Comstock Inc (LODE) 2020 Q4 法說會逐字稿

Good morning, everyone and good afternoon and welcome to the Comstock Annual Report. This is Corrado here. And we're hosting the call on Zoom today using the same format that we used at our annual meeting last November.

I'll provide a brief summary of the financial information included in our press release from this morning and from our Annual Report on Form 10-K that we filed last night, including our progress on specific performance objectives, especially our silver and gold developments, MCU, which is our mercury remediation business that's now up and running in the Philippines and our recently announced lithium-ion battery recycling venture with LiNiCo, as well as some good progress on monetizing our non-mining assets and our overall financial position.

I also want to thank our incredible financial accounting and reporting team, including our auditors for completing accurately and completely our financial information and clean audit opinion that, again, was all filed last night on Form 10-K.

As a shareholder and on behalf of our shareholders, I thank the team for their diligence, their expertise and saving us a lot of time and money in that process.

If you don't have a copy of today's press release, you'll find a copy on our website, which is www.comstockmining.com by just clicking on the press release tab on the main menu bar.

Our filed 10-K is also available via EDGAR on www.sec.gov. Please let me remind you that we will make forward-looking statements on this call, including our plans for the next 3 years and our current outlook. Any statements relating to matters that are not historical facts may constitute forward-looking statements.

Our 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 as well as 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 can't identify.

Once we complete the prepared remarks, Zach, who is with me in the room will direct questions that are zooming in to me, and I'm happy to answer all of that. If you're not using Zoom, you can follow-up with us after the call directly or via our website with any additional questions, and we'll be happy to answer them.

So we have like a record number of entrants using Zoom. So we're thrilled about that. Thank you, guys, for your interest. Let me briefly address the financial results. As 2020 sort of represented the end of 4-year process for repositioning the company's assets, its businesses and its balance sheet with a purpose.

The 2020 financial highlights include net income last year of $14.9 million or $0.49 of earnings per common share, driven primarily by the $18 million gain on the sale of the Lucerne Mine to Tonogold.

Debt obligations last year were down to $3.6 million. It was an all-time low by the end of last year. But I guess the bigger news is that now as of today, all of our debt has been completely extinguished. That is no debt. None. Not a -- none as of today. Someone texted me last night saying, not even one penny? Not even one penny. So I'm very happy about that.

Cash and cash equivalents are now over $12 million plus multiple current noncore assets that are still being sold, including our industrial and commercial properties in Silver Springs, totaling over $13 million of proceeds expected to come into the company. All of those are now under contract for sale.

We still have actually over 12 million common shares in Tonogold as well as a secured note receivable from Tonogold. That's due later this year. Both of those together totaling over $8 million. Those sales alone scheduled for this year represent an additional $20-plus million that could easily result in us having over $30 million in cash on hand possibly by the third quarter and again, with no debt. So we feel very, very good about our financial position, our new financial position, our hard fought effort to get to that financial position.

Our balance sheet is actually pristine now, meaning not only do we have no debt, but we don't have any convertible instruments. We don't have any warrants and all of our newer investments, including in Sierra Springs Opportunity Fund, MCU and LiNiCo have a preferred priority status to us representing a very strong turnaround, but also a clear opportunity to fund all of our growth initiatives.

Beyond the gains, I'll just spend another minute talking about the Tonogold transaction. It obviously has turned out very well for us. But it's kind of also the following additional and ongoing benefits. Recall, that we actually get annual reimbursements of over $2 million a year paid monthly to us. And last year, 2020's reimbursements actually exceeded $3 million from Tonogold to us. We also retained a 1.5% net smelter return royalty on all of our properties. That includes Lucerne, the Occidental Lode claims and the Northern Comstock Lode claims with a 2.5% royalty on most of those main Comstock Lode claims. So 1.5% across the spectrum, 2.5% on some of the most prospective of those claims.

Incredibly, we have an option to also increase the NSR on those main Comstock Lode claims by additional 3%. That brings our NSR royalties on the core of those gold and silver mineral claims up to 5.5%, which is actually a huge number.

We also get monthly cash income in addition to the reimbursements, which represents the 12% interest income paid monthly on that note receivable.

I guess, most importantly, Tonogold is investing millions of dollars in exploration with drilling fully engaged now on major high-grade targets. The process is slower because they're drilling very, very deep holes using core drill rigs. But we understand very well the geology that they're drilling into, and we've now gotten enhanced geophysics across the entire district, which I'm going to talk about a little bit later in conjunction with Dayton. But we just need to stay tuned with Tonogold because their results and their technical reports will be forthcoming, and they're extremely active here now, drilling in multiple locations on the Comstock.

I guess it's also notable to highlight that the $18 million plus gain from 2020 on the sale of Lucerne wasn't taxable. We have been operating losses that covered on all of those incomes. So there's no federal taxes, no state taxes either paid last year. And we have an additional $168 million -- over $168 million of net operating loss carryforwards that are reflected on our balance sheet as a net 0 asset. So no asset showing up on the balance sheet, an embedded asset of $168 million of net operating loss carryforwards. So we're positioned incredibly well. We've not only sheltered our 2020 gains and other incomes, but we look forward to continuing to do that in the future.

