Comstock Inc (LODE) 2020 Q3 法說會逐字稿

Good day, and welcome to the Comstock Mining Q3 Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Corrado De Gasperis. Please go ahead, sir.

Thank you, Nick, and good morning, everyone. It's Corrado, CEO of Comstock on the line; with Zach Spencer, our Director of External Relations and our Treasurer. And we welcome you to Comstock Mining's Third Quarter 2020 Conference Call. I'll provide a brief summary of the information included in our press release from this morning, including our progress on our strategic initiatives, especially our Mercury remediation business and the monetization of our nonmining assets, which has really picked up some incredible momentum. If you don't have a copy of today's release, you'll find a copy on our new website at www.comstockmining.com by just clicking on the press release's link on the main menu bar. We have also filed our quarterly report on Form 10-Q last night, which is also available on the website as well as via EDGAR on www.sec.gov.

Please also let me remind you that we'll make forward-looking statements on this call, including an update on the remaining 2020 outlook and also looking forward into 2021 and beyond. Any statements relating to matters that are not historical facts may constitute forward-looking statements. These statements are based on current expectations and are also 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 and with the SEC and in this morning's press release, and all forward-looking statements made during this call are subject to those same and other risks that we can't identify.

All right. Let's jump right in. I'm trying to sort of shorten my prepared remarks, hopefully allow a little bit more time for Q&A. But going into our update, with the closing of the sale of Lucerne, which we did complete in September, our realignment and all the work that really has been going on over the last 2 to 3 years is essentially complete with some very positive financial implication.

Let me summarize about half a dozen of those or more for you. First and foremost, we did record an $18.3 million gain on the sale of Lucerne, which resulted in net income this quarter for the 3 months ended of $17.3 million or $0.54 per share. We also recorded net income year-to-date of actually $18.3 million for the 9 months ended or $0.63 per share.

The company doesn't expect to pay any federal income taxes on these gains or -- and/or income based on our existing net operating loss position. As most people know, the company has over $175 million in net operating loss carryforward that stems back 50 years of exploration and development. And those are our NOL carryforwards, if you will.

Total assets as of September 30 grew to over $48 million. That's a remarkable number, and it includes about $26 million in current assets. This compares to current liabilities at the same period end of $6.6 billion. And remarkably, we've already paid down about $3 million of that $6.6 million just in the last 30 to 40 days. So from a balance sheet perspective, our net assets, I don't think have ever been stronger. The $26 million in current assets include investments still in Tonogold's common and preferred shares. That was as of 9/30, and they were valued at almost $10 million. It also includes a 12% cash-paying coupon convertible note receivable from Tono of $4.475 million that's due in just about 10 months. The company expects to monetize all of these assets within the next year.

On October 2, as we did announce that week, Tono redeemed the remaining $2.16 million of our convertible preferred stock for -- at a large premium at over $2.6 million in cash proceeds that came in from that redemption. And those proceeds were immediately used to pay down the debt obligations that you see on the balance sheet at September 30, of $4.8 million, down to just under $2.5 million. The company actually expects to pay off the range of that debt from a variety of sources, obviously, but it could easily come just from the continued monetization of a small portion of those Tonogold securities.

But we're on the cusp of being debt free, we're on the cusp of very strong liquidity, and we're on the cusp of being able to implement our 3-year plan through our own financial resources. Remember also that we still receive currently about $2 million in annual reimbursement with Tonogold subsidizing our production platform, resulting in one of the lowest cost production platforms that I'm aware of regardless of what happens in terms of the timing of Lucerne going back into production.

So we still have less than $2.5 million of debt, almost $12 million in Tonogold securities, as we sit here and speak today to be monetized, and another $10 million in assets held for sale relating to Silver Springs. Plus the company recently announced the sale of the Daney Ranch for $2.7 million, really putting total cash proceeds from these monetizations at almost $25 million against residual debt obligations of just $2.5 million. So we're incredibly well positioned financially and, otherwise, to move forward.

On that note, looking forward, we have just completed a 3-year planning process, which will detail a little bit more specifically tomorrow at the annual meeting. But that planning process is -- been broken down precisely to grow our intrinsic value to $0.5 billion by 2023. And we've published the dozen-plus performance objectives that are related specifically to delivering that value by 2023 with the full intention of linking all management incentives 100%, with the performance of those objectives and the delivery of that value. That value today would represent somewhere between $12 and $15 per share. That's what we're locked and loaded to do.

We're going to do it by commercializing our environmentally enhancing precious metal and strategic metal based products and processes. And almost everything that we're focused on now in terms of forward activity has some form of positive cash flow returning to the company associated with that. We want to deliver that cash flow from our Northern Nevada-based platform, while still increasing the long-term value of our mineral assets. So the next 3 years are dedicated to this. We've published those performance objectives. I'm just going to review them with you right now, essentially in 3 categories.

The first one is to establish and grow the value of our mineral properties. Number one, establish the Dayton resources new maiden stand-alone mineral resource estimate; objective two, expand that complex through exploration drilling and geophysical modeling; number three, develop and expand the Dayton complex towards a full economic feasibility report, supporting a decision to go into mining; four, fully entitle that complex with all the permitting that's required to do so; and fifth, under the topic of our mineral properties, validate and grow our Royalty portfolio.

