the Lucerne and the Occidental, but all of them, and in some cases, higher. So there'll be much more that we'll be discussing here in the near future when it comes to the work and the geology, but the geological research and the drill planning and the drill programs that are put together are truly impressive.

As you know, we own $6.1 million in Tonogold preferred stock. The majority of which, by the way, becomes unrestricted this month. And if-converted to common shares, we'd total well over 33 million Tono common shares. With the current prices, that values our position at closer to $12 million, not $6.1 million. As of March 31, our third-party valuation firm valued at a little under $9 million. That is March 31 10-Q reporting date.

It's now fair for us to say with the geological work that we've seen and the capital that's been lined up and the drilling that's getting ready to commence that Tono is really starting to exceed expectations, and there's much more to come here. And we're looking very much forward to it.

In terms of Dayton, we are expanding the economic resource, meaning we are nearly finished with our expanded geological interpretations and then working on the engineering of an expanded pit shell. That work is actually coming together very, very nicely. It's almost done. But if we just reevaluated Dayton's value right now, just based on the previous economic shelves that we had developed, and those economic shells were developed using cutoff grades that are more consistent with an $800 gold price. And if we just take those shelves, in other words, no way in engineering, just the ounces and resources that we put an economic shell around we now show a low end value being at not $40 million, but closer to $75 million or $80 million, and that's using a $1,600 gold assumption.

Now I'm not saying we've reengineered the economic shell with those different cut-offs. We're just simply saying with the old smaller design, and today's gold prices, we have something exceptionally valuable. So we are going to do that work. We're doing that work towards the stand-alone 43-101 technical report for Dayton that we will be looking to publish this year. And I just don't feel that a value range with what we know now, that goes between $75 million and, let's say, up to $150 million, if anything, but reasonable in the current environment.

When we summarize all of our resources, we lower in the low end for the day in the low end for Lucerne. We just literally put the investment in asset values of our other investments on the list. And what we see is a number that quickly gets us to $120 million. We've blogged on this recently, but we're going to be talking about it a lot because our focus is simply going to be on implementing these initiatives, proving out these technical reports and summaries, developing the resources further and realizing that $120 million loan value in the market. If we get just half of that, we're well over $2 a share. And if we get all of it, we're over $4 a share as we summarized.

Let me move on to MCU. As you know, we've partnered and launched MCU -- this is our clean mercury remediation growth venture -- with 2 projects in the queue. The domestic 1 on the Comstock is now scheduled for May and the 1 internationally in the Philippines for July. In terms of that means landing equipment and processing materials. This weekend, the Comstock and MCU team will be making site preparations for the delivery and assembly of the first system. It was delayed by quite a bit of time because of the COVID-19. Unfortunately, the majority of the system had been completely manufactured, and it was just powder coating and painting that was shut down by the third parties that we're not allowed to work and do that. That's all in progress now. Site preparations are underway. The system is incredibly impressive. I'm really looking forward to this MCU start-up in the U.S. collaborating every single step of the way with the Nevada Division of Environmental Protection. We've had at least 2 meetings with NDEP just in the last 3 weeks. And it's all progressive. It's all supportive. I think people are generally excited about what we're about to do here. And we certainly will be posting photos of the system as it arrives and gets set up on our new website, but it's impressive.

MCU, I think, as everyone already knows, has also signed a definitive joint venture agreement with Clean Ore Solutions, our partner in the Philippines. And we've been working weekly with them on getting things set up, enabled and ready to go, just the logistics of setting up a foreign branch and getting organized and being able to do business. It's all happening expeditiously. The Philippines also has COVID-19 restrictions and those restrictions require if you go there prior to May 15, you have to quarantine for 2 weeks, so we're not going there until those things start to get listed. But we're very excited about this project because we recently enhanced the scope of the project by combining the Mercury cleanup intentions and remediations that we've already agreed to with the sand and gravel system. This was really done in collaboration with the Philippine environmental regulatory authorities. And it's kind of a breakthrough for us because by building a system, which is happening -- being built by oral as we speak right now, and targeted for delivery in July, we're creating -- in addition to the Mercury remediation system that will be very, very similar to the 1 that we're bringing here onto the Comstock, although bigger. We're creating a second system, which actually will be the first 1 that goes that is really designed for sand and gravel operation. But will be enhanced also with the Mercury remediation technologies. What it means is that we have a definitive revenue stream and a definitive cash flow that comes from the system just from the sand and gravel operations, which is a certainty, and then any mercury and gold that we know is in the environment really just adds to the profile. So it actually reflects an expanded scope of what we're going to be doing there, a meaningful derisker of how we're going to enter into that business because we have this essentially guaranteed offtake of sand and gravel that allows the system to get up and running and assures its profitability without quantifying the certainty of the amount of mercury and gold that would also come out of that process.

Overall, we built these entire systems initially on our models at $1,200 gold. So we just can't we just can't give a better time to begin processing these contaminated materials and extracting the gold from them now with gold at $500 price higher than it had been.