Moving on to the Southern Comstock property, the Dayton and Spring Valley complex is the most exciting development in gold and silver that we're working on directly. And last year, late last year, we conducted a vast airborne geophysical survey of the entire Comstock district properties.

So that's news because we had indicated to everyone that we were doing the geophysical surveys of the Dayton and Spring Valley complex, which we absolutely did. But we -- it was so inexpensive we decided to extend the helicopter and just continue all the way up to Virginia City. So we now have geophysical survey data. It just recently came in both magnetic and proprietary electromagnetic surveys. The ultimate surveying was almost 1,200 line kilometers surveyed and we -- and the data now is in the data sets are with our geological team.

The data is remarkable. I personally, professionally, have never seen anything like it. There's clear 3-dimensional images of the geological structures. I mean, usually, we're drilling, and we're trying to configure what we think those geological images look like. Now we have clear 3-dimensional images of the geological structures, but at depths that exceed 1,200 feet.

Many of you know that most of the drilling that we have done in the Comstock over the last decade barely got to 1,200 feet. And on average, it was somewhere between 300 and 500 feet.

Tonogold is drilling to depths in excess of 2,000 feet and now we have data going almost this far as that. W're now in the process of interpreting the data. And we've also begun the process of remodeling the updated resource for the Dayton.

So we will now begin to publish a series of geological interpretations and developments. We started doing that during the annual meeting. We're very, very far along. Now we're actually remodeling. We started the remodeling process for the resource, and that will be not only to a number of communications and releases, but ultimately to new technical report this year. We're now expecting it in early in the third quarter that will incorporate all the interpretations, all of the new resource model, all of the drilling programs that now are being derived from those works and I'm sure we'll have some questions, and I'll be happy to answer more about that later.

Let me turn to MCU as much as we love our Comstock properties, and we do love them. Our business is rapidly expanding into these higher value, high cash-generating ESG-based impact activities. We're moving into spaces that are fully within our core competency. So when you see the process map for the lithium-ion battery recycling, you'll see leaching. You'll see precipitation. You'll see refining. These are activities that we're very familiar with. They're new technologies. They're new chemical processes but fully within our core competency.

But most immediately in the mercury remediation business, we are remediating contaminated amalgams. These amalgams that are left back in the environment are loaded with gold.

We have been involved in the heavily EPA regulated mercury remediation business now for over 8 years. But we're just now commercializing it. In fact, this week, the MCU Philippine operation has gone live. We're very excited to say that. And tomorrow, there is going to be a full delegation from the Philippine Department of Environmental and Natural Resources, that's called the DENR in the Philippines, the provincial governor, Governor Tyron and even possibly, we're not certain, the President Duterte himself, will christen the kickoff of our ecosystem wide cleanup of the entire Naboc River territory in the province of Davao de Oro.

We were actually supposed to have the kickoff about a week or so ago, but a small COVID outbreak delayed it by about a week. The system is up and running. As soon as it's christening kicked off by the delegation, we'll start running it full. And despite all of the COVID quarantines and restrictions, our entire team is fully assembled, the system is fully up and running. It's on the ground, and we're happy to say that finally, it's there.

Just to be clear, we own 50% of the Philippine operation directly. We earn that 50% directly through a $2 million secured loan that we believe will be repaid rapidly as the system gets up and running. It starts generating revenue and cash.

The ultimate project life of this cleanup is closer to something like 6 to 10 years. We envision multiple systems operating in the Philippines even over the next 12 months. As I said, we have one fully up and running there now. Once we have more specific operating information, we'll start to provide a more specific guidance on revenues and returns to the market.

Not many are familiar with our engagement with the mercury cleanup. The parent company is called MCU. We have 25% of MCU fully now. That's due this quarter as well. We had 15% last year. We added 10% this year, and we secured the full 50% directly of the Philippine joint venture. What that means is that we get 50% directly, and we get 25% of the other 50% for a total of 62.5% participation in each of the projects that we choose to.

We've been engaged with this business directly with the United States state department. We've been engaged directly with the United States policy group out of Washington, the EPA. Comstock itself has built all of its mercury remediation sampling analysis remediation protocols with U.S. EPA District 9 and the Nevada Department of EPA.

It's a very, very highly regulated business, which is, frankly, a big barrier to entry. By us spending in the last 8 years building this platform, we are now sitting in an incredible position to be able to start cleaning up mine sites and cleaning up ecosystems with our systems and with our technologies.

We're really not aware of any other company that has mobile, self-contained, fully mercury remediating systems that can be deployed anywhere around the United States and anywhere around the world for a relatively low capital investment anywhere between $2 million to $3 million.

We also just got notified by the United States Patent Office that our patent application for our system has been accepted for review with no changes. This is incredible as there's typically a lot of back and forth that goes into these submission, and we're on the fast track now to actually patent on the system.

