Q: Can you clarify why the valuation numbers for MCU just changed on the new blog post? Is Oro equipment still being delivered this month?
A: Thank you for the questions about our mercury remediation business. Oro Industries has completed the manufacturing of the equipment, and it’s quite impressive. The equipment needs powder coating, held up in large part because the coaters shut down during the COVID-19 lockdown. We expect the coating to be completed over the next few weeks and the equipment to arrive onto the Comstock before the