Let me talk a bit and wrap up about our financial position and our outlook, and then we'll turn to questions. As of March 31, we had total assets on our balance sheet of almost $40 million. I think that's probably a record. Our silver springs assets are part of that. They're being held for sale, and we're moving forward. We now expect to close this quarter, most likely within the next 30 to 45 days. The markets were royaled, obviously, by the COVID-19 lockdowns. And they're slowly coming back to at least stability, let's say, so that slowed the opportunity funds capital raising down a bit. But in the meantime, the fund was focused on the assets that had already acquired last year, including the clean processing manufacturing facility, including the Silver Springs airport. And over the last month or 6 weeks, the fund has been able to lease its first 2 companies coming into the manufacturing facility and also break ground on the first new tenant building hangers on the airport.

The leases that were signed were remarkable. They were at rates that were well above what we had planned in our models. Frankly, we were thrilled at the validation of this and the thesis that Northern Nevada and Silver Springs is the place that manufacturing, especially these conservation based companies these impact recycling based companies want to base themselves at. We're working with a handful of additional companies, small, midsize and some, frankly, are very large. That want explicitly to move into our opportunity zone. So despite not having raised the second tranche of money because of the COVID slowdown, the company has been rocking forward.

Maybe to put that in a little perspective. When we acquired when the fund acquired the manufacturing facility, it paid less than $6.5 million. We valued it based on expected lease rates, let's say, models, lease rates and an 8% cap rate. At about $10 million. So the idea was we're getting an incredible facility at an exceptional value. But with the current lease rates that we've already secured, signed and sealed, if you use that same 8% cap rate, you're talking about a valuation of over $23 million just for that facility. So that's a leap forward, and it's going to accelerate now the rest of our capital raising activities. And as you all know, everyone is anxious about the fund closing on the 2 Comstock properties for the remaining $9.7 million that -- the remaining $9.7 million that will pay off our debt and leave us with at least $4 million of cash in the bank. The fund is acquiring much more properties and making much more investments than just the 2 Comstock properties. But obviously, our immediate interest is getting those asset sales closed so we can be funded and move on.

I've already talked about our total stock position earlier in the call. The stock is highly valuable and becoming more monetizable for us potentially in the range of $9 million to $12 million. If you just look at what other people are telling us the value should be. I mentioned that, that stock for us, most of it becomes unrestricted this month, and Tono is really impressing us with their ability to intelligently put together a pretty remarkable drill program.

They also reimbursed us about $0.75 million in cash for expenses incurred during the first quarter. So they're very timely with that. We appreciate that extremely well. They even reimbursed us some additional monies in anticipation of some of the upcoming expenditures because we're fully supporting them with our staff. And that includes local permitting. That includes federal permitting. That includes geological support, for the exploration planning and drilling. So we couldn't be working more closely with them. While we certainly haven't ever been working more closely with them than we have been now.

And we also formalized the remaining number that is due to us from Tono regarding Lucerne, which is almost $5.5 million. We did that by formalizing a no receivable, that no receivable has a 12% interest component associated with it. And starting last month, we are now billing and receiving about $55,000 a month just in cash income from that but receivable. That's allowed us to not continue the stock sale activities of the past. We did have a little bit that was sold. And in March, our outstanding shares are 27,875,000 and $75,000 and that was the number at March 31, that's the number today. So let me just conclude and summarize with our just 6 bullet points of our outlook. So number one, this quarter, hopefully, in the next 30, 45 days, close on the Silver Springs assets, get the remaining $9.7 million, extinguish the $5 million of debt, put the cash in the bank. That's number one. Number two, Tono launches their drill program. It's very exciting. It's going to happen next month. We believe they've already planned it. They've already permitted a significant portion of it, that's moving forward. Number 3, we're going to land the MCU system this month. We can start operating this quarter. That's going to be a big movement forward for us finally getting that system on the ground and operating. Number four, we're going to commercialize the second MCU system with the sanding gravel Mercury enhanced unit first in July and the second unit to file hopefully before the end of the year. We are #5, really getting to closer to the finish line of our planning and expansion of the geology in 100% on Dayton resource so that we can update our resource estimate. We can start putting economic parameters around it and publishing an updated stand-alone at 43-101 resource later this year.

And lastly, not as much of a milestone has just a focus we're just -- we're undervalued by any measure recognizable. I mean, it's just horrible in that regard. I blog that. I mentioned it earlier. But our immediate goal is to unlock the value that we see and that we know driving us to $120 million. I know that's almost 10x from where we are now, but we are doing things that are tangible, that are technical, that are reportable that support that kind of number, and we're going to continue to push it in the immediate term and continue to layer in the growth activities of the Dayton, be it of MCU and the projects that will grow and follow, be it from the cash that gets generated, be it from the money and monetizations that we affect but it's all laid out in clear. So the focus and the value to realize is sharp, it's clear and it's happening.

So Eduardo, I think I'm going to stop there and turn to questions and answers, please.

(Operator Instructions)

We'll now take our first question from James Dell.

On the Tono stock. Is -- do we convert 0the -- how you should centers did you convert the preferred over to regular?

No. So we have $6.1 million of preferred, as you said, convertible, and it's not -- we're not allowed to convert it until May 22. So coming soon to it or near you.