Lastly and certainly not least, let me turn my attention to the other metals. Let's call them the electrification metals. Most Compstockers appreciate the importance of silver, for sure, in the electrification of everything around us. And now with the automobile becoming the ultimate electronic device, certainly beyond our phones and beyond our computers, we're talking about lithium. We're talking about cobalt. We're talking about nickel. Of course, we're also talking about carbon and graphite and certain other critical metals.

These critical materials are increasingly scarce and staring at remarkable demand curves. Even the most conservative estimates show them as desperately scarce and increasingly (inaudible). So we can't spare announce, let alone a ton of these materials, and that's why they must be valorized. That is they must be renewed. Their values must be enhanced. They must be revalued. They must be recycled. Those liabilities, we need to turn back into assets and they're critical assets.

So it's a very, very consistent theme with us to -- in terms of both mercury remediation or battery recycling. So last month, we announced a remarkable entry into this market by securing the right stuff to 64% of LiNiCo. LiNiCo stands for lithium, nickel, cobalt, who is ramping up plants to produce 99.9% cathode materials, 99.9% pure cathode materials for the lithium-ion battery market.

Critical to this acquisition was securing a previously permitted existing state-of-the-art facility designed purposely for battery metal recycling right here in Storey County, Nevada, just 10 minutes from our Silver Springs properties.

When I say state-of-the-art, I mean essentially new, designed just for this purpose. And with full air quality control systems designed and built for this purpose already installed and operating in the facility. And a massive $1 million-plus water treatment plant already and fully installed and built into this facility. The plant sits on 11 acres of prime industrial real estate and could not be, in my opinion, a better location anywhere in the United States.

So sometimes it's better lucky than good. It's right in our backyard. But it sits directly across the street from Gigafactory #1, and the building has a built-in laboratory as well as probably in my estimate, easily $20-plus million just in terms of replacement cost for the facility.

So it's designed and situated to receive batteries, crush batteries, separate battery metals and turn it into black mass and then take it to the final cathode material.

I should mention, I think before I go on that I started my career -- after a decade at KPMG, I started my career at GrafTech International. I call it my first real job. That was then the largest industrial producer of graphite cathodes and electrodes in the world, representing the largest valorization supply chain on the planet, where we took the waste from the waste petroleum coke from the oil refining industry and recycled into synthetic graphite that was then used to recycle scrap metal in electric arc steel furnace and smelt aluminum.

So we're very, very excited about being back into this kind of supply chain and this kind of business with LiNiCo. So first, with LiNiCo, we secured this facility, right? Then we committed $10.75 million or 64% of the company, which represents a post deal valuation of under $17 million. Part of that commitment was in cash paid over about 7 months. And the other part was 3 million restricted shares. Lithium gets -- LiNiCo, sorry, gets the first $6.25 million from those shares, which today are valued at closer to $12.5 million, $13 million, and the rest comes back to Comstock. This is a critical point on how we structured the deal and retain the excess value.

LiNiCo has also secured the rights to Singapore-based Green Li-ion's patented process technology and the equipment that enables the production of the 99.9% pure lithium cathodes here in the United States. LiNiCo also directly owns 20% of Green Li-ion with the Board -- with Board representation and a post deal investment value in Green Li-ion of only $10 million. Green Li-ion's technology has been proven to convert the black mass into rejuvenated high-purity battery-grade metals and essentially pure cathodes for a fraction of the cost, a fraction of the water consumption and a fraction of the time of conventional processes.

So low water usage and purity are the breakthroughs here and the entry values into the space. And the hard assets that we've acquired all as part of this package, make it a much safer and obviously key way for us to position value creation for our shareholders.

We've committed to purchasing 20 of these Green Li-ion systems over 3 years with the capacity of producing 10,000 tons of cathode materials per annum.

We previously said that just with 33% of that rate and 60% of the applicable commodity prices, the facility could generate more than $100 million in sales. Said differently, 20 million Li-ion, Green Li-ion units could generate running full up to $400 million in revenue and up to $250 million of cash flow with space in this facility to grow further.

So this is a huge landmark contribution to our ESG-based product and process stewardship and our climate smart mining objectives. Permit submissions are being finalized as we speak. They'll certainly be finalized this month and submitted with equipment scheduled to arrive at the end of this year.

When you consider our metals and mining background, the mercury platform established on the Comstock over the past 8 years, our relationship with local, state, national and now international regulators. And with the now entry into LiNiCo all of it sitting right here in Storey County, Nevada, we don't think the platform could be stronger and for the economics looking better for us.

We've directly linked all of these strategic objectives with our goal of delivering $0.5 billion in shareholder value. Or at least $12 a share and then align every one of our employees with 100% performance-based stock-based compensation for delivering these values and the values to our shareholders. If you shareholders aren't rewarded in this situation in either our way.

So let me pause there. I'm going to move to Zach, our Zoom most, right, and let's stop and turn the questions. Zach, do you have our first question?

