The following discussion provides information that we believe is relevant to an
assessment and understanding of our condensed consolidated results of operations
and financial condition as of and for the six months ended
2020. It should be read in conjunction with the condensed consolidated financial
statements and accompanying notes included in this Form 10-Q and our Annual
Report on Form 10-K as of and for the fiscal year ended
Overview
valorization, and production of innovation-based, clean, renewable natural
resources, with a focus on high-value, cash-generating, strategic materials that
are essential to meeting the rapidly increasing global demand for clean energy,
property in the historic Comstock and Silver City mining districts
(collectively, the “
responsible mining and renewable material processing, and is currently
commercializing environment-enhancing, material science-based technologies,
products, and processes for environment-enhancing natural resource recovery,
including mercury remediation and lithium-ion battery materials recycling.
Unless the context otherwise indicates, the terms “Comstock,” the “Company,”
“we,” “us,” or “our” mean
subsidiaries.
The Company’s goal is to grow per-share value by commercializing
environment-enhancing, natural resource-based products and processes that
generate a rate of predictable cash flow (throughput) and increase the long-term
enterprise value of our northern
dedicated to delivering that value by achieving the performance objectives
listed below:
Commercialize a global, environmental, social, corporate governance (“ESG”)
compliant, profitable, mercury remediation and other critical mineral systems:
•Establish the technical efficacy of the
Mercury System, and protect the intellectual property;
•Deploy and operate the first international mercury remediation project by
deploying MCU’s second and third mercury remediation systems into
Philippines
•Identify, evaluate and prioritize a pipeline of potential mercury remediation
projects; then deploy the third and fourth mercury remediation projects,
producing extended, superior cash flow returns; and
•Assess and acquire accretive, ESG-based, natural resource material expansion
opportunities.
Establish and grow the value of our mineral properties: •Establish the Dayton Resource area's maiden, stand-alone mineral resource estimate; •Expand theDayton-Spring Valley Complex through exploration drilling and geophysical modelling; •Develop the expandedDayton-SV Complex toward full economic feasibility, supporting a decision to mine; •Entitle theDayton-SV Complex with geotechnical, metallurgical, and environmental studies and permitting; and •Validate the Comstock NSR Royalty portfolio (e.g.,Lucerne Mine , Occidental Lode,Comstock Lode ). Monetize non-strategic assets and build a quality organization: •Monetize our third-party, junior mining securities responsibly, for$12.5 million or more; •Monetize our non-mining assets for$12.5 million , excluding theGold Hill Hotel ; •Grow the value of ourOpportunity Zone investments to over$30.0 million ; and •Deploy a systemic organization, capable of accelerating growth and handling complexity.
The plan is designed to deliver per-share value over the next three years, while
positioning the Company for continued growth.
We began acquiring properties in the
have consolidated a significant portion of the
single largest known repository of historical and current geological data on the
Comstock region, secured permits, built an infrastructure and completed two
phases of test production. We are currently developing four new businesses,
including our Lithium-ion battery recycling business,
(“LINICO”); our mercury remediation business, MCU; our development of disruptive
quantum computing programs with prioritized applications in all of our existing
lines of business,
resource-based products and processes, especially in the areas of
and utilization, that can grow the rate of our predictable future cash flow
(throughput) and increase the long-term enterprise value of our entire
asset-based platform.
36
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We now own, control, or retain a royalty interest in approximately 9,358 acres
of mining claims, parcels, and royalty interests in the broader
District
patented claims and surface parcels (private lands), and approximately 6,962
acres of unpatented mining claims (public lands), which the
Management
north of the Lucerne resource area and just south of
Because of the
known and has been extensively studied by the Company, our advisors and many
independent researchers. We have expanded our understanding of the geology
through vigorous surface mapping and drill hole logging. The volume of geologic
data is immense, particularly in the Lucerne and
amassed a large library of historical data and detailed surface mapping of
public and private sources. We integrate this data with information obtained
from our mining operations, to target prospective geological exploration areas
and plan exploratory drilling programs, including expanded surface and
underground drilling.
Our
located in
Access to the properties is by
Our sale to Tonogold Resources, Inc. (“Tonogold”) of the membership interests in
permits closed on
miles southeast of
test mining operations from 2012 through 2016. Lucerne is the subject of ongoing
assessment, exploration and development plans by Tonogold. We retain a 1.5% NSR
royalty in the Lucerne properties.
We achieved initial production and first poured gold and silver on
2012
2016, we mined and processed approximately 2.6 million tons of mineralized
material, and produced 59,515 ounces of gold and 735,252 ounces of silver.