No problem, but that's another source of income, but we're hoping to get you out of debt and all that. A tunnel have an excess to CCRO tunnel as part of their agreement?

Good question. I think that -- so the Sutro Tunnel which originates in Dayton down about 3.5 miles south of Virginia City, the interest of the tunnel is accessible, but it's caved in at about 200 feet in the immediate term. So in terms of entering the tunnel and using it in a free moving place, the answer would be no, right? Having said that, it goes right underneath the Occidental on its way up to Virginia City. And both we and they have identified meaningful historical information from prior reports that show grade, meaningful grade, like high-grade for lengths at that depth, that is 1400, 1500, 1,600 feet. And the Occidental way never been accessed in any meaningful way. Beyond maybe, let's say, 500 feet, you might have a working at 700 feet, but it's very, very little. So the point is that we know there's great at surface. We know there's great intermediately, but we have huge evidence that there's great at depth. So in that regard, we have access to use the term tunnel data, but not necessarily like human entrants.

My question -- asset was apparently part of your Tono contract, can we lease that asset to Tono and generate more capital?

So we have leased, and I may have misunderstood you, but we have leased the Occidental claims to tone. And yes, it's -- we think it's going to represent an incredible partnership. We do get paid some monies for that, but it's the money going in the ground that really will create huge value.

Okay. Now with Tono, it could make their whole -- their mining operations a whole lot easier if they can access the croton get a clean down whatever. The --

Yes. So let me expand the thought, Jim, just 1 point. Okay. So there's been there's meaningful amount -- sorry, go ahead.

The Sutro tunnel is not part of their lease contract, is it?

No.

Okay, that's something else you could lease to say.

Right, potentially. And soles and -- but so that's a good thought. I mean, it's a good thought. There's no reason to debate any further. But access to underground edits even apart from the Sutro tunnel could help facilitate more efficient exploration and drilling. It's just -- safety is sort of the number 1 issue. But yes, it's a good point.

Okay. My last question for you is the silver brings an opportunity zone. So if they're out there hearing other properties. Before they paid us off, should we be thinking about cutting the string to them and moving on to someone else because I think they're just sort of like -- no?

No. No. So it's a fair question, but no. So there -- we're the priority in the queue. And they've already paid $400,000 in escrow. We have secured agreements. And there's a very logical sequence of the acquisitions, right, that give the strongest footprint. The airport and the manufacturing facility as operating assets, just the pressure and the circumstance, those had to be first. But the comps by properties are next in line, and it will happen here. So I think a little bit more patient. It's taken forever, I understand, but a little more patience and going to be a big win-win. And I think everyone is going to be extremely happy. So it's all happening.

Why don't you tell them that your stockholders are losing patience here? Last thing is -- it took forever for the week of -- guys, your conference call folks to dial me in so I missed the first third of your presentation. You your MCU operation, you're going to both -- if you use a start a gravel pit with it after you clean it up and sell the clean up gravel, am I correct?

No. It's -- let me explain a little better. Thank you for that question. So basically, the area under permit is about a 27-mile -- I'm sorry, 27-kilometer long expands, okay? And they -- there were literally -- I may misquote this, so I'll be conservative and say, like 1,200 mills all along the expands. And so along the soils, along the surface or alluvium mining activities and all along the river is mercury contamination. It's horribly colluded. The process that we have and the 1 that you'll see that we're even landing here in the U.S. is basically taking alluvium from the surface and processing it and cleaning it. And there is a huge amount of Iluvien sand gravel, both alongside the river beds and in the river. I mean, we will literally be in the river processing material in a wet format. All of that material, the #1 objective is to extract out the mercury and clean the river, clean soils. In the primary system, there is residual material that comes out, but it's not designed for higher volumes of that, right? It's more designed to be surgical in terms of getting the contaminated material, separating the mercury, et cetera.

So what we've done because it's such an expanse, 27 kilometers of soils and rivers, beds and materials, we've created a higher volume, soil and gravel purposeful system with the same mercury controls, the same separators, the same spirals, but it's the higher volume. So in that machine, in that system, we're going to be going to areas where there's massive amounts of sand and gravel. And let's say, maybe minimal amounts of mercury and gold. But even mineral amounts, even minimal amounts are meaningful. So you're going to have 2 systems: 1 with the primary purpose of processing sand and gravel and still capturing mercury and gold. And then the other one, with the primary purpose of capturing, it will still put out some clean soils and some clean gravels but on a much, much lower volume scale.

So 1 of the things we're going to be producing a lot of mercury and a little bit of sand and gravel. The other is going be reducing a lot of sand and gravel and a little bit of mercury and gold. And so -- but the coolness of it is that there's such a massive amount of construction, and there's such a heavy need for construction purpose, sand and gravel. That we were securing all the offtakes and the government is even committed to taking the material for their highway and road projects. Such that it just derisks the whole dam thing. It's just -- because there's still -- despite the sampling that we've done and despite the knowledge that we have of the mercury and the metals contained in the Mercury it's still nascent, right? So to be able to land the sand and gravel primary unit, make money, generate profit, continue the sampling, get the second system ready, bring it in with more intelligence, it just makes the whole project. It actually accelerates the project. But it also makes it safer in the way that we deploy the first system in the second system. So I hope that helps explain a little better.