Yes. Actually, we have a lot of questions. So we'll take them in the order that we receive them. Your first question is, does the MCU equipment function as expected?

Yes, great question. The question was does the MCU equipment function as expected? So most people know that we had setup the most sophisticated system here on the Comstock. It's sitting right back at American Flat on our fully double-lined platform, the fully permitted leaching platform that we have at American Flat.

At the end of November, we got the system. It's a fully integrated system. It's even more complex than the first unit that we sent to the Philippines, up and running. We got it functioning at a relatively low operating rate, but all of the operations was functioning consistently.

The pressure on the Philippines had to send the operating team over to the Philippines, including the CEO, Paul Clift. And so on the Comstock now, we're testing numerous sites across the whole district. And we're starting to identify materials that will be brought up so that the Comstock unit will be running at a much higher level as the snow pause and the spring comes in. But the -- with the Philippines system, we'll give you more updates as we go. It's running extremely well. We haven't even pushed it very hard at all and we're starting to see mercury coming out. We're starting to see gold coming out, and we're also in that system, able to sell the clean sand and gravels into the construction industry. With the sand and gravel sales alone, the company -- the system makes money and then with the gold extraction, it makes a lot of money. So the answer is yes.

All right. Our next question is, can you give us a little more color on the geophysical surveys that were done last fall?

Yes. So in October, we completed a remarkable, almost 1,200 line kilometer geophysical survey. This technology is relatively new in the industry. Geophysics is certainly not new in the industry. But this technology, we're using airborne technology, electromagnetic surveying to go to depths of even deeper than 1,200 feet. So the surveys were completed in relatively short order. It took about a couple of weeks to do all the flying.

The initial surface scans were provided to us quickly, and we're showing that in the press release where you see the warmer colors, the red with magnetic and the cooler colors, the blue representing magnetic highs and magnetic lows. Those are all indicators of structures and indicators of mineralization. Typically, when you have that surface information, you start to drill into those structures, into those indications.

Now we're actually able to see, and I've never seen this before. We've actually -- we're able to see 3-dimensional structures that represent the geological formations. 3D add depths and we can spin and then we can turn them.

And so when you're looking at a surface indicator, you're drilling a hole frankly, with the objective of identifying potential structures. And then once you identify potential structures drilling along them to identify actual gold and silver mineralization.

In this case, we can now see the structures. It doesn't mean we can see gold. It doesn't mean we can see silver. There's going to be -- there's going need to be breakthroughs in technology beyond geophysical scanning to do that. But to be able to see 3 dimensional structures, to then overlay those structures on the known geology because we've been -- the Comstock district has over 150 years of geological information and then calibrate the 2 together, the precision of the drilling and the precision of the targeting is like night and day.

I frankly would not drill another hole, again, in the industry if I didn't have this kind of geophysical depth and data available, because it just makes it so much more productive. So what we're doing now is we're finalizing -- we already had a drill plan based on all the hard work we've been doing over the last 2 years that we thought was very precise. So now we're recalibrating that.

We will probably eliminate some holes because of what we don't see. We will certainly add holes because what we do see, and we will sharpen the direction or the specific area that we'll put to drill holes into.

Okay. Our next question is, when do you anticipate drilling will commence on the Dayton?

So yes. So repeating that drilling is ongoing right now in the Occidental and in the Comstock Lode areas by Tonogold. Tonogold is investing a tremendous amount in those properties, which, as I said earlier, we retain royalties on.

So our drilling in the Dayton is coming up fast. And the answer is as soon as we recalibrate these drill programs. And as soon as we're able to review and approve those drill programs we're going to start some drilling. And so if you want me to estimate a time frame, I would say probably within the next 3 months. So it's coming up very fast.

Okay. Our next question is, can you please define valorization as used throughout their press release today?

So valorization is a new term that we're -- it's not a new term, but we're adopting it because we're seeing a widespread and critical environmental needs. We do not see how the planet can sustain its rate of population growth. We do not see how the planet can sustain its consumption. And I would say, inefficient consumption of materials without the renewal, the revaluing, the valorization of these materials.

And the term is not only applicable to metals, we're talking about it in terms of metals here, as we're focused on metals. But when you look at other industries that are using agriculture hemp for CBD and the amount of biomass and the amount of waste, when you look at mines that are open pitting and leaching silver and 50% of the silver remains trapped in the leach pad. When you see batteries, 97% of lithium-ion batteries going into landfills, that we can't allow that. We must valorize those materials. We must recycle those materials. We must renew those materials on a mass scale.

And I think that there's a convergence here. There's a recognition of the need and there's an enhancement and a breakthrough of the technology to make it all economically feasible. And that's what we've been trying for, frankly, half a decade to turn our company's attention toward.

Okay. Getting back to MCU or the Philippines, the only country that you are looking at for mercury remediation outside of the U.S.

So no. The market is massive. It's almost unquantifiable. In 2017, the Minamata Convention sponsored by the United Nations, signed up 140 nations. So there's 140 nations that have signed up and committed to eradicating mercury from industrial mining with a target start date of 2020.