On
Agreement (“LINICO Stock Purchase Agreement”) with LINICO and purchased shares
of LINICO convertible preferred stock representing 45.45% of LINICO fully
diluted shares and 48.78% of voting shares, in exchange for 3.0 million shares
of our restricted common stock, and committed
between February and
for a state-of-the art battery materials recycling facility focused on
commercializing economically viable and environmentally sustainable technologies
for lithium-ion battery recycling. LINICO’s goal is to alleviate global reliance
on harmful mining activities that are used in the production of critical
minerals, to support the increasingly high demand and shortage of these critical
minerals, to close-the-loop on sustainable practices for end-of-life lithium-ion
batteries, and to support a clean energy economy. We have the right, through a
warrant and other investments, to purchase over 57% of LINICO’s fully diluted
voting share ownership.
37
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[[Image Removed: lode-20210630_g2.jpg]] Figure 1 -Comstock Mining's Land Position in theComstock District 38
——————————————————————————–
[[Image Removed: lode-20210630_g3.jpg]]Figure 2 – Comstock’s Corporate Alignment
as of
Our corporate structure is well aligned with our strategic focus. Comstock
remains the parent company that wholly owns the realigned subsidiaries.
Processing LLC
for potential expansion.
remaining
Lucerne properties, including the Occidental Lode.
Development LLC
targets, including the Dayton Resource Area and the
rights.
Hotel
properties, including those owned by
Comstock”). The Company recorded a gain of
sale of
Current Projects – Natural Resource Renewal
On
into the LINICO Stock Purchase Agreement. The investment is in line with our
focus on sustainable extraction, valorization, and production of
innovation-based, clean, renewable natural resources, concentrating on
high-value, cash-generating, strategic materials that are essential to meeting
the rapidly increasing global demand for clean energy.
Purchase of LINICO Preferred Stock
Pursuant to the LINICO Stock Purchase Agreement, we purchased 6,250 shares of
LINICO Series A 8% Convertible Preferred Stock (“Series A Preferred”) for
Stock”) in payment of the purchase price. Upon issuance, the CMI Stock had a
fair value of
shares of LINICO and
LINICO on the condensed consolidated balance sheets. The Series A Preferred has
a conversion price of
purchase of the Series A Preferred, we own 45.45% of LINICO fully diluted shares
and 48.78% of voting shares. Our chief executive officer is a member of the
LINICO board of directors.
The LINICO Stock Purchase Agreement provides that LINICO will use the proceeds
to fund (i) technology-based lithium-ion battery recycling and cathode
production equipment, (ii) an industrial facility lease-purchase, (iii) startup
costs and general working capital; (iv) a
Li-ion Pte. Ltd.
39
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Cash Commitment
Under the LINICO Stock Purchase Agreement, we also agreed to make
in cash payments to LINICO (“Cash Commitment”), payable in a series of
installments between
2021
derivative asset related to LINICO on the condensed consolidated balance sheets.
Warrant
Pursuant to the LINICO Stock Purchase Agreement, the Company and LINICO entered
into a warrant agreement (“Warrant”) wherein we have the right to purchase 2,500
additional shares of Series A Preferred for a total exercise amount of
million
Warrant may be converted into shares of LINICO common stock at a conversion
price of (i)
if exercised after
LINICO Lease Agreement and Additional Lease Deposit
Pursuant to the terms of an industrial lease between LINICO and AQMS, entered
into on
exercise its option to purchase from AQMS land, buildings and related
improvements, initially leased by AQMS to LINICO, for (i)
purchase is made on or before
purchase is made after
The LINICO Lease Agreement requires LINICO to make an initial deposit and, by
equal to
facility. The LINICO Stock Purchase Agreement grants us the option to fund the
Additional Deposit with shares of our common stock (in no event will we issue
shares to LINICO pursuant to the LINICO Stock Purchase Agreement that exceed
19.9% of our total issued and outstanding common shares as of
2021).
Obligations
In the event cash proceeds received by LINICO from the sale of the CMI Stock are
less than
of our common stock or cash to make up the shortfall. However, if cash proceeds
from the sale of CMI Stock plus Cash Commitment payments received by LINICO
(“Consideration”) exceed
LINICO, along with any remaining shares of CMI Stock held by LINICO. The first
applied to exercise our Warrant (up to
Additional Lease Deposit (up to
Preferred issued to us for the amount funded.