Okay. How dry is the material when it comes out of the -- are you here?

Yes. It's no, it's not -- I mean, I don't -- I'm not expert in that question, but I think for most intents and purposes, it's initially wet. It's a web process and a wet system. And in some cases, the system will be right in the water. And it's capable to do that, right? So -- but ultimately, it will be prepared and ready for the sand and gravel construction uses that we're targeting for.

Well, what I was thinking for -- coming out of the ASCO already. Okay. In other ways, you can sell it or link up and build your own asphalt and so ready to go as asphalt you wanted to?

Yes. Our partner, I believe that our partner, our Philippine partner is already involved in some of those lines of businesses. So that could be a wonderful complement for sure.

I want to emphasize, though, like our #1 mission, our #1 differentiation is that we get the mercury and the metal out of the environment, which is huge.

You're creating value here, okay?

Huge, huge.

As you had shown everything I can ask you about as you create value, you've got to get paid for it.

The market to here is unlimited. I mean, I don't -- I'd stop counting at like 1,500 sites in the U.S. alone that have mercury contamination, okay? So it's a global issue. And it's a UN priority and the UN's accord that was signed in 2017 targeted 2020 for countries to cease using mercury in industrial mining activities. And so we're seeing it, right? Philippines is actually a leader, believe it or not, in the world telling the miners to stop using mercury and to bring people like us and to clean it up. So this is just the beginning. It's just the beginning.

Yes, this may sound silly to some people, my point is you should be generating a lot of sand and gravel as an off-product of this and being able to -- and sand and gravel is a valuable material. Not as valuable as silver or gold, but it still has value. And just keep your mind to open to -- because as you accumulate tendered a bunch -- eventually, it will get in your way. So you've got to find a way to get rid of it and hopefully sell it at the same time.

Thank you, Jim, for that, and I appreciate the question. And I would just -- as you're signing off, I'll just complement by saying that I had the epiphany sitting there in the Philippines hippies talking to the provincial heads, and they kept asking us, why don't you switch the order and get going right away with sand and gravel? And I said, look, we're not -- that's not our core competency. Quite frankly, it is. Ore industry has a lot of competency in building and gravel systems and Paul might be 1 of the best alluvial miners and processors I've ever met, okay? But then they said, "Well, what if we take the material from you? And I'm like say that again, and the rest was history. So we own 100%. We have 9 permits now. Our partner has 9 permits that all allow for sand and gravel along the entire expanse. So we're going for it. So that's the news. That's the big update is that we're expanding the scope and including that material. And I think it just makes everything so much safer.

We'll now take our next question from David Brigham at Brigham Investments.

Can you hear me okay, gentlemen?

I can, yes.

Listen, on the Mercury and the gold which you're getting out of the gravel, I mean, out of the tailings, what form is the gold in? Does it mineralized? Is it recognizable as gold? And what about Mercury, Mercury is liquid. What does that look like when it --

So great question, David. Thank you. So Mercury, in most intents and purposes, is in its liquid form, right? I think it's the only liquid element, and it if you come on to the Comstock and you drill down to some bedrock in some river ways. I mean, you could literally have a little ball of silver liquid in your hand, okay? That's not uncommon. And so the technologies that we have, it's a mercury, we call it a mercury reactor. It's a centrifuge which is very, very effectively. And then we have spirals and separators that very, very effectively. I mean, light years more effective than any standard in the industry in terms of separating the mercury from the soils. And then we have an organic solution, which is the fourth technology. We have 3 engineered process technologies. And then we have an organic solution that allows us to -- and this is big, not only separate the gold. But we I think the biggest differentiator of the technology is that not just the effectiveness, the high-efficiency and effectiveness of separating elemental mercury, liquid mercury, if you will, from the soils. But we also have the ability to convert metalized mercury. So what happens when mercury enters the environment, is it pools, like you'd expect, gravity takes it down to bedrock. And then typically, if it's in a waterway, it will find itself down to rivers. That's very common, okay? Carson River mercury is a problem because of the Comstock. So -- but if it stays in the environment long enough, it will metalized, it will literally absorb itself into the biology, and that could be soils. It could be plants. It could be fish. And when it metalized, there's -- that has generally been thought of the point of no return, you're screwed. We can convert metalized mercury back into the elemental mercury, that's the breakthrough and the technology, and we can do it with organic materials. So we'll be filing for patents. We'll be protecting the technology and that's our claim to fame. And that's how it -- without going into the black box, we can't describe how it actually works, but it works.

So -- but no, the mercury, does it have a value industrially or something.

Okay. Yes and no. There are some applications of Mercury. But for most intents and purposes, it -- the disposal and storage of the mercury represents the highest cost in this entire business plan and model. In the Philippines, for example, the government has agreed, and it was very critical to us that the government agrees to handle the storage, the disposal, the storage of the mercury. We don't want to see the mercury go back into the mining environment, that would became inconsistent with the UN's mandate in the Minamata accord, which is to eliminate it, not reprocess it back in, right? That's the toxic problem. So we have some ideas about potential future applications of mercury but they're just way too early to talk about. And right now, what we're trying to do is manage the responsibility and the cost of safely disposing of it, not letting you get back into the environment.

