Q: Why is Comstock so deeply undervalued? Something doesn’t add up – The non-mining assets alone of $20+ million exceed your Enterprise Value (EV) today (Equity of $15 million+ Debt $4.7 million), not to mention all of your mineral properties and strategic investments in the Mercury Remediation and Sierra Springs Fund. Could you share more on the value estimates and timeframes?
A: This is our most important and frequently asked question, so let’s be thorough on discussing how we identify, create and deliver value. We discussed this briefly during our last annual meeting and published an initial summary to help our stakeholders better understand our existing and potential growth values. We will continuously update that summary as we make real progress on our goals.
Our goal is to identify and deliver over $500 million of value from our existing assets, technologies, partnerships and ventures. Our growth is tied to initiatives aligned with our Board-approved strategy focused on high-value, cash-generating, precious metal-based activities, (the “Strategic Focus”) including, but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of environmentally friendly, conservation-based and economically enhancing mining technologies.
Comstock’s value starts with its land, water and mineral rights on the historic, world-class Comstock Lode district, and our growth plans start with our existing mineral resources in Lucerne and Dayton.
We have partnered with Tonogold on Lucerne and now expect to fully realize over $25 million just from the sale of our Lucerne mining claims to Tonogold, plus the potential for over $35 million (totaling over $60 million) of additional value from leasing, processing and royalty agreements already in place.
We are reassessing and expanding the Dayton resource, but just based on current gold and silver prices, before any resource updates, we now show a low-end value of over $75 million based on our existing economic shell (using an $800 gold equivalent cut off) and a $1600 gold revenue assumption. We have not expanded the pit shell (even though higher gold prices allows for lower grade cut-offs and significantly higher, economically-feasible ounces) and only increased the revenue based on higher metal prices.
American Flat Processing and Commercializing Platform
Our processing platform includes the Company’s crushing, leaching, processing and metallurgical equipment and labs, where our clean-technology joint ventures (including Mercury Clean Up LLC) and other partnerships, represent opportunities for value growth; most immediately with mercury remediation and clean reprocessing of previously leached mineralized materials.
The following table summarizes the components of the previously announced activities and the related, estimated value build-up of the high and low valuation targets of such components. In total, these components reflect an estimate of the exciting potential, future valuation range for the Company (with the low target being more quantifiably known and the high target being more nascent and longer-lived):
Our focus on realigning and transforming the Company was driven solely by our determination to reposition the Company, and its balance sheet, for sustainable per share value growth. The valuation target range of $120 – $500 million in equity value based on our existing assets, investments and growth plans. Our entire, hard-asset and technology platform and existing resources are deeply undervalued. Our non-mining lands and non-mining water rights alone are valued at over $20 million, net, based on recent, comparable sales in the area, with agreements to sell the Industrial and Commercial lands plus the senior water rights in Silver Springs, for over $10 million, with $0.4 million already in escrow. These proceeds will extinguish the remaining $5.3 million in obligations (including our $4.9 million bond. Our $6.1 investment in Tonogold Convertible Preferred Stock (CPS) is valued between $7.3 million (through a 120% redemption right held by Tonogold) and $13.9 million, based on Tonogold’s current share price. We are also owed $5.475 million from Tonogold through a 12%, cash interest paying debt instrument, with principal payments of $1 million due this October 2020, and $4.475 million due September 2021.
More meaningfully, we have already positioned the permitted platform and tested both mercury remediation process technologies and leach-pad reprocessing solutions for new process technologies that we are now developing for commercialization. We have also facilitated an investment in an opportunity zone fund that is already worth ten times our investment of $330,000, based on the last investment round into the fund during late 2019. The fund owns or has secured almost 3,000 acres of land at less than $10,000 per acre, and owns and operates the Silver Springs Regional Airport, and also operates a 180,000 square foot manufacturing facility with conservation-based businesses moving into Silver Springs, literally as we type this update. We expect that our efforts in monetizing the non-strategic assets, eliminating the debt and commercializing the mining assets, will move us first toward the $120 million valuation throughout this year and position us to grow those businesses and valuations toward our $500+ million target over the next 2-3 years and beyond. The growth potential is extraordinary.