As many of you know, we've set up Comstock royalty fee. We are in the process now of segregating all of our royalties into that entity. And I'm going to talk a little bit more about that in a bit. But it's growing, and it's something that could be remarkable for us in terms of the asset value that we're compiling there.

The second category is to commercialize our global profitable mercury remediation system. And so we have 3 strong objectives here. First and foremost, establish the technical efficacy of our Comstock system, I'll give you an update on that in just a minute, and protect the intellectual property. We just filed a core patent on the system so that was a very exciting progress for us. Secondly, we want to deploy and operate the first international remediation system. As most of you know, we've already shipped the system over to the Philippines, and we're expecting to be heading over there in a week to get it up and running. So great progress as well.

And then within the same period, identify and prioritize the pipeline of potential new mercury projects and deploy at least our third and fourth project over this period of time. The pipeline is growing fast. The projects are seemingly feeling like they're unlimited. They're not obviously, but they're huge. And in the next 3 years, we want to have at least 4 projects up and running as we look at a huge growth market there.

The last component, the last category is the completion of monetizing our nonstrategic assets. This has now built up the momentum of its own, and we've broken it down to monetizing the Tonogold securities that we previously talked about. We talked about monetizing our other nonmining assets. We are not -- in this news, we are not intending to sell the Gold Hill Hotel. We have just an extraordinary view of this cultural value, both to the Comstock as a company and with all the other asset sales now being contracted and scheduled for completion, the Gold Hill Hotel, we will keep as the only cash profitable entity in our nonmining portfolio with the company. We're also going to grow the value of our investment in the Opportunity Zone, and we are going to grow other strategic metal-based opportunities that we are in the midst of developing currently.

So we are laying this out in a very specific schedule. We're laying it out in a very specific sequence. But as we build these blocks very, very specifically to the goal, we expect the value of these components to grow to an aggregate of over $500 million, which will be at least $12 a share. Happy to talk more about that. I just want to give you a little bit more color on MCU, a little bit more color on Dayton, and then I'll turn to Q&A.

With the MCU, as I mentioned, we had last week, the system running on the Comstock. We had all the components of the system running independently. And then last week, we got all of the components of the system running interdependently except for the mercury reactor. That's the last piece that we'll activate. The intention is to activate the mercury reactor this week, which means that we will have all of our centrifuges, all of our spirals, all of our separators, all of our systems working in conjunction with the mercury reactor.

We've also developed, and at the highest EPA standard, testing protocols using collate for testing process to ensure that we know precisely how much mercury is going into the system and precisely how much mercury is coming out the other side of the system. And again, we've created that testing protocol in conjunction with the Nevada Department of Environmental Protection and the EPA so that everyone will have validated, certified, accepted results on the efficacy of the system.

We've also enhanced our joint venture with our counterparty in the Philippines, that's Clean Ore Solutions. And we formed the venture over in the Philippines. As you know, we've shipped our system over to the Philippines. We are now accumulating the peripheral materials, the peripheral operating equipment to get that system up and running. And as I mentioned, we should be sending Paul and the team out as early as next week.

Recalling that we built all of our initial models at $1,200 gold, we think the timing of our systems coming online, the timing of them starting to be productive, could not be better. So we're certainly excited about more news coming out of these systems over the next few months. We couldn't be more excited about the size of the market that is aggregating around us. And it seems like we're -- really, really the only solution that we're aware of that cannot only clean the mercury from the soils, extract the metals from the mercury but also be used on a sustainable ongoing basis, chemical-free for many of these types of mining operations. So couldn't be happier there.

Turning to the Dayton. We're expanding -- we've completed actually all of the foundational, structural, geological work that we had been working on for almost the entirety of this year. We'll profile some of that tomorrow in the annual meeting, but it's come together incredibly well. We now are moving from geology level plans, cross-sections, to full integration to the engineering and expanded pit shell from that information as well as laying out the drill program that would complement and grow that resource.

As most of you know, we also completed the geophysical survey via helicopter in October. And we just, last week, got the data load, the data done and the report from that information. Frankly, we haven't even had the ability yet to delve into the details of all of that geological data, but it's impressive. It's directionally very corroborating for what we know. It's directionally looking to be expansive to what we didn't know. But I honestly am telling you that I'm giving you that real feedback just based on the superficial view of the highest level of the report. The details and the data is just tremendous. It's still shocking that we can get this amount of depth and this amount of detail so efficiently, but now we have it.

And so what will happen is not only will our engineers update our resource model, our resource estimate with all the geological data that's been done from the ground up internally, but we will now then corroborate and ultimately integrate this data into that data with 2 results. Obviously, we will enhance the precision of what we already know. But I think the biggest benefit was it will expand dramatically where we believe the target prospect to, and it will expand and contract, it will modify in both ways, the drilling program to what we would then be able to see as the highest prospect target.

I think as you guys also know, and we talked about on the last report, that we retained Behre Dolbear. We're certainly planning to file a U.S. compliant S-K 1300 technical report. This is going to be a first where we are able to report under SEC standard, not Canadian National Instrument 43-101 standards, but SEC S-K compliance standards, our resource estimate. We may be the first to do that in the United States because it's not going to be required for SEC filings until the 2021 calendar year. We're looking to do it as part of the 2020 results this year. And so we think that the fact that all of our geological resource estimate data typically regulated, if you will, to a technical report and prohibited from being in our 10-K, 10-Q and S filings now is going to be required to be in our 10-K, 10-Q and S filing. And we're static about that.