Okay. Changing the subject just a little bit. Tonogold, I guess, they're going to be looking for a big chunk of capital to get into production and your examination of their financial statements and talking to them, do they have a clear path? Do they know where they're going to get the big bucks as they need to produce gold?

Yes. Good question. And I mean we think of 1 other thing I may not have said in the call is that -- but I think I did say in the press release is that they're working very diligently to have fully audited financial statements. They're on a schedule of completing full audit with a top public accounting firm, Marcum. They're planning them to file a 10-K and become a full reporting entity, and they're also have upgraded board with independent board members. And they've already evaluated file and prepare themselves to uplist onto a major exchange, hopefully, in New York, but they'll be on one. And all of that activity was driven by a wave of, I would say, more professional capital coming towards the investment. So they're attracting very serious funds. They're attracting a very resource expert funds and now they're taking what I would call the logical evolution of staffs, right, to prepare themselves for that. Number one. Number two, to answer your question, they've lined up, I believe, about $5 million of capital commitments for what is really a well-thought out on our drill program really, well thought out. And exciting, quite frankly. And so I think that what we will see them do in the next 12 months is spend $3 million, $4 million, $5 million in drilling that will enable them to publish the technical report that they have. The technical record will have Lucerne as a central aspect to that update, which is great, but it will also expand geologically. A lot of what we've leased to them and what they're looking at. And I think that will, in my mind, represent the next valuation or revaluation of the company. And then I think they would be in a much better posture to then think about past to production and capital for that purpose, right? So in other words, their first priority, which is different than, let's say, 1.5 years ago, their first priority will be to expand the geological footprint, do a meaningful amount of drilling to prove certain concepts that they've laid out in those concepts. Are not speculative per se. They're based on a tremendous amount of historic data. But if they calibrate and prove those concepts out, this drill program, it look out, right? There won't be a shortage of capital, in my opinion, because what they will define will be much bigger than what anybody is talking about. Yes, exploration drilling is a riskier proposition than production and certainly some of the things that we're doing, we think, are safer, but there's big upside to it. And there's segments of capital that are very excited about it.

When it comes with data, and so what -- I think what they're doing, what they've been doing is becoming extremely data savvy and they -- it's a small company, but they have a big network of advisers, like super competent geological engineers that are working with them. So I think there's going to be some very exciting news coming out of the Comstock here in the next 3, 6, 9, 12 months. I can't speak for them. But we're very close now. We're working together in a remarkably collaborative way. So it's come a big circle. It's not a circle. It's just evolved tremendously over the last 12 months.

We'll now take our next question from [Harvey Molca].

Could we take a look at the strategic value targets that you have? We're looking at Dayton at $75 million back in January 6, that was valued at $40 million. So it's gone up to $75 million. The mercury cleanup was -- you have value that $2 million and $3 million back in '06 and January of this year, it was $25 million for each of those categories. So there's some significant shifts in both of those. Can we address that?

Absolutely. Let's talk about it because that's what I want -- it's all I really want to be talking about is how we evolve that number, ultimately, hopefully, on a path, $500 million. But so with the on -- let's just -- let me address the in really quickly. That $40 million was based on an economic shareholder had done. 1 of our prior and really excellent senior engineers had designed. It was based on a very high cut off and the average grade the economic shell was over 0.05 ounces per ton, which is outstanding in terms of an average grade. To The Lucerne by comparison, we mined it at about 0.029, so not quite a double, but 75% higher. And the economics showed about a $30 million net cash flow from relatively short mine life, let's say, 2.5 years, okay? So the NPV of that number is almost exactly the same as the number. It's about $40 million. Our Chief Geologist, Larry Martin, has been doing a remarkable amount of work, and that work is based on additional data and additional drilling that we did since what I just discussed with you. So Larry is adding geology, adding data, building cross sections, building level plans, he's almost done. He's expanded the footprint of what we know. And in min patients for all that work to get done because once that's done, then our senior engineer, Mike Norit, will we run economic pit shells, okay? And he will not only add the geology to the equation and the engineering to the equation. Obviously, he'll change the cut offs based on what's optimal with gold prices. So in my patients, I said, let me just use the smaller shell. Let me just use the more conservative assumptions and slap $1,600 on the number instead of $1,200, and the number went from 40 to 75. So that's a simple answer. And I just thought it was prudent -- I don't think it's prudent to put a $1,900 gold price on it yet or a $2,000, but $1,600 that, in my opinion, was what I see people now using in the field.

And why did mercury go down from $50 million --

So mercury, when I -- when I first did that chart, I think it was at the annual meeting, the idea and this is still the case, right? It's still the case that we're going to target projects, and this will not be difficult, right? We're going to target projects that have at least $100 million of value. And by the way, I didn't say it earlier, but use the Philippines as an example. We were talking yesterday about life of the sanding gravel easily 10 years. Easily running for 10 years, okay, easily. But we're targeting $100 million. And the way we structured our ownership with MCU is that if we do nothing, if MCU decides to take a project on in an area that maybe we're not interested in participating, we get 25% so that's, to me, every project should accrue value to Comstock of $25 million. And then -- but we have the right of first refusal to have a 50% direct ownership in any project. Okay. We have the right to first say. We would actually like to do more and be more involved in this 1 and have directly 50%. So 50% direct and then technically, you're getting 25% of the other 50%. Through MCU, you get 62.5%. And so that's the $62.5 million. So that was like conceptual. So we know we got 2 projects coming, we should be between $25 million and $62.5 million conceptually. And that's still correct.