Acquisition of
On
renewable technology development company, in exchange for 1,000,000 restricted
shares of our common stock, with a fair value of
of
We identified RPS in discussions with our current and prospective investment
companies, and acquired RPS to build our critical core competencies in advanced
process engineering and renewable technology development necessary to facilitate
our participation in the development and growth of these companies.
Investment in
On
quantum computing technologies with the goal of accelerating material science
discovery and development and partnering in the commercialization of new quantum
generated materials. GenMat is developing a proprietary quantum operating system
to harnesses emerging quantum computing technologies and develop breakthrough
new materials for use in our strategically aligned, high-impact fields of
interest, including global mining, battery recycling, and
Comstock’s Venture with
40
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In
Agreement”) to pilot test new, cleaner technologies, in collaboration with
Industries Inc.
remediation systems with proprietary mechanical, hydro, electro-chemical and
oxidation processes, to reclaim and remediate mercury from soils, waste and
tailings. MCU has the exclusive, worldwide rights to four patentable
technologies and equipment that we believe will demonstrate feasible, economic
mercury remediation. Comstock provides the platform for testing the mercury
remediation system and MCU will conduct the trials that prove scalable
feasibility. MCU plans to deploy the solution globally and has secured its first
major, international remediation project in
award-winning mercury reclamation experience coupled with MCU’s technology and
processing know-how positions a new, global growth opportunity consistent with
our Strategic Focus.
Worldwide unregulated activity has released thousands of tons of mercury into
the environment. The continued worldwide use of mercury in unregulated
activities, primarily outside of
waters, and poisoning marine life and endangering lives. Ongoing, unregulated
artisanal mining outside of the
contamination and represents a tremendous opportunity for cleaning up the
environment in a sustainable, profitable manner. Mercury will not go away by
itself and must be removed to stop the pollution. Mercury can’t be broken down
or destroyed, and MCU, in collaboration with Oro and the Company, is pioneering
an effective solution.
Pursuant to the MCU Agreement, the Company committed
contributions payable in cash of
for 15% of the fully-diluted equity ownership of MCU and 50% of the equity of
any future joint ventures formed with MCU. Through
invested
representing a
the Mercury Remediation System on CPL’s permitted platform. In addition, by
providing
Philippines
in MCU, increasing our equity ownership in MCU to 25%.
Over the past seven years, Comstock has implemented several plans, approved by
the
NDEP and the
for sampling, characterizing, transporting and managing mercury within the
Carson River Mercury Superfund Site (“CRMS”) Study Area. These plans and CPL’s
existing, permitted infrastructure provide an ideal platform for validating the
efficacy of the MCU process and technology. MCU and the Company will work
closely with NDEP for any additional approvals or permits.
The Company and MCU are evaluating numerous locations containing historical,
mercury-contaminated tailings, and developing a detailed schedule for pilot
testing. MCU delivered sampling and testing equipment to the American Flat site
in
to locate suitable material to commence testing. The remaining equipment arrived
at the American Flat site during the third quarter of 2020, and MCU began
stockpiling material and initial test processing during the fourth quarter of
2020. During the first half of 2021, we led a program of detailed sampling of
several Comstock-district tailings deposits. The results will lead to the
prioritization of the tailings for pilot-scale production.
Based on successful proof of technical and economic viability, the Company and
MCU would create a new, 50-50 venture to be called Comstock Mercury Remediation
to pursue global business opportunities. We currently hold 25% of the membership
interests of MCU and, separately, the right to 50% participation in any joint
ventures, including, but not limited to, MCU-P and the Comstock mercury
remediation project, the first two mercury remediation project opportunities.
We entered into a second amendment of the MCU Agreement, on
wherein, MCU and Comstock have identified an opportunity to remediate mercury in
Opportunity”); where Comstock and MCU formed a new joint venture to engage
profitably in the Philippine Opportunity. We have made cash investments in the
form of
additional
ownership of MCU-P. Our investments in joint ventures under the MCU Agreement
reached
additional 10% of the membership interests in MCU, for total membership
interests of 25%.
The first processing unit was shipped to
of 2020. Mercury remediation testing combined with limited production of sand
and gravel commenced in the first half of 2021. A permit is pending to allow the
operation to scale to full production rates. Production rates are expected to
increase throughout the remainder of 2021.