So the timing is perfect. The Philippines has embraced the Minamata Convention in an extraordinarily strong way. The United States is taking a lead. The U.S. EPA Group out of Washington, D.C. has taken a lead in implementing Minamata, not just in the United States, but helping to implement it internationally. That's why we've been discussing this with them.

We have at least a half a dozen countries that have just outreached to us. And then there's just thousands of abandoned mine sites in the United States alone. Some would say in Nevada alone, I think we're one of the only mining companies that I know that has a full-time archeologist on staff who has spent most of her career assessing and certifying abandoned mine sites for these contaminations for safe closure. And so our database of targets is in the hundreds.

And our biggest challenge, quite frankly, is prioritizing them based on the specific criteria, magnitude of social impact, magnitude of environmental impact and magnitude of financial impact in that order, but they're all high.

So there's -- frankly, the market is ready for us, and we're not yet ready for the market. So the commercialization of the Philippines and the success there will be a landmark -- a landmark achievement for us. Because, frankly, we picked one of the hardest locations with one of the most contaminated ecosystems. We want to prove not only that the system works, but our competencies in cleaning up those types of ecosystems and in the world, for sure, will be MCU's waster.

Okay. And what is the company's position on the report that was issued by Spruce Point Capital yesterday?

We don't really have a position. We think it's an unfortunate assessment. I certainly don't think that they have the depth of appreciation for what we've really established here as a platform, 10 square mile land position fully entitled U.S. EPA, U.S. state department, local, state and federal support, the regulatory complex for doing these kind of activities far and exceed a mining regulatory complex, which is probably the most complicated in the world other than what we're talking about. The barriers to entry are massive.

The reason that MCU approached us day 1 was because it would have taken them years and years to recreate the regulatory approvals that we already have in place here at the Comstock. It was the absolute critical decision factor when the Philippine contingent came here to the Comstock and then assessed our competency in being able to clean up an ecosystem of this magnitude.

The Comstock is not as big as the Naboc complex in the Philippines, but it's pretty damn close. They're both huge mining districts. With decades, in our case, centuries, but decades of contamination. So to suggest that we're a failed mining endeavor, it's just -- I just think it's -- there's just not a lot of understanding of what we're doing.

I think when you move into a market as massive as the EV metals market, you're going to get a lot of eyeballs and with a lot of eyeballs come a lot of great opportunities and great relationships and comes with some criticism. We love -- we'd love to talk to them about what we're doing. I think they'd be shocked. So that's all I have to say about it.

Okay. And a little bit of follow-up on what you just said. Where do you anticipate the lithium-ion batteries coming from for recycling with such a large number currently going into landfills?

Yes. So there's a -- we have people now on staff that we're associating our plans with that have over 2 decades of hazardous waste management experience. And so the -- it's not right to say the sources are endless. I think, because there's a lot of people that are actually buying to secure these feedstock sources. It's the #1 injection in our plan is to secure the feedstock sources.

But they're coming from -- we're talking to some of the largest computer manufacturers in the world, believe that or not. We're talking to -- which also produce phones. We're talking to all of the major hazardous waste processing, the waste management processing centers. We're taking to not-for-profit organizations that are in the business of stripping and scrapping these metals, remarkably, a lot of this escrap is being preserved and lithium-ion batteries are being disposed off.

So I think that it is the most critical success factor in our minds to secure it. One of the things that we have an advantage on is storage. There are very, very specific record rules on what permits are required for receipt of the materials. And when you do or don't -- or when you are and are not allowed for storage. Because our platform here is massive because we have sites that are not related to the state-of-the-art processing facility. We have the ability to have immediate storage. So that's what we're engaging immediately.

Those batteries are essentially equivalent to a mining resource, right, or a mining reserve. And so we're building that chain as we speak. It's the first and most important priority. And it's actually what you'll hear outside of us submitting permits and updating the market about those processes, which take about 6 or 7 months, by the way, here in Nevada, we're very intimate with that. The establishment of the feedstock will be the most communicated updates that you'll be hearing from us prior to actually starting to crush and process the material.

All right. And Corrado, we have just about 300 people on this Zoom video conference, and we see that quite a few people have raised their hands to ask a question. But the way we're doing the questions is via chat. So you'll have to submit your questions in a written form. And if we do have time, we're taking that questions on a first come first serve basis.

So getting back to another question that's come in through the chat room, how much do you expect to spend on exploration and mine development in 2021?

So good question. So it's not a huge budget. We actually remarkably only spend a little over $100,000 on all of the geophysical surveying that was done. That's going to save us millions and millions of dollars.

Our geologists typically put together their green drill program, and then we start phasing it in. And so my answer to the question is that we're probably going to spend something less than $2 million on the Dayton Spring Valley drilling program for this year. And that's not because we don't have much more extensive targeting and opportunity and drilling plans for that, but we have a very, very specific amount of gaps in our data. And that amount of drilling will create a huge amount of connectivity and information and resource update for us.