However, now we have agreements. And in the Philippines, for example, we are going to -- I'm going to propose that we do 50% direct because it's exciting. It's economic, it's looking really good. But ultimately, that's going to be a 62.5% of not 100%, but 62.5% of 40%, right? So what I did in the Philippines said, look, the asset value is going to -- we're going to -- we're now -- we have now have a known project. The asset value is $2 million or the asset values $3 million. That's the minimum. That's -- those assets are -- by the way, all these mercury systems are Eluvia mining systems that even if you weren't in a mercury-contaminated area would magnificently plus their mine the service metals out of that, even if there was no mercury. So the point there is these assets have value even if we weren't using them for the specific purpose that we're using it for.

So the low end, I'm just putting the asset value. And then the high end, I'm putting what I believe our percentage of the project will be, and it's known, right? So -- but I expect all of those over time to grow to a minimum, as we learn more as we have more hard financial data, grow to 25 minimum and 62.5% is not the maximum. I could -- projects could be hundreds of millions. But so I'm just being more conservative with more specific data. I hope that in a year or 2 from now, there's 12 mercury projects listed on that thing.

I just want to understand why you were 25 per and now you're at yes.

I was sort of laying out a concept of what we were targeting, and that is exactly what we're targeting, but now it's more tangible, and I just want to be more -- as we have agreements they're signed, I want to be more precise, right? But our biggest issue, I think, with MCU, outside of just getting the technical proofs out to the market once we get operating is going to be how we manage the growth. There won't be a lack of opportunity.

Okay. If we shift over to the assets and liability page, we're looking at a $39 million of assets. And that is up significantly from the $24 million that you showed in January. And the obligations, we're selling at 16.8 --

So ironically, the -- change the profile of those net assets there at the bottom of that chart. Again, I think more conservatively. Previously, in theory, I was showing sort of com stock land values and that was almost in a sort of a liquidation mindset. Like what would our land be worth? And I took that number out. Quite frankly. So what I did put in there was assets that are now known and monetizable. So we have assets that have nothing to do with our mining platform that we're selling, as you know. But the investment in Tono is also a monetizable asset, and we have a receivable from Tono. And we have some debt. So I tried to be more pedantic and not like speculate about other values and try to say, look, this is money, and this is money that we're going to get. And I know it's ridiculous that the net value is higher than our market cap. And that's why I want to just pound that into the market. And I've had at least 10 calls with new types of investors, 3 yesterday. Asking me these questions. And slowly, but surely, they like what they're hearing. They get their head around it. So -- just pound this into the market.

I understand the $5.3 million of debt, but I don't understand the $16.8 million of liabilities. And what happened to the Northern Comstock debt of $7 million?

Yes. Yes. So the -- yes, okay. The $16 million in liabilities is reasonably simple, okay? So $5.3 million of that is the debt. We have about $6 million of reclamation liabilities, which is the long-term reclamation liability associated with the -- associated with the leach pad, okay? So that's not -- that we don't view that as any kind of near-term cash obligation. So you have the debt, then you have a reclamation liability that's $12 million to $16 million. And the other $4 million is either $1 million of it is deferred liability, which is just some expenses that we receive from Tono in advance of spending them. So it's not a reliability. And then we have deposits for MCU, which we have to show as a liability until we close on the actual transaction. And then you just have a couple of million of payables and accrued expenses. That's the balance sheet is pretty simple and pretty clean. And what happened to the northern comp stock then. So Northern Comstock is a real obligation it's about $6.6 million. It's not on the balance sheet, weirdly because it's kind of a lease type of an obligation, if you will. And so Tono has guaranteed and is reimbursing us for that 100%. So it should still be on the radar screen because technically, we're the obligor, but we're not paying any of that right now. Once we close Tono deal, Harvey, that will legally also be gone, but right now, it's substantively gone.

Okay. How about the number of shares outstanding? It appears to have increased by over 600,000 shares.

Yes. So we did a small placement at the end of March because I had a strong sense that the asset sales were going to be delayed by a couple of months, which is what's happened. And we just had to ensure that we have sufficient liquidity to get to the asset sales. And by my math, I wanted to be conservative and make sure that even if we didn't close this thing, we end of June or July, we wouldn't have any issues with that. So relatively smaller in terms of anything we've done historically. I don't see any more of that happening in the near term at all. But we did have to do some. So I wanted to be out there and transparent. We have 27,850,000 shares at the end of March 31. It's the same number today, and it's the same number that we're projecting.

Last question based on our comment -- based on valuation, why are we not buying back our own stock at this point. So it's a 10 camper. I really work.