Current Projects – Mining
41
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Exploration and Development
We have identified many exploration targets on our land holdings in the
District
our collaboration with Tonogold, the Lucerne resource area (including surface
and underground exploration). We have also leased the remaining
mineral claims, including the Occidental group and other exploration targets, to
Tonogold, which has near-term plans for exploration and ultimately development
towards economic feasibility for those assets. We are developing exploration
plans for the remaining areas, primarily the
Valley
Our district-wide exploration and development plans contemplate three specific,
geological areas that we have organized into our wholly-owned subsidiaries,
and
Occidental and Gold Hill exploration targets now leased to Tonogold, and
Lucerne properties, in which we retain a 1.5% NSR royalty. These exploration
targets represent over 7 miles of mineralized strike length, with current and
historical grades of gold and silver, and significant historical mine production
(Figure 3).
We retain royalties ranging from 1.5% to 3.0% on the Lucerne, Occidental and
other properties, and an additional royalty of 1.0% (that is 25% of 4%) on
Tunnel Company
Company’s 25% membership interests in
the 100% owner of Sutro.
42
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[[Image Removed: lode-20210630_g4.jpg]]
Figure 3 - General Overview of Priority Exploration Targets
43
——————————————————————————–
The processing facility is in the American Flat area of Gold Hill,
than a mile west of Lucerne, and operated 24 hours per day, seven days per week,
for substantially all of late 2012 through 2016. During 2019, Comstock formed
owns all of the properties, plant, equipment, and permits for the crushing,
agglomerating, leaching,
metallurgical operations located at
Nevada
implementing our Strategic Focus on high-value, cash-generating, precious
metal-based activities, including, but not limited to, metals exploration,
engineering, resource development, economic feasibility assessments, mineral
production, metal processing and related ventures of environmentally friendly,
and economically enhancing mining technologies. To date, CPL has entered into
two agreements that leverage its platform for nearer-term cash generation; first
with the Lease Option Agreement with Tonogold to lease and operate the
facilities and second, with MCU for the commercial pilot of the MCU mercury
remediation system.
CPL’s Lease Option with Tonogold
On
permitted American Flat mining properties, plant and equipment to Tonogold for
crushing, leaching and processing material from the
Lease Option Agreement, Tonogold is required to reimburse the Company
approximately
exercised, Tonogold will then pay us a rental fee of
the facility. After the first
fee will step down to
next
CPL and Development of Clean Technologies
The ongoing testing of alternative technologies aligns with our Strategic Focus
on responsible development. A breakthrough with cleaner technologies could
result in higher, faster recoveries with reduced waste, shorter permitting cycle
times and lower reclamation costs.
We continue exploring other partners and ventures that can leverage our
fully-permitted platform for the development of cash-generating, precious and
strategic minerals-based activities, including, but not limited to, metals
exploration, engineering, resource development, economic feasibility
assessments, mineral production, metal and other materials processing, and
related ventures of environmentally-friendly and economically enhancing mining
and materials technologies.
44
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Comstock Exploration & Development (100% owner of the Dayton Resource and Spring
Valley Exploration Areas)
Our
located in
Access to the properties is by
and the Dayton Consolidated mine workings. The historic Dayton Consolidated mine
was the last meaningful underground mining operation in the
before being closed after the War Act in
non-essential gold mining operations in
The
In
master plan and zoning changes on the
patents and other properties located in the
more practical, comprehensive feasibility study for mining. Geological studies
and development planning are currently underway utilizing data from extensive
metallurgical testing and assessment during 2017, an additional 30,818 feet of
drilling completed in 2015, geophysical analysis and interpretation completed in
2013, and extensive geological data from pre-2013 drill programs.
During the third quarter of 2020, we engaged
Canada
properties. The survey included both magnetic and Geotech’s proprietary
Versatile Time-Domain Electromagnetic surveys. The survey was flown from
interpreted, three-dimensional results were delivered in the second quarter of
2021. The results will greatly increase our understanding of the
area and
exploration targets in
Our technical staff is currently compiling a detailed structural interpretation
of the
new resource model. The detailed interpretation is leading to a list of highly
prospective drill targets to further define and expand the mineral resource.
The plan includes expanding the current resource at the
and continuing southerly into
exploration targets lies adjacent to the
toward the southern-most end of the
portion of the Kossuth patented claim and the Dondero and Daney claims, and all
of our placer mining claims in
mineralized structures lie mostly concealed beneath a veneer of sediment gravels
and the volcanic host rocks, and the structural controls of the mineralization
defined for the
Valley
that will continue southerly from
site (Figure 4), with a potential strike length of approximately 9,600 feet.
On
our option with
unpatented lode mining claims in
from New Daney since 2010. We paid a total of
balance.