So we're going to have a resource estimate available before we do any of that drilling, we're going to publish that technical report with the drill program embedded in it, and then we'll commence that drilling, $1.5 million, $2 million this year is a very reasonable number. Ultimately, with the precision of the data and the geological structures, we should have high returns, meaning incredible number of ounces added to the resource relative to the amount of money spent in the drilling.

Okay. And what are your revenue expectations for MCU in 2021?

So we haven't given revenue or return guidance yet. We have models built on the system. We're just going to hold off on the revenue models until we have a couple of months of operations under our belt.

I would like to give color on that, though. Because every MCU location, there is a strong analogy to a mine site. And so each one is different, meaning what is the grade of the gold contained in the amalgam? What is the rate of yield that we're extracting and able to extract? What is the cost of -- and the time and rate for processing?

And the great thing about these sites is that there's so much data, but we just like to get some operating sort of history to complement that. Let me, though, add that in all of our MCU investments, both the 25% in the mother ship, if MCU, the parent company, and the 50% in MCU Philippines, the first commercialized joint venture, we have accelerated returns.

In other words, in the Philippines, 75% of all of the joint venture's profit has to go to us first to repay the $2 million investment. Then once we get the cost basis of our investment to 0, we have a 5, 6, 7, 8, maybe 9 year mine life of processing. That with the cash flows that the system generates, we'll be able to deploy a second system, a third system, a fourth system.

I have said previously that even with the low-end range -- if this gives you some guidance, even with the low-end range of grades and gold prices, and I'll be specific, slightly over 1 gram per ton of gold, we consider that low. $14, $14.50 gold price. Obviously, that's low. These systems could generate $1 million a month. That's remarkable.

Some of our sampling here in the Comstock is finding grams ranging between 1 and 7. So if you're doing that at 1 or 2 grams per ton, what is 5, 6 or 7 looks like. It's incredibly exciting from a cash flow perspective, and it's fast, right? Deploying $2 million deployed not only the fully operational system, the supporting bucket loaders, excavators, graders and the entire team around it. And then within months, you're getting positive cash flow out of the system. It's -- that's how it's very different from hardrock mining.

Okay. And the next question is, can you give us an update on the sale of the non-mining assets to the opportunity funds?

Absolutely. So we have an investment in Sierra Springs Opportunity Fund. Our investment was at a cost basis of about $335,000. That investment today is my goodness, it's like $12 million in value based on the valuation and the fund sales of its own equity. So that's remarkable. We have an agreement to sell 2 properties and water rights in Silver Springs for $10.1 million. We've advanced the fund a couple of million dollars as well. So we're looking to get $13 million back within, let's say, the next 3 months. That process is going very well now.

The COVID period last year slowed it down. The fund has fully leased it's manufacturing facility. It's fully operating the airport, and it's excited to start developing over 3,000 acres of land consolidated and right on the mouth of where USA Parkway connects to Highway 50. So we expect those sales within the next 3 months.

On the Tonogold, we have about $8 million between stock and debt. The debt is due within the next 6 months. And so we're looking to monetize that. We're huge stakeholders in Tonogold. We're huge supporters of Tonogold. And we very much like where they're drilling and what they're drilling I think it's going to be a huge increase to the value of our assets.

Your press release today cited several business -- businesses that you have embarked on. Where do you see your main area of growth?

So the main area of growth is going to come from MCU. It's going to come from LiNiCo and that's -- we're talking about revenue growth, and we're talking about cash flow growth. The value of our precious metal assets will also grow. We believe that they're very valuable today. We don't believe the market understands that value, and we believe that's our fault.

So the intention is for us, first, to publish the technical report here early in the third quarter on the Dayton Spring Valley complex that will have resources of gold and resources of silver that establishes a baseline of value. Tonogold is planning to do the exact same thing. They are prepared to publish a resource report on Lucerne, but they want to incorporate the drill results from Occidental and the drill results from the Northern Comstock minerals. Once those technical reports are out, the value of our gold and silver will be recognized, will be understood, and then we will grow that as well from there.

So there's none of our lines of business -- there's none of our lines of businesses are disadvantaged in terms of our commitment in development of them. The first 2 I mentioned, our cash generators. The second one is resource developer, ultimately, to production, but not in the near term.

Okay. And a follow-on to that one. What is your top priority in the next 90 days? And are you hiring?

So in the next -- we have quite a few priorities in 90 days. So let me go down each one of them. The first one is get MCU cash positive. It will be absolutely amazing to have 3 months of operating data in that first Philippine unit. We've already initiated the building of the second Philippine unit, okay? So that's where MCU looks in the next few months.

LiNiCo in the next 3 months -- this month, we will be filing our permits. We have very precise and certain outcomes for those permits. We did all that diligence before we acquired the plant and the company. And then we will start commercializing the back end of the chain with properties ready for storage of those battery materials.

In terms of Dayton, as I mentioned, we're working very hard to publish technical report and define and communicate results of geophysics, results of technical report, specifics of drill plan and then sometime after the 90 days start that drilling.