We're ecstatic about that because of the disclosure to our investors, but we're also -- and the rules also require the information to be maintained and current. So you won't have an area where you have a 10-year technical report or a 7-year scale data set. You'll have current data remaining and being updated continuously in our U.S. filing. And as a U.S. registrant, as an NYSE-listed company, we think it will represent sort of a leadership point for us in resource reporting. It will also include our drilling plans, which we are looking very much forward to in 2021.

Just before I wrap up, let me talk a little bit about our royalty portfolio. From a genesis standpoint, this all came about when we sold Lucerne mine to Tono. We retained 1.5% royalty on what we believe is an incredible resource that ultimately, Tono will publish their technical report on Lucerne. That will give much more clarity to the value of our 1.5% royalty on that mine, which is great.

But Tono is also expanding their clean grouping East of Lucerne in the area that we consider the southern extension of the Occidental Lode. And the Occidental Lode itself has some preliminary resource connotations around it. And then has an additional 2 miles of extended mineral strike, which is part of Tono's exploration and development program. We also retained a 1.5% royalty on Occidental, one of the more exciting clean grouping here on the Comstock.

Tono has already launched what we believe is an incredibly well conceived and expansive drill program that will include some of those eastern expansions of the Lucerne, will include the Occidental. And now we'll also -- well, it always would have, but they started on the Gold Hill target. We believe the Gold Hill target represents some of the most prospective claims with some of the most highest grade potentials on what was the heart and soul of the original Comstock Lode.

We also retain a 1.5% royalty on those claims as well. But through our acquisition of 25% of Pelen, which owns the Sutro Tunnel Company, we also have effectively 25% of an additional 4% royalty on those Gold Hill targets. In addition to that, we have the option to buy out the rest of that entity, which would give us 100% control over the Sutro Tunnel Company and, more importantly, 100% of that 4% royalty.

So sitting here with anywhere between 1.5% to 5.5% royalties on some of the most incredibly prospective claims here on the Comstock has created a value center for us that is attracting and starting to attract a lot of attention. And so I think you're going to be hearing more about Comstock royalty, what the potential values of these components are and even potentially growing it beyond what we know and already have.

So let me just wrap it up to say that our focus now is strengthening in the sense that closing Lucerne and monetizing some of these assets and getting these things behind us has created a sound financial position, but more so, it's created a narrowing of our focus to only these objectives that we believe will drive $0.5 billion of value. So our capacity, our capability, our momentum is just getting stronger, and we're very much looking forward to 2021.

Nick, I'm just going to stop there and let's just go ahead and turn to questions.

(Operator Instructions) And our first question comes from Mark Reichman.

With respect to Dayton, and I know you're still kind of interpreting the geophysical results. But what would your expectation be in 2021 on the exploration program dollars spent? And what do you think is the timing to get to a full economic feasibility study for both Dayton and...

Yes, very good question. So I didn't say it as precisely, but I think that over the course of those performance objectives that I mentioned, there's probably 3 technical reports, meaning the publication of our maiden resource estimate, which I think we're trying to get this work wrapped up this year, probably looking to see that published in the first quarter, and the intent, as part of our 10-K filing as well. So we'll be able to publish that report. We've also been able to incorporate it as part of the 10-year -- the 10-K filing.

Secondly, the drill program, we already have a very focused drilling programs sort of pulled together from all of the geological work that's been done this year. And I think the last step now is to refine that based on the geophysical data. And I know you said we're still looking at it. I mean we literally just -- we literally just got it. So there's -- it shouldn't be viewed as so much as a report. It is an extremely robust report, but it really is just the amount of geological and geophysical data, deep data. So our team will now look at our drill program. And my expectation, to answer your question more directly, is there will be probably some real refinement to drilling. I think there'll certainly be added targets from what we're seeing already, which is very exciting.

But I really think that the first drill program will be modest. When I say modest, I mean, you're probably in the range of $1 million to $2 million. And the reason I say that is because we have so much data that we've reassembled and recalibrated, and we have a very precise set of information gaps that we would like to fill in with this billing program. It will strongly enhance the resource, it will upgrade the resource, it will expand the resource. And so I think 2021 will allow us to step the new platform, identify the first real phase of drilling.

I think it will be very exciting, don't get me wrong, but it will be very, very focused. While we're doing that, in other words, while we're drilling for explicit expansion, explicit connection of what we know, we will then continuously be evaluating the geophysical data to create what I would think would be as a second phase drilling program and a step out and expansion based on what we learned in 2021.

And so I think that, that would result in a second stronger expanded resource estimate. We don't have it scheduled yet, for example, to say by the third quarter or fourth quarter of next year. But certainly, that would feel reasonable in terms of a modest drill program where we're drilling, filling data, updating a known data set and then updating the resource.

And then parallel to that, we would be working on the economics of what all of that means to us. We already feel like we have a good strong economic shell to start. But we would then start adding engineering, what we typically refer to as pre-preliminary economic analysis with the idea that by 2022, we would be publishing a technical report that would have preliminary economic analysis. It wouldn't be full feasibility mine plan production decision, but it would essentially be the step before that. And then we would look to 2023 to publish -- to get through full feasibility.