We are proceeding to publish a separate S-K 1300 compliant, Initial Assessment
technical report for the
estimate. The new technical report will provide not only a new resource
estimate, but also a phased drilling plan for further defining and expanding the
resource for sustainable, profitable mining. We plan to continue to advance the
Mining and processing on our 100% privately held lands should simplify and
shorten the critical permitting chain.
45
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[[Image Removed: lode-20210630_g5.jpg]] Figure 4 -Dayton and Spring Valley Group Targets 46
——————————————————————————–
Mineral Claims)
Tonogold has commenced further, detailed analysis of our northern targets that
correlates historical data with modern geological assessments and reveals a
potentially much larger exploration opportunity. Accordingly, we signed a
Mineral Exploration and
certain mineral properties in
term of 5 years, with options to renew for an additional 15 years, as long as
specific commitments are met, including Tonogold spending of at least
million
technical reports.
The lease has a quarterly fee of
year thereafter. Tonogold is also required to reimburse all claim maintenance
costs, third-party lease payments, and other costs associated with owning the
properties. We retain a 1.5% to 3.0% NSR royalty on future mineral production
from the properties. We also maintain an additional net royalty of 1.0% (that
is, 25% of 4%) for the historic Sutro mining patents in
through our 25% membership interest in Pelen, the 100% owner of Sutro. On
remaining 75% of the membership interests of Pelen for a purchase price of
will be credited to the purchase price. See Note 2, Acquisitions, Investments
and Divestitures, to our condensed consolidated financial statements.
The Exploration Lease includes the Occidental group and Gold Hill group of
exploration targets, which contain many historic mining operations, including
the Overman,
under-developed Occidental Lode, parallel to the main Comstock trend. We believe
this will accelerate the development of these targets and enhance the value of
our mineral property and royalty portfolio. Tonogold has permitted an
exploration drilling program for these areas, and began drilling during the
third quarter of 2020, commencing their announced
including both core and RC drilling, focused on the historically significant
the leased properties during the year ended
eleven holes totaling 12,232 feet of drilling during the six months ended
In
restated and amended in
Lucerne properties and related permits. The transaction was completed
8, 2020
control of
in cash,
Non-Cumulative Perpetual Preferred Stock (“CPS”) with a fair value of
We retained a 1.5% NSR royalty on the Lucerne properties. Tonogold also
guaranteed the remaining payments for our membership interest in Northern
Comstock, which owns and leases certain mineral properties in the Lucerne area,
and assumed certain reclamation liabilities.
On
notice of a One Payment Surplus Event, as required by the Northern Comstock
operating agreement, as amended. The payment was triggered by our receiving net
proceeds in excess of
connection with the direct sale of registered shares of common stock on
2021
Note was amended in
amount of the Note for Tonogold’s Northern Comstock accelerated payment
reimbursement obligation and an accommodation fee of
principal amount
On
principal amount of the Note for certain Tonogold, Northern Comstock and other
reimbursement obligations and an accommodation fee of
Acquisitions, Investments and Divestitures, to our condensed consolidated
financial statements.
Over the past two years, Tonogold, aided by the independent mining advisory firm
of
resource, and plans further exploration, development and economic feasibility
assessments.
47
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Current Projects – Real Estate
On
LLC
ends on
previously deferred rent from the previous month to month tenant,
Management LLC
real estate taxes, increasing to
tenant may renew the lease for up to two additional five-year periods, at a rate
of
financial statements.
Investment in SSOF – During 2019, Comstock invested
Opportunity Fund, Inc.
wholly-owns a qualified opportunity zone business,
(“SSE”). We expect to own approximately 9% of SSOF upon issuance by SSOF of all
75.0 million authorized shares to investors. As of
the voting shares of SSOF and SSOF has received
investors, including
shares) from our officers and directors. Our chief executive officer is
president and a director of SSOF and an executive and a director of SSE.
agreements with SSE to sell our two
Properties
senior water rights for
its rights in the membership interests of DTSS for
2021
deposits under current liabilities on the condensed consolidated balance sheets.
The transactions are expected to close during 2021.
Advance to SSOF – For the six months ended
additional
SSOF for deposits and payments on land and other facilities related to
investments in qualified businesses in the opportunity zone. The advances are
non-interest-bearing and are expected to be repaid during 2021, upon the sale of
our
COVID-19
For more than a year in
emergency managers, local health authorities and community partners have come
together in a statewide response to COVID-19. Processes continue to be in place
to support testing, contact tracing, disease investigation and vaccine rollout
in communities throughout the state.