There's 2 answers to the question. The first 1 I okay. The first 1 is liquidity. And we have to be good fiduciaries. But the second answer, which I think is stronger is that, look, we're going to close on these asset sales. We're going to land the mercury system. We're going to publish for and D. And if we don't get that, if we don't get that value and there is cash in the bank that we have discretion over than we would. I think we would -- I'd have to get Board approval. But I think, though, that go forward on that yet. Well, I think conceptually, everyone would say that if we did a, B, C&D, and it's real and it's solid and it's done, and we have cash in the bank, and the stock is at a stupid valuation, then we would approve buying some of that back and show that confidence to the market and get the value for ourselves. But we got to do a, B, C&D and really get that foundation and, frankly, get the debt paid off and, frankly, have the cash in the bank. So -- but I think it's all going to happen.

It's nothing happening with the --

We had a couple of people look at it, and we had -- and they seemed interested, but we haven't heard back. And that's like within the last 4 or 5 weeks, we also have an incur about leasing the whole facility until we're -- with the other asset sales coming to the finish line here, if it isn't going to be sold at value, we think it's worth, then it could become a nice revenue stream for us. And remember to everyone that we have $150 million of net operating loss carryforward. So any revenue that we bring into the system for almost all intents and own purposes for us as tax rate.

What did we pay for the data?

So the total cost of the entire facility plus the extra 120 acres plus about 400 acres of mineral claims that we've -- was really the original reason we wanted 1 of the mineral claims that were between us and that property, and we ended up just buying the whole thing because the Canvas package deal was about $2.1 million.

(inaudible)

We could sell it for 2.1 right now. So we have it listed in 2 pieces right now, like the before buildings on 70 acres for $2.6 million and 120 acres of Freeland for $1.1 million. And any offers that we get we'll be talking to the people. So will be engaged.

We're -- as a shareholder, I think, we're better off blowing it out of what we paid for it in buying our stock back, much better return.

Yes. So if we could blow it out for what we paid for it, and then the very first use of that will be to pay off our debt. And then as I said, if we get the other things done, and we have cash in the bank, then it becomes an option.

We have to pay off the debt first, right. That's obvious.

We'll now take our last question from [Jeremy Harrison].

A question, I got on kind of late. I guess the system is acting up again, but as far as, I don't know if you've talked about any of the sampling numbers for MCUs as far as running through the small sample if you guys ran through the spirals. Have you got any numbers on that as far as old content?

Yes. What we've been modeling, what we've been modeling is very -- I would say, excuse me, it's been very conservative range, meaning we've been modeling grades that, I would say, are 0.5 gram per ton. And we've got feasibility in that range, okay? I think that we're believing and seeing grades of at least 1 gram per ton and ultimately, in some of these jurisdictions, there's 2, 3, 5, 7 grams per ton. So in the comp stock, we're sort of planning for the lower end of the range. It's a gram ish per tonne. But it gets incredibly exciting when the grades start growing because and here's something we didn't say. I think it's obvious, but it's worth saying. If you compare Eluvia mining, which is kind of like a lost thing, it's like a lost or if you will. But if you compare Louisville mining to hard rock mining, there's 2 or 3 things that jump right out of you. One is hard rock mining takes tens, if not hundreds of billions of dollars to define and improve a resource, ultimately a reserve. And then tens -- it's not hundreds of millions of dollars to build facilities and process it. And usually, the lead times are sadly 8, 10 years, right, to bring something into production. It's a tough business, right? -- an MCU system, on average, from $3 million. And when I say $3 million, you have the entire system you have the mercury technologies. You have metallurgical lab. You have a portable retort. You have water system. I mean, it's -- this thing is impressive, okay? $3 million. And could it throw off $1 million a month? Well, at 2 grams, easy, easy, okay? So the speed, the cycle time, the throughput, the low capital, fast return, I mean, I don't know if I'm weird, but like, I love it. Like I'll take it any day over the hard stuff, right? And I guess, I don't want to disparage hard rock mining, be open payer underground at all because we have a welfare with gold, and that's our core competency, right? But if there's ways to get it faster, cheaper, there are other risks, obviously, to us, the biggest 1 is how well can you sample? How well can you sample and confirm the amount of material that's there. And in some cases, the answer is going to be easy. You just got piles of contaminated stuff. In other cases, where you're in the river, it's not as easy. And that's why the sand and gravel component of our next business is really a wonderful evolution because it gives us conventional cash stability while allowing for all the upside to come as we get the mercury gold. So does that answer the question? As best I could, I guess, at this point?

It does. I was just curious if we would ever get any actual numbers from that. I know you guys are in the sampling phase.

Yes, as soon as the systems in place up and running, we'll start sharing the with the regulators and everyone. The grades that we're putting in, the grades that we're getting out, the efficacy of the system, how well it's doing all the things it's supposed to do. So it's coming.

Okay. And I did have a -- just for clarification because the equipment has been on order for a while. I think the first mentioned on the call, I believe back in October. And there's just been keep kind of guessing what kind of was the holdup? Was it design changes? Was it is it financial?