One risk factor on full feasibility, which is a positive context, is to the extent we step out and to the extent this geophysical survey show so much more, then we could have an economic feasibility that we would still want to expand before we went to a production decision. So in one way, success would beget success. And so if just the step-outs into Spring Valley are what we expect them to be, then we'll step out more, then we'll step out more. I mean conceivably, you could spend another 2-plus years drilling and development to come up with a much bigger model. But I think the positive of this scenario is that we know we're going to have a good outcome and then it's a question of how much further could we grow it and let the economics sort of dictate that to us. So I know -- I think I answered more than what you asked. But I guess, let me just make sure I at least answered what you asked.

Yes. You did. That was very helpful. And just one quick follow-up before I get back into the queue. But -- so you've been very successful in paying off most of your debt even prior to executing the sale of some of your noncore assets, which still remain. So I guess the question is, in light of kind of a modest exploration budget in 2021, how do you think about how you might allocate that -- the expected proceeds? Do you think it will still be dedicated to Dayton and MCU? Or do you think there'll be some portion may be available for returning capital through a buyback or something like that?

Good question. So we -- thank you for the question. So in terms of Dayton, I mean the economic potential, as we look at -- we just look at some of our preliminary economic shells, and we look at $1,400 gold, $1,600 gold, $1,900 gold, I mean, you have a range of $100 million to $150 million of economic value that to invest $1 million or $2 million to expand that number, the returns are exponential. I mean they're very, very high. I mean if you could spend $1 million or $2 million drilling to not only support and validate $100 million or $150 million of value in a more robust third-party technical way, I mean that's very high priority allocation for us.

But if you could spend $1 million or $2 million and add $20 million, $25 million, $30 million, $50 million of value, that's an extremely high-return for us as well. What we had said up until now is that we weren't -- and this is still true. We're not committing the capital until it's available. The difference is we have an absolute clear sight, an absolute clear sight to that -- those funds becoming available.

To your point, we have a clear view of it even before we close on the Silver Springs assets for over $10 million. And now the Daney Ranch for $2.7 million, right? So we have a clear path to those funding sources with agreements. But even before that, we have almost over $10 million of liquidity coming through Tono. So I think Dayton is going to be green lighted. As soon as the drill program is updated, expanded and reviewed with the Board, we would look forward to moving on that.

MCU's commitments are less than $2 million to go. And we also have clear sight. We obviously want to see the efficacy of the mercury remediation on the U.S. system, which is now happening, so as we speak. We want to see the efficiency of the Philippine system, meaning the generation of cash flow there. And then from our perspective, deploying $1.5 million to $2 million for a system that can generate $1 million to $2 million a month, it's -- we're going to be doing that as fast as the organization will allow it.

And there are some constraints. If you're going into different jurisdictions, there are some lead times as we see in the Philippines, even though that's come together very nicely. There is actually the 3 to 4 month lead time of building one of these systems. So we want to be deploying those as fast as we can get the cleanup and the cash flow moving. So those 2 things are at the top of the list. That's what we prioritized.

But we have other metal processing technologies that we've been developing. We have other opportunities, but that's just way too early to talk about. So the likelihood is that there could be some excess liquidity in sort of canvassing the Board. There is receptivity to buy back. But we're going to only do it in the most financially diligent and disciplined way. We don't -- we've just gone through 3 to 4 years of absolutely brutal restructuring to reposition our liquidity. I hated it, it's been miserable, but I'm pleased with where we are.

It wasn't always obvious that we would get to where we are. So we're very pleased with where we are, and we will consider those things very diligently. Because I think, as we look at the landscape, we have the liquidity to deploy in high return, high cash returning opportunities. But we may also have more liquidity. And if we have more liquidity, then yes, we would consider doing something like that. It might be modest. But I wouldn't get too exaggerated, but it might be very intelligent. So good question. And I think if we did make a decision like that, we'll obviously communicate it immediately.

Our next question comes from James Dell.

All right. Listen, what kind of throughput are you getting on your mercury systems on the risk tons per hour or anything like that? Or if you...

Yes. And so the U.S., just to compare and contrast. Great questions, compare and contrast. The U.S. system has really been designed to prove concept. And the proof of that concept is intended to show operating at a range of 2 up to 25 tons per hour. And so what we've been doing so far, Jim, in the U.S. system is -- and it's intended that 2 to 25 is -- it's not a range of possibilities, it's the rate that we want to scale it up from. Like you want to be operating at 2 tons per hour, run about operating at 3 to 4 tons per hour, and we want to slowly but surely move that up to 25 tons per hour. The reason for that is we want to have absolute certainty that it's effective. And to us, the definition of effective is that from whatever amount of mercury is being fed into the front end of the system, let's just use an example of 100 parts per million that we want to -- we -- our goal obviously, the ultimate would be have 0 parts per million come out the other side.

But our goal is to try to get below 11 parts per million. 11 parts per million is the EPA standard for -- if you have less than 11 parts for million mercury, then the material could be used for any purpose, meaning it's defined as clean and not harmful at all. And so the goal here is to prove that as we scale it from 2 to 25, and then all of that data will be monitored and corroborated with third parties.

That's why it's also -- it was very important for us -- and it wasn't something we've talked about a lot. But one of the most critical success factors was coming up with a sampling methodology. There's many, many, many of them out there that would be fully accepted, universally accepted certainly by the EPA and the NDEP. And we came up with them.

And the oddity of that is that when you're dealing with certain materials, sampling protocols aren't as statistically acceptable, meaning because the material is disturbed, you can't necessarily extrapolate certain assumptions the way that you can in a normally geologically accepted context.