On
This directive requires people in areas with substantial or high COVID-19
transmission to wear a face covering while in public indoor locations.
Currently, 12 of
Pine
We are operating in alignment with these guidelines for limiting the spread of
COVID-19 and continue prioritizing the health of our employees, partners and
suppliers. This includes the continuation of remote working for certain at-risk
professionals and heightened monitoring of illness indicators.
48
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Outlook
We have approved a three-year, strategic plan with specific performance
objectives designed to deliver per-share value over the next three years, while
positioning the Company for continued growth beyond 2023. The plan objectives
include establishing and growing the value of our existing mineral properties
and royalty stakes, commercializing and growing existing, ESG-compliant,
lithium-ion battery recycling and mercury remediation businesses and acquiring
additional, accretive, ESG-based, natural resource material expansion
opportunities, including the recently announced acquisitions and investments in
RPS, GenMat and
(“LPB”) for industrial-scale hemp processing and extraction of winterized,
decarbonized crude oils.
The plan objectives separately include monetizing over
non-strategic assets for funding these investments and their prospective growth.
The specific performance objectives are shown under the Overview section above.
The plan is designed to deliver significant per-share value increases over the
next three years, while positioning the Company for continued growth thereafter.
Our annual operating expenditures, excluding depreciation and amortization, are
planned at approximately
amount being reimbursed under the various Tonogold agreements, resulting in
expected net operating expenses for 2021 of approximately
During 2021, we expect to close the sale of the
total proceeds of
will use a portion of the proceeds from the sale to fund investments in LINICO,
GenMat,
Our 2021 plans also include updating the
continuing southerly into
that include recently completed geophysical surveys, surface exploration and
definition drilling of targets identified by the geophysical surveys, surface
mapping, prior drilling and deeper geological interpretations that all lead to
publishing a new, SK-1300 compliant, mineral resource estimate.
Our remaining 2021 plans include advancing the investment in and the
commercialization of LINICO’s battery metal recycling operation,
industrial-scale hemp processing and extraction of winterized, decarbonized
crude oils and MCU’s mercury remediation processing technologies.
We expect to exercise our
our LINICO lithium-ion battery recycling venture during the third quarter,
resulting in a majority stake in LINICO and consolidating LINICO’s financial
results into our consolidated financial statements.
We expect to expand our assets to include the extraction and valorization of a
portfolio of critical and inevitably scarce materials, including the recently
announced acquisition of
hemp processor and extractor of winterized, decarbonized crude oils. With an
initial preference for high cash throughput generators that complement our
existing competencies and operations, we also are evaluating an additional
transaction that we hope to close during the third quarter of 2021.
Equity Raises
For the six months ended
stock through a registered equity issuance agreement (“2021 Leviston Sales
Agreement”) with
payment of related fees, and 4.0 million shares of common stock through a direct
offering to 37 investors (“Equity Purchase Agreements”), with gross proceeds of
For the six months ended
restricted common stock to purchase 6,250 shares of LINICO Series A Preferred,
with a stated value of
in exchange for the 100% of RPS capital stock, and 3.0 million restricted common
shares as part of the consideration for our investment in GenMat. See Note 2,
Acquisitions, Investments and Divestitures, to our condensed consolidated
financial statements.
49
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Comparative Financial Information
Our comparative financial information is reflected in the following table:
Three Months Ended:
June 30, 2021 June 30, 2020 Change
Revenue - mining $ - $ - $ -
Revenue - real estate 54,625 48,375 6,250
Total revenue 54,625 48,375 6,250
Mining 22,514 47,332 (24,818)
Real estate 49,410 15,320 34,090
Exploration and pre-development 278,597 151,666 126,931
Mine claims 156,703 122,069 34,634
Environmental and reclamation (Note 12) 257,792 30,972 226,820
General and administrative 999,326 891,953 107,373
Total costs and expenses 1,764,342 1,259,312 505,030
Income (loss) from operations (1,709,717) (1,210,937) (498,780)
OTHER INCOME (EXPENSE)
Interest expense 253 (91,656) 91,909
Interest income 231,496 180,230 51,266
Other income (expense) (4,843,024) 2,398,349 (7,241,373)
Other income (expense), net (4,611,275) 2,486,923 (7,098,198)
NET INCOME (LOSS) $ (6,320,992) $ 1,275,986 $ (7,596,978)
We ceased processing material from our leach pad in
no mining revenues for the three months ended
respectively.