There -- yes, 2 simple answers. We Comstock slowed down the funding and spread it out over time, in part because we needed to, but in part because as the winter sort of came in, is sort of if you missed the November December window, which we kind of slowed down to, then it doesn't make a sense. And then we targeted March. And everything was built and ready, all it needed to be was powder coated, painted and reassembled, and when the COVID thing hit the powder coating company that we use to shut down so the good news is they've been up now for about a couple of weeks, and we expect within a few weeks, it will all be here and we're very excited about it. So that's what happened there. The Philippines, we really were not thinking about a second project until we got to the tail end of the Comstock work. The market's sort of coming to us on that 1 and demanding that we go faster, which has been a little stressful for us because we got to build 2 systems, and we've got to get moving forward. And again, we're trying to manage capital and manage the activity. But it's all -- it's going very well.

Okay. Fantastic. I guess that's been the 1 thing with the scalability of it from what I understood. And in the Philippines, I thought that would be, I guess, I'm trying to understand exactly how -- has already done some scalability testing as far as the process because to take on the Philippines projects, if it's not proven.

So -- yes. So let me just -- that's a good question in there. Yes. No, that's a good question. So in substance, the system that we're landing on the Comstock is going to be in up to 25-ton per hour system. It's formidable, like it's impressive. But in the grand scheme of things, it's a smaller rate of capacity, okay? That is by total intention and design because we want to trial at 2 tons per hour, 4 tons per hour. We want to have heavy involvement of engineering. We want to have heavy involvement of regulators. We want to make sure that we can perfect the scale ups and perfect to us means like you're in the high 90s of efficiency. And so that system is going to be our last sort of proof of concept, if you will, to how high that percentage can go, okay? I don't want to confuse that with the fact that these systems are already very efficient, 85%, 90%, 91%. I don't know, like they're efficient. They already work. So depending on the project and depending on the needs, right, we can deploy now. So -- got you. So --

So that in the Philippines, what size are you all planning on sending there? And how many and --

Yes. So let me say 2 other things to that exact question. So first of all, despite the system being as impressive as it is and, let's say, big as it is, they're all mobile, believe it or not, okay? So we're a Comstock at the 25-ton per system, we're going to be getting material on a test basis for all intents and purposes at those levels and bringing it up and processing it there on a test basis. It will be -- it won't be continuous, right? We'll be running trials. We'll be running campaigns, if you want to think of it that way, right? But let's say there wasn't enough material. We can take that anywhere we want. We can take it to the next site. We can take it to the next site. We'd have to permit its use at that site, but the equipment will be used again and again. Now the idea, though, is to then scale to 100-ton per hour system. I don't know if Paul has a notion of optimal in his head. But I think we've heard and talked about 100 to 200, maybe 100 to 300 ton per hour. One of these -- the objective is to figure out what is optimal? What's the largest scale that we feel good about? The Philippine system, the first 1 that we're going to be sending, I think is going to be like a 50 to 75 tonne per hour. I that's sized for the top part of the river and the rugged nature of the environment that it's going to be in. Now at the bottom part, assuming there's this efficient mercury and contaminations there too, you might put a much bigger system in. The sand and gravel stating is bigger, but it's bigger for sand and gravel. So yes. So it's -- that's the range, I think, that we're in --

Is that system currently being built or --

So just to recap, the Comstock systems is built. It's been painted and powder coated. The sand and gravel system is, I think the system, except for all the mercury additions is built. I see pictures of it, but there's still work to do for -- with the centrifuge and the spiral and those kind of things. So it's in progress. And then -- and that's the sanding gravel equip unit. And then the third 1 has not been started yet.

Okay. And last question, I appreciate -- I try to get on the last call. The leach pad with Itronics, it's only your valuation. What is the plan with that? Is that part of the new clean tech just referenced was --

Yes, thank you for that. So that's a great last question because it's the only question that really didn't get addressed yet. So we really, really like the thiosulfate based solutions. And Dr. Whitney at Itronics is a deep -- it's an evolution of that. It's something even technically more remarkable. And we like it a lot. We think it's feasible. It hasn't -- we just have not been able to prioritize the final design of, essentially, what we want to do there is the same thing we're doing with the first mercury system here, right, is build a system that's not to the ultimate scale but to an economic scale that proves the concept once and for all. Having said that, we have signed some additional NDAs with some remarkable technology that's completely -- it's different, always organic, always 0 waste in its objective. And we're hellbent, we're hellbent on the notion of commercializing the reprocessing of those tailings. And we'll go through those materials begin, but it's the lowest priority of the list, but it's on the list, which means priority, right? And so yes, there'll be news coming on that a little bit longer term, a little bit slow, but we're hellbent on making that work. And I think we know enough to see a feasibility. Then we just have to prove that then to the world, like we're doing with and then it goes from there.

Eduardo, as we wrap up and close, I'd just like to apologize because I do know I don't know what the cause of it is, and Zach will follow-up with Eduardo after this call, but a lot of people did have difficulty getting in at the beginning. And usually, I leave a few extra minutes to allow for some of that, but this seems like it was a bigger issue than that. We will absolutely address it. I apologize for it. If anybody wants to follow-up with the call, please reach out to either Zach or I directly, and we'll take every step to make sure that it doesn't happen again. Thank you all.

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