And getting back to MCU, where will the MCU rig be set up next on the Comstock?

So that's a great question. So the MCU system that's here in the Comstock is going to operate without question on still a pilot test basis for the entire remainder of this year.

As I mentioned, we're identifying sources of previous mercury amalgams that are still resident across the Comstock. That's within our existing properties and even properties outside of ours. The Comstock is -- we have about 10,000 acres, 10 square miles property. Comstock District is the third largest national land market in the country. There are about 16,000 acres. So we're identifying those sites. We're moving materials up. And what the Comstock system does for us, and this is probably an important contrast.

The system in the Philippines today does 150 tons per hour. The Comstock system was designed to do 25 tons per hour. But with all the technology and all the potential variation -- so what we want to do there is test every type of amalgam. We're testing mercury contaminations that have been reprocessed with cyanide. We're testing mercury amalgamations that have not been touched possibly in 100 years, 120 years and everything in between.

So we're building a database. We have a physicist on staff. We have -- I'm sorry, a PhD chemist on staff. We have engineers. We have geologists who are working to build a much, much broader competency in terms of mercury remediation and processing. And so we're starting to grow the company, and we will be amongst some of our businesses, bringing in even more people, yes.

Okay. The next question is about the direct placement that was done last week. What will the funds be used for that came from that direct placement?

So we did a direct placement, 4 million shares at $4 a share with Noble. We weren't out initially seeking it at that exact time. But there was a tremendous amount of interest from new keen investors. And I would say that it wasn't just because of LiNiCo. I mean a lot of them were very interested in ESG. A lot of them are very interested in incredible renewal of metals and materials. And certainly, excitement about the growth that comes from mercury and the growth that comes from lithium-ion battery recycling.

And because there was such a vast interest of new investors, we thought it would really strengthen our capital base, and we couldn't have been more thrilled about it. Great pool of investors, institutions across the board all interested and keen in what we're doing. The use of proceeds will go towards -- already, to some degree, have gone towards the LiNiCo investment where we've committed about $4.5 million in cash. They will also go towards some of the MCU accelerations and will also go towards some of the drilling that we talked about the Dayton and about $3.5 million already went to completely pay off our debt. So we're debt free. We're funded, and all of our initiatives are moving forward now at the best possible pace.

With regard to LiNiCo and battery recycling, do you have any partnerships or any plans for partnerships with companies that could provide batteries to you for recycling?

Yes, tremendously. So one of the things I mean did emphasize as well, there's a lot of -- there's companies out there that are getting into this space. We actually start with an alliance of 4 companies. Where you have Green Li-Ion with intellectual property and equipment that's proprietary. You have Aqua Metals with intellectual property and equipment that's proprietary. You have Comstock with the platform, the storage platform, the regulatory platform and the operating platform. And then you have LiNiCo itself, which is the heart and soul of the business and the supply chain.

And so we've already -- even before we started implementing our plans, we've already been getting outreach from companies, battery companies, computer companies and others. And so I think this idea of an alliance of companies, this idea of operating an interdependent system of battery metal renewers is really taking root with the fact that we started with 4 companies in the alliance, and now it's just growing.

So we'll give you more specifics on those relationships as they're secured as they're inked. But I guess, rest assured, that's what we're really spending a substantial majority of our time on, except for filing the permits. Once the permits are filed, that's what we'll be spending all of our time on.

Our next question is also about LiNiCo. Can you please explain the different cap lodes? And how they can be recycled or reused? And also, can you explain what black mass is?

Yes, yes. So those are good questions. So there are -- so first, with the black mass. So basically, what the business model is, is we will receive 20,000 tons of spent batteries, okay? And they don't have to be spent batteries, they can be just out of spec batteries that never made it. They could be beginning of life out of spec and they could be end-of-life spent.

And we feed those into a crusher. The crushing system that we procured is state-of-the-art. It's coming out of Germany, and it's fully integrated. And what it does is it not only takes the batteries and crushes them, it doesn't even discriminate. In other words, we could feed it an iPhone battery. We could feed it a computer battery. We can feed it a EV, it doesn't discriminate. And then very, very effectively, crushes, contains and separates all of the nonessential materials for recycling.

So it will take out steel. It will take out copper. It will take out aluminum. It will take out the plastics and the framings. And then -- and it will sort all those. And those will be sold as byproducts. Then the residual configuration, the residual amalgamation of the highly mineralized materials, that is the lithium, the cobalt, the magnesium, the nickel, the graphite, right? All of that will amalgamate into what is generally referred to as black mass.

Now it's probably important to say that there's not a lot of proprietary tech in that process, right? And you can sell black mass at a profit. So that's not what people are most interested in, but that's a pretty important derisking thing to understand, right? So right there, the company can sustain. Having said that, most companies are then taking the black mass and have developed processes to getting to either the salts, like the lithium carbonate, the nickel, the cobalt and then selling those minerals to cathode manufacturing operations.