So we came up with this coal vapor sampling process. We didn't invent it. It existed, but we came up with a way to obtain materials, mix materials, sample materials, third party-proven materials. And so up until now, we've been running each part of the system -- quite frankly, each part of the system independently has run excellently. We feel really, really good about it. Last week, we got all the parts of the system running independently and then we ran all parts of the system without the mercury reactor, which is sort of the central core technology to our IP and see the whole system as a whole with tremendous results. Like in other words, without the main mercury remover, we ran all other parts of the system with tremendous results, getting a substantial majority of all the mercury out.

Now we're going to activate the reactor and run the whole system as to your point. But I expect we're going to be running it at a 2-ton per hour rate for quite a while. Like we want to run it at a 2-ton per hour rate with varying types of materials. Like different types of materials going in. And at each step of the way, proving we're getting all the mercury out, which we fully expect to be the case.

Let me contrast that to the Philippine unit where we're starting at the lower base of river, where there's a lot of sand and gravel and it's -- but it's so far downstream. It's got much, much less mercury. In other words, it wouldn't need 4 layers of technological sophistication to get the mercury out. That system will run at 150 tons per hour almost from the onset after a week or 2 of just getting it up and running, it will run that way almost from the onset. And our models show that, that system running at that rate would be profitable with no precious metal, with no gold. So even if you had a 0.1 gram or 1/15 of a gram, it starts generating a tremendous amount of cash because of the higher operating rate.

So there are 2 very different profiles, but not -- I don't want to make -- I mean they're both eluvial mining systems just with a different focus of priority. Once we get the U.S. system sort of running at the higher end of the 2 to 25-ton range with the same result, then we'll start building the first sort of fully integrated mercury system that will go to the Philippines. Now that one will be more like the Comstock system in some regard, but it's also being very different in other regards because each one of these things is designed for -- customized is probably a better word, for the environment that they're going into. And we're looking for that system to be 75 to 100 ton per hour system with the higher sense of sophistication. That would be the second Philippine system.

We could see this Philippine project having 4, 5, 6 of these systems deployed at the same time, right? So even though we think of each project separately, a project could typically have much more than 1 system deployed depending on its size and scale. So I know, again, contextualized beyond what you asked me. But did I at least hit your question?

You did, you did. What I'm thinking of is are you -- you're using leach pad material, right?

We started off using leach pad material just to run the system material flow. Then we started taking from some tailings, some dumps that are in immediate proximity called the Baltimore dumps, and we've identified a dozen top targets across the Comstock that we would bring and feed material up.

So the U.S. -- the U.S. project is really the proven concept across a variety of different materials, a variety of different contamination levels and, frankly, different types of material feeds, like different soils, some rockier, some sandier. It's kind of the full spectrum test.

Okay. Now are you crushing the material before you feed it in?

We're not currently -- we're trying to target material. We didn't with the leach material. We didn't with some of the other waste, we didn't with any of them so far. To the extent the material -- to extent we identify material that has, let's say, excessive sizing, like bigger rocks, if you will, I wouldn't imagine crushing. But we would probably screen, right? So screen the material before we fed it into the system.

Okay. Now what sized screen you're using? 100? 1/4? 200?

We're not currently using for sizing, but probably we would be looking to go below an inch or 1.25 inch minus, maybe smaller. The system can handle bigger components. It's just not -- I mean it's just not -- it's not an efficient use. The more granular the material is, the better it will process, right? So it will just be a question of optimizing the size screening. We use some form of [grid leader] screener to do that, which is very simple and easy to deploy. We haven't done that yet, right? We haven't confronted that yet. Because we can choose the material, right, that we prioritize, right?

Okay. What does the output consist of? Is it a slurry, a liquid, I guess, more sand or what?

Yes. Like all of the above, right? So we -- obviously, we are separating and capturing the mercury. At this point in our process, we're capturing mercury that's an amalgam, right? So we will literally have mercury with metal in it. And to the extent we have that, we would -- there would be subsequent processes that we have here for retorting and refining. We have slurry, we have all the sort of residual material other than the gold and the mercury that would be separated cleanly. In our case, those materials would just be put on the leach pad on a fully contained unit. And that's one of the beauties of our platform from doing this process is that everything is approved and everything is contained while we're running the task.

Okay. Are you finding -- I don't know if you've done any output on this or look into it, but are you finding any other valuable minerals besides the mercury, like more gold and silver?

Yes. Just gold and silver, yes. Just gold and silver.

Okay. But you're finding some. Is there any way to spend this material through your mineral growth plan?

There would be a way to use some of the portions of that process, particularly the retort for sort of final stage refining. We're not planning to do that right now. Right now, our goal is to prove that the efficacy of how much mercury we can remove from the soil. Once that's proven to others, like we're confident in what the system can do. But once that's proven to others, the validation is certified, right? That's really the goal of the system. And then the intention then would be to be deploying the system in larger scale mode to many, many, many other projects around the country and around the world.

So we never had a profit motive, even though we've modeled the residual gold, et cetera, from the Comstock. The goal of the Comstock unit was to prove unequivocally how effective this is removing the mercury from the soil. That's what we're going to do, right, and we're doing it. And then scaling up bigger systems that would be much, much more profitable and deploying them at the highest priority projects that's already been largest cleanup/metal extraction opportunity.