Real estate revenue for the three months ended
compared to the same period in 2020, primarily related to an increase from the
rentals associated with our metallurgical labs and
Real estate costs and expenses for the three months ended
increased
higher depreciation expense associated with the
properties, which were classified as assets held for sale prior to
2020
Mining costs and expenses decreased by
assets becoming fully depreciated. These costs consist of depreciation expense
on temporarily idled mining equipment, processing facilities and heap leach
pads.
Exploration and pre-development costs and expenses increased by
the three months ended
primarily due to higher labor costs and consultative cost, somewhat offset by
higher Tonogold reimbursements.
Mine claims costs and expenses increased by
ended
the accelerated Northern Comstock monthly payment.
50
——————————————————————————–
Environmental and reclamation costs and expenses increased by
the three months ended
primarily due to an increase in the accretion expense related to the revised
asset retirement obligation as well as higher environmental and labor costs
offset by decreases in depreciation and insurance costs.
General and administrative expenses increased by
months ended
due to higher professional service and performance-based stock compensation
expense, partially offset by lower directors’ fees.
Interest expense decreased by
2021
of our unsecured promissory notes (“Promissory Notes”) in
related reduced interest expenses, partially offset by the accelerated
recognition of original issue discounts and lower Tonogold reimbursements for
interest expense.
Interest income increased by
2021
Tonogold principal amounts due and higher accretion on the notes receivable from
MCU-P.
Other expense of
resulted from the net
derivative assets related to LINICO, MCU and GenMat, the decrease in fair value
of the Tonogold Note of
of
of
Other income of
from an increase in value of Tonogold CPS of
estimated fair value of the Tonogold contingent forward asset of
reduction in the make whole liability of
mining claims of
Net loss was
a net income of
in net loss primarily resulted from a decrease in estimated fair value of the
derivative assets related to LINICO MCU and GenMat of
in estimated fair value of the Note of
value of Tonogold common shares of
the make whole liability, change in estimated fair value of the Tonogold
contingent forward asset of
common shares of
of mining claims.
51
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Six Months Ended:
June 30, 2021 June 30, 2020 Change
Revenue - mining $ - $ - $ -
Revenue - real estate 103,125 96,800 6,325
Total revenue 103,125 96,800 6,325
Mining 45,028 173,225 (128,197)
Real estate 98,582 28,916 69,666
Exploration and pre-development 350,301 288,387 61,914
Mine claims (533,727) 244,139 (777,866)
Environmental and reclamation (Note 12) (498,458) 57,770 (556,228)
General and administrative 1,953,358 1,737,181 216,177
Total costs and expenses 1,415,084 2,529,618 (1,114,534)
Income (loss) from operations (1,311,959) (2,432,818) 1,120,859
OTHER INCOME (EXPENSE)
Interest expense (144,576) (142,244) (2,332)
Interest income 386,969 187,372 199,597
Other income (expense) 2,936,805 3,400,464 (463,659)
Other income (expense), net 3,179,198 3,445,592 (266,394)
NET INCOME (LOSS) $ 1,867,239 $ 1,012,774 $ 854,465
We ceased processing material from our leach pad in
no mining revenues for the six months ended
respectively.
Real estate revenue for the six months ended
compared to the same period in 2020, primarily related to an increase from the
rentals associated with our metallurgical labs and
Real estate costs and expenses for the six months ended
depreciation expense associated with the
properties, which were classified as assets held for sale prior to
2020
Mining costs and expenses decreased by
expense as a result of certain assets becoming fully depreciated. These costs
consist of depreciation expense on temporarily idled mining equipment,
processing facilities and heap leach pads.
Exploration and pre-development costs and expenses increased by
the six months ended
primarily due to increase labor costs somewhat offset by higher Tonogold
reimbursements.
Mine claims costs and expenses decreased by
ended
the reimbursement of
Environmental and reclamation costs and expenses decreased by
the six months ended
primarily due to reduction in the estimated reclamation liability of
million
52
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General and administrative expenses increased by
ended
higher professional service and performance-based stock compensation expense,
partially offset by lower directors’ fees and utilities costs.
Interest expense increased by
as compared to the same period in 2020, as a result of higher interest expense
associated with accelerated recognition of original issue discounts from the
early repayment of the Promissory Notes in
Tonogold reimbursements of interest expense in 2021, and reduced interest
expense from the repayment of all debt on
Interest income increased by
as compared to the same period in 2020, as a result of higher interest income on
the various notes receivables from Tonogold, MCU-P and PSI.