Our process is different than that. We don't go to the pure lithium, the pure nickel, the pure cobalt, right? We're going through an extensive, heavily, heavily computer-controlled system. The Green Li-Ion system has got proprietary software. And what's unique about it is that it enables us to create not only 99.9% pure cathodes from the coprecipitation processes. So the process looks like this. You have a leaching step. You have 2 filtration steps, okay? After the filtration steps, you go into the first coprecipitation, and then you go into a last coprecipitation.

Computer controlled in the coprecipitation steps to result in 99% -- 99.9% pure cathode materials. And then there's basically 5 major segments of cathodes in the market today. And they range from $20,000 to $22,000 a ton to up to $80-plus thousand a ton. And then -- and they're just different configurations of batteries.

If the market expands into more configurations of cathodes, our system will be able to -- our software will be able to configure those materials to that same outcome. So what the software does for us, is it allows us to get the purities, and it allows us to manufacture from the same system, 4 of the 5 cathode market segments. And again, green Li-Ion has a second system that will do just the fifth. So we'll have the ability to serve all 5 of those markets for sure.

All right. Well, we're getting to the top of the hour, and we have a follow-on question regarding LiNiCo. When do you expect LiNiCo would get consolidated into your financial reports?

So good question. We have today 45-plus percent of the company because the way the transaction is structured, we make our initial investment, which is already made and we get 45-plus percent. And then we have warrants to get an additional amount of ownership. And really, the warrants are not warrants in your typical Wall Street connotation. It's really a commitment, right, to invest in additional amount of money, all included in the amounts that we've already talked about just structured in 2 steps. And once we exercise that warrant, which will occur most likely in the seventh or eighth month of the year and there's no question it will occur within the first 12 months, but probably in the seventh or eighth month. Meaning like September, October, then we would be over 51%. And I believe that is the trigger to consolidate their results into our financial results.

Okay. Well, we're right at the top of the hour. And I'd like to report that we had approximately 300 people on this Zoom video conference, which shatters all of our previous attendance records, at least during the last 4 years. So I definitely want to thank everyone who participated.

I would also like to say that we made it to about 20 questions today, which is great. And some people have very unique questions. And then there were questions that a lot of people were asking. Just one final quick question. With LiNiCo located in the Tahoe Reno Industrial Center in such close proximity to Tesla as well as other companies, are they interested in recycling batteries with LiNiCo?

So it's a good question. So the market is huge. It's very -- it's been fun being here in Storey County because in 2013 everyone started saying Project Tiger, Project Tiger, and we were like, what the heck is Project Tiger? Only to find out that it was Tesla's Gigafactory #1. There's some remarkable history even with our company as to how they came into the county and things like that.

So we've been watching it. And then we launched everyone in their mother say that it's going to fail. And even Elon Musk himself said, he gave himself less than 10% chance of success when they first invested. When they did the equivalent of what we're doing in LiNiCo, right, coming into the [sea round] and investing it.

So yes. So -- but now we see Gigafactory #2 coming up in Austin, and it's fascinating to see what Tesla is doing, right? First of all, they're back integrating that Gigafactory into 2 areas, cathode production and lithium carbonate production. So it gives you a sense of how important, right, this delivery of this material is to the industry. And then you consider that GM has announced full EV by 2030. And Ford has announced similar plans.

And it's just dynamic, right? So I think that the automakers should be the most concerned about sufficiency of these materials, obviously, but it impacts everybody, right? So everybody is going to be concerned about the sufficiency of the material.

And so I think you're going to see -- so for us, we don't have delusion of grandeur. We are excited about having one facility to 10,000 tons a year, making incredible amounts of money, 99% pure, delivering the pack throughput, throughput, throughput. The growth potential beyond that is it's remarkable, but the growth potential beyond that doesn't mean anything until that's actually happening.

And so we have long-term plans, we have short-term plans. But I think the answer to the question is, there's no question that they're going to have to be involved in the industry. There's no question some will back integrate. There's no question, some will acquire. There's no question that some will partner, all of the above. It's very dynamic, but the demand is huge.

People ask us about 2 or 3 other companies in the industry. I mean, if they were all running full, had all of our announced capacities, it's a pimple on the butt of the industry, right? It's not even going to be a scratch. So we're excited about the growth potential.

And yes, it will be with -- there'll be partner conversations. There'll be acquisition conversations. There'll be alliance conversations. And we just feel like we don't feel -- we feel like with the way we constructed the platform, the plant, the technology and the people in the alliance of companies, like we're not -- we're ahead, like, I don't think we're behind, we're ahead.

So I'm thrilled at the way the call went. I was pretty nervous. I love Zoom, myself personally, but we've never done a full call like this with Zoom. Next time, we'll be webcasting as well, and we'll walk through presentation, a slide presentation. We didn't want to bite off more than we can chew this time. We're thrilled that we had over 300 participants. It shatters the record. As Zach said, we're thrilled with the questions. And as always, we're available for follow-up questions, either by calling us directly or through our website, and we really look forward to keeping you updated on all of this progress. Thank you.