I got you. Let's switch gears a little bit. Any prognosis on when you'll close on the Daney Ranch and the Silver Springs property?

Yes. So Daney is very precise. What we did was we signed a 2-year agreement where -- and it was with the drilling services company, it's actually with the drilling services company that Tonogold is currently using and actively drilling with it as we sit here and speak. And they're very good.

So the owner of the company wanted to buy the ranch. So we agreed to buy the ranch for $2.7 million. But the way we did it was we signed a lease, a 2-year lease, pay, $9,000 a month in rent. And if he closes within the 2 years, the $9,000 a month would apply to the purchase price. And so we think that there's a high prospect of that happening.

But there's an additional feature in the agreement that says we're able to use his drilling services. That was something one of our business guys negotiated. It wasn't something we necessarily were motivated or driven to do. But the end result of it is if we did $0.5 million or $1 million worth of drilling, it would be very liquidity friendly to us. In other words, they would drill those services for us. And then those services would apply to the purchase of the ranch. And if they did not close on the ranch in that time period, those dollars would be forfeited by then. So it's almost like the rent payments plus the drilling services become a nonrefundable deposit on the sale.

So when I first understood the terms from our guy, I was like, "That's nice to have." And I really wasn't thinking about it in any kind of excited way. But as we start to develop some plans here for the Dayton, it could be a very strong, strong win for us to effectively accelerate our drilling and it could accelerate the closure of the ranch, all for good value.

So if you ask me in my opinion, I would say that it will -- it's 95% probable it will close. I would be surprised if it didn't, but that's in a 2-year window. So you're looking at September 2022, I think, maybe 2023, '21, yes. So it's all good. It's solid.

When you come back to Silver Springs, COVID has slowed down some of the capital raising activities by the fund, they've really restarted in good haste. I think there was some good sort of reconnection in September. But now it's really quickening. We're getting a lot more interest. We get a lot of interest from people who would typically be a 1031 exchange-type people, selling real estate and looking to roll the capital gain into another real estate project. They think they're realizing that investing in an opportunity fund is much more efficient, much more flexible, much more user-friendly way to roll those capital gains. So we're getting money. We're getting money at higher valuations that much, much higher valuations. So if the thesis is being validated every step of the way and the pipeline is growing.

So is there a prospect of closing these things by the end of this year? I think there's a very strong one. At the same point, right, it could be early next year. But at this point -- and this is I think important for us to also appreciate. There was almost -- there was an urgency. There still is, okay, I don't want to misspeak. There's an urgency in selling the Silver Springs property because most of us, including myself, saw it as the most probable, if not the sole means for us to stop selling stock, okay? It was the way to fund ourselves first to pay off our debt, remove that risk factor, right, and then provide for some funding to start our business activities, be it MCU Dayton or otherwise going forward.

Well, the reality in the last 3 months has changed dramatically. We paid off our senior secured debt completely. That risk has been removed from the equation. We did that primarily through the monies that were coming in originally from Tonogold, right, taking the debt from over $10 million down to less than $5 million. We got more money in from Tono and to chip that away a little further, which allowed us to sort of refinance a very tight senior secured, stringent debenture that was due by the end of this year to a very flexible extended term unsecured promissory note.

So that itself was a big victory but then with the Tono monetization accelerating and then Tono redeeming over $2.5 million, we chop that number right down in half. And so as I was saying earlier, there's a clear path to paying off our debt without these nonmining asset sales. It's sort of just the sequence of the money coming in. I think the assumption was, look, we're never going to get any real money from Tono, so let's get these nonmining asset sales. Well, there was a flaw there. Tono came through, bigger and more surprisingly than we expected. We have liquidity. We're about to pay off our debt. And the nonmining asset sales become the gravy on top, whereas previously, the Tono monetization was considered the gravy on top that people were putting less priority on it.

What's important, I think, in this thesis is that we're getting great investors at the higher values, which is good value. The value of the assets that have been assembled is very high. And maybe more importantly, Northern Nevada used to be immune to COVID when it comes to industry and people moving into our area. Like we have companies coming in that want industrial capacity. We have a list of maybe 10 just that want to come to Silver Springs alone. We're signing leases and bringing in these companies, the fund is. And the value of the real estate and the value of the water, right, just keeps going up.

So I don't -- I think the urgency remains exactly where it is. It's our #1 priority to monetize the -- all of these nonmining assets. It not only does all the things that we just talked about for our financial position, but it also simplifies our lives and allows us to focus on the dozen objectives that actually create $0.5 billion of value. But I just think the -- I think the acceleration of the Tono activity, closing the deal, getting the monies in, monetizing some of the securities has just made it less of a -- it's not a desperate thing. It's just an urgent thing that we're going to continue to drive forward.

I'm very confident. I'm 100% confident the deals will get closed. We're just trying to do it with the best investors and the best timing. And we all wish it would be faster. There's no question. But we haven't seen anything that would equate to a step back or a fatal flaw in any of the thinking. So I'm trying to say, I wish it was done, but I don't feel any less confident that it's going to get done, right? It's coming and it's coming faster and faster every week. We're getting more and more inquiries. There's a lot of capital looking to come into these kind of real estate. So it's going to happen.

Our next question comes from Carl Frankson.

Just a real quick aside kind of from left field. Lithium is hot as a pistol. And Nevada is, I guess, is sensibly one of the centers of lithium deposits. Is lithium on the radar at all for any of your mining claims or any by-products or anything like that?