Other income of
resulted from the increase in estimated fair value of the derivative assets
related to LINICO and MCU of
partially offset by unrealized losses on the value of Tonogold common shares of
Other income, net was
primarily from
preferred and common shares,
estimated fair value of the contingent forward,
on the Tonogold secured convertible note,
reimbursements and
proceeds used for qualifying expenses.
Net income was
net income of
in net income primarily resulted from a net decrease total costs and expenses of
accelerated reimbursement by Tonogold, lower environmental and reclamation costs
of
lower mine costs of
Liquidity and Capital Resources
The condensed consolidated financial statements are prepared on the going
concern basis of accounting that assumes the realization of assets and the
satisfaction of liabilities in the ordinary course of business. Our current
capital resources include cash and cash equivalents and other net working
capital resources, planned sales of Tonogold securities, collection of the Note
due on
We have had recurring net losses from operations and have an accumulated deficit
of
we generated net income of
operating activities. As of
other net working capital. At
of Tonogold and 109,000 common shares of Northern Vertex with fair values of
value Note from Tonogold.
We intend to fund our operations over the next twelve months from existing cash
and cash equivalents, planned sales of Tonogold common shares, the repayment of
the Note and the planned sale of the
sources of funds are in excess of cash expected to be used in operating
activities and to fund LINICO, GenMat and MANA Cash Commitment payments. While
we have been successful in the past in obtaining the necessary capital to
support our operations, including registered equity financings from our existing
shelf registration statement, borrowings and other means, there is no assurance
we will be able to obtain additional equity capital or other financing, if
needed. Based on the funding sources described above, management believes we
will have sufficient funds to sustain our operations during the 12 months
following the date of issuance of the condensed consolidated financial
statements included herein, including payments required for the LINICO. GenMat
and
On
to offer and sell registered shares of common stock, with an aggregate sales
price of
condensed consolidated financial statements.
53
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On
related transactions, including the payment of
payments through
Divestitures, to our condensed consolidated financial statements.
On
of the shares closed on
statements.
On
under the Promissory Notes, including principal, earned original issue discount
and accrued interest expense. See Note 11, Long-Term Debt, to our condensed
consolidated financial statements.
On
the Northern Comstock operating agreement. The entire amount was reimbursed by
Tonogold through an increase in the Note, including a
amendment fee. The Note is due and payable on
Acquisitions, Investments and Divestitures, and Note 21, Related Party
Transactions, to our condensed consolidated financial statements.
On
principal amount of the Note for certain Tonogold, Northern Comstock and other
reimbursement obligations, and a
2, Acquisitions, Investments and Divestitures, and Note 9, Accrued Expenses and
Deposits, to our condensed consolidated financial statements.
On
Biosciences, LLC
Divestitures, to our condensed consolidated financial statements.
On
restricted cash in our condensed consolidated financial statements. The
restricted cash is related to an expected loan to
Acquisitions, Investments and Divestitures, to our condensed consolidated
financial statements.
On
million
Divestitures, to our condensed consolidated financial statements.
On
GenMat and have provided Cash Commitment payments totaling
condensed consolidated financial statements.
Net cash used in operating activities for the six months ended
was
The comparative increase in net cash used resulted from non-cash Tonogold
reimbursements and fees, and reductions in accrued expenses and other
liabilities.
Net cash used in investing activities for the six months ended
was
payments to GenMat and LINICO of
note receivable of
Net cash provided by investing activities for the six months ended
2020
for payments toward the purchase of
proceeds from the sale of mineral rights and properties and
deposits received related to the sale of the
partially offset by
and
Net cash provided by financing activities for the six months ended
was
used by financing activities for the six months ended
million
partially offset by net proceeds from the sale of common stock of
Future operating expenditures above management’s expectations, including
exploration and pre-development expenditures in excess of planned proceeds from
the Note, the sale of Tonogold securities and the
amounts to be raised from the issuance of equity under our existing shelf
registration statement, declines in the market value of properties held for
sale, or declines in the share price of our common stock would adversely affect
our results of operations, financial condition and cash flows. If we were unable
to obtain any necessary additional funds, this could have an immediate
54
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material adverse effect on liquidity and raise substantial doubt about our
ability to continue as a going concern. In such case, we could be required to
limit or discontinue certain business plans, activities or operations, reduce or
delay certain capital expenditures or investments, or sell certain assets or
businesses. There can be no assurance that we would be able to take any such
actions on favorable terms, in a timely manner, or at all.
Critical Accounting Policies and Estimates
There have been no material changes to the critical accounting policies and
estimates previously disclosed in our Annual Report on Form 10-K for the year
ended
55
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