Yes. So it's interesting. It's fascinating that you asked that question, Carl. So last month, we had 2 Board meetings because we've been so incredibly focused on our strategy. And if you look at the verbalization of our strategy, right, we want to commercialize high-value, cash-generating precious metal based materials that are environmentally friendly, environmentally and socially responsible.

Before I answer your question, let's say two things. One is the amount of investor interest that we're getting for -- because of the mercury remediation is probably impossible to exaggerate. We went from last year having sharky-type capital, always looking to want to do short term things, not interested in being long-term investors. Which our responses have been, "No, no, no," right, to ESG-type investors asking us how much capital we need. And it's a fun situation to be saying we don't need the capital, right? But we're very interested in enhancing our shareholder base.

So switching -- before I answer your question, again, our shareholder base, we like. We know the people, they know what we're doing. And obviously, people want to start seeing huge value leaps, and we think it's coming. But we need -- one way to do that is we need to enhance the top 30 base. Like in other words, we're not looking to subtract any investors, we like our investors. But we'd like to see, 6 months from now, 8 months from now, 10 months from now if I looked at the top 30, I'd see 15 new. Or so maybe instead of looking at top 30, we're now looking at top 45. And we believe that's a foundational driver to get us to $4 a share, to get us to $12 a share as we look at our intermediate objective.

Pivoting back to your question is when we talk about mercury remediation or we talk about metal recycling, and these are the 2 areas we've been investing time in metallurgical process, in metallurgical and engineering process that we're confident in, the investor response is overwhelming. I mean it's truly something that is getting me excited about 2021. Like to actually go on a non-deal roadshow and talk about mercury and talk about what we're doing, not to mention that precious metals is in favor. And Ohio teachers and Warren Buffett, for the first time in their careers, have allocated meaningful capital to the gold industry.

So we love what we're seeing in precious metals. But in those Board meetings, we decided to tweak the strategic statement to say precious and strategic metals. So we've tweaked the strategy, but it's not insignificant. And the reason for that is we're being approached by lithium-ion battery recyclers, we're being approached by other critical mineral opportunities that are within our wheelhouse, right? So we're not straying from our focus or core competency. But when you look at a process that has crushing that leaching metal reprocessing, we've done all of that. And so lithium, nickel, cobalt, magnesium, we're getting hit with some pretty interesting ideas, more than ideas, more advanced than mercury remediation was when we first started talking to that.

And so I think both from an opportunity to get into a huge cash-generating activities, remember, we have $175 million of net operating losses. So the returns for us are even more enhanced. And to feel the investor feedback, I mean it's not strong, it's kind of overwhelming. I think we're positioning ourselves for some incredible growth here.

And so the answer is too early too early to communicate an opportunity, but we are very strongly looking at those, including lithium, nickel, cobalt. If it's economically feasible -- and these are crazy models. I mean some of these models, the return is too much. I mean you invest $20 million, you're generating $15 million a month. I mean there are some stupid numbers here that are hard to ignore. So we're -- we've -- yes, we've expanded our purview but we don't, in any way, shape or form want to impair the focus that we've spent 2 years creating. So it's important to us to sell the nonmining assets, not just for the money. Because we don't want to invest brain cycles in nonmining assets. We don't want to invest brain cycles in what Tonogold is doing. We want Tonogold to be hugely successful, and we want to benefit from that.

We want to invest brain cycles in 2 or 3 things that have huge opportunity, huge cash-generating possibility but are within the wheelhouse of precious or strategic metal processing that we believe we're just as able as anybody else to, if not more so, to commercialize. So again, I may have over contextualized, but that -- your question is one of the things I'm going to spend a little time on at the annual meeting tomorrow, is this tweak in the strategic focus, which is only a broadening so that we're not limiting ourselves to something that could be possibly very lucrative and right in our laps.

Okay, good. Okay. And that sounds good. One other quick one. As far as the Dayton, wouldn't it be possible to speed up a little of that process? I got to be quite honest, I'm a little disappointed in how far out we're looking at this. Couldn't you explore this a little bit with some of these streamers, like the smaller ones like Maverix Metals or Ely Gold or something to finance it and maybe get it going a little earlier?

Well, I think -- so if you ask me that like 6 or 9 months ago, we would debate a little bit. But I'll tell you, I think we're there now. Because with this contract to sell the Dayton, for lack of a better way to say it, we literally have $2.7 million in non-dilutive financing lined up. Theoretically, we could do $2.7 million of drilling with Lucerne and it would be paid for, right?

So I always -- my key for the Dayton was I didn't want to allocate the capital to it, not because it didn't qualify return-wise, but because we didn't have it, right? And so now we have the access to the capital. The only thing that I think we're waiting for is to finalize the drill program with the geophysical work that we just received incorporated into that thinking.

Once we have it, we'll get moving faster. And even though there might be a 2 to 3 time line here, the economics and the economic appreciation of what we have there is going to grow immediately. Like as soon as we start publishing this technical data and these technical reports, which we're planning to do in months here, we should start seeing a recognition of that value.

We could always consider additional funding sources beyond what we have now. But I'd rather do that with a published and known resource where we're not speculating and sort of losing value because we just don't have current data. So I think it is going to move faster. I think you'll be happy that we are going to start moving it faster because I think the obstacles that we were waiting to remove, frankly, as really right now are removed, it's just a little bit of internal work to finalize that drilling based on the latest geophysical survey.

And our final question comes from Lawrence Danny.

Corrado, thanks for all the hard work. I like the way it's moving forward. My question is regarding the mercury remediation. So if you can give me a quick abbreviated version of, do you sell the machinery -- hypothetically, you sell it to another gold mining company. Do you then go help implement it and install it and consult? Is that the whole picture? Or I'll let you take it away...

Great question. So first, let me say -- let me give you a couple of the givens, right? So first, MCU, which is the company that we're invested in and we have the right of first refusal to participate 50-50 in every project right alongside MCU. So the way this is structured, we end up with 25% of MCU, and then we have the right to do 50% of each project alongside them. So in theory, we could end up with 62.5% of the economics of each project as a structural context, which we like.

Now to answer your question. How can MCU deploy these systems? So the idea -- first of all, we're not restricted in any way. It's up to MCU. We can decide how we want to deploy the systems. And we haven't necessarily ruled any model out as a point of matter of fact, number one. MCU has the exclusive right to the intellectual property and the global right, global exclusive right, to deploy these systems.

How would we do it? So our first preference is really coming from the mining perspective. We would like to secure the material that's contaminated and we would like to process that material. We would like to be the ones cleaning at all. And we would like to keep all of the profitability that comes from the gold extraction from that material. So if you use the Philippines as an example, the Philippines does not allow for 100% foreign ownership. So in the Philippines example, the local -- our local partner literally owns or controls the mine claims. And so we have a 60-40 venture, they being 60%; we being 40%, where we come in and we clean it up and we share the profits. However, we have an accelerator on all of the profits until our original capital is recaptured, and then they get 60% and we get 40%.

So it's a very nicely set up at least for us. And then we own or have security on all the equipment as part of our venture there. We could do the exact same thing and own 100% of the property. We're looking at major scenarios in Northern Nevada. We're looking at scenarios in Montana, Alaska, California, where we could secure the property, we could do royalty arrangements with the property owner. But we make it very clear to them, we're not just processing their material. We're eliminating a massive liability, right? So there's a lot of leverage that we have in terms of this work.

Having said that, could we license the equipment to somebody? We could. Absolutely, there's no restriction. Could we sell the equipment? We could. There's no restriction. But it's not our intention to do those two initially, right? We have so many projects around the world, we almost feel like we can pick and choose the one that has the most impact. And we mean that plays, right? Like the most impact in terms of economic feasibility and profitability, but also in terms of social impact. These communities, these ecosystems are being destroyed by this mercury, and we're really going to be willing to clean it up.

Interesting. That's great. Sounds good.

That is -- so if you look at us a couple of years from now as a major miner with a dozen mining projects all around the world, right? The only difference is we're cleaning up the environment rather than impairing the environment as we're making that money and as we're making that profit. That's how I like to think about it, okay? But there's no -- I mean even the government. What if the EPA came in and said, "Hey, we want to pay you 100 to clean up this super fine." I mean there's no -- we could do that, too. Just take a fee for doing the work, you know what I mean? There's no prohibition. Yes.

Right. Plus the new administration is going to be more pro-environmental.

So I'll tell you something that there's no question about that. But we're starting from a point where the UN passed the Minamata Convention. And the Minamata Convention targeted 2020 to start eliminating mercury from industrial mining, especially artisanal and small-scale miners around the world, okay? This is the year.

We've already been engaged with the Washington policy group out of the EPA, we've already been engaged with the state department. We've been engaged with District 9. We've been engaged with District 8, EPA. They are all mandated to accelerate and implement Minamata not just in the U.S. but around the world. And so they're monitoring our progress very closely because they see us as -- as I said earlier, one of the few, if only, think, ones that they've seen that can not only clean the environment but actually provide a sustainable ongoing solution. So we already have -- feel like we already have huge federal support. I think it can only get better, to your point, right? It can only get better.

Right. It sounds interesting. I like the flexibility. Sounds good.

Yes. Yes. It's a real company, it's a real business, and it's a huge market. Our challenge will be the speed at which we can deploy systems and making sure we just have the organization around it. So far in the Philippines, it's been fantastic. Not only do we have Paul Clift, the CEO of the company, has family in the Philippines and is resident there as well as California, but our local partners are just exceptional. So they named their company Clean Ore Solutions, so everybody is really on the same page to set a new standard here for how they'll be bringing.

I could see that...

Yes. If we show the efficacy on the comps, which is more technical, and then we show the international success of a paradigm shift in one of the richest -- I mean Davao de Oro, which is where we're helping clean up the river and the mountain is one of the richest precious metal districts in Asia. If we can show a paradigm shift in that ecosystem added to the technical aspects of what we're doing here, I mean we're literally the global leader overnight. And overnight is like after 8 years of hard work, right?

Right. But I see the potential for sure. Very interesting.

Yes. It's very -- thank you, Lawrence.

We have no additional questions at this time.

Well, I'd like to just thank everybody for your interest and your attention. We have our annual meeting tomorrow, which will just be an emphasis on the things we've talked about today. I hope everyone keeps their family safe during COVID. It's encouraging to hear about the vaccines, but we've got to suck it up until April. But we here are, other than some of the Philippine delays, have not really been affected business-wise and we're just marching forward. So thank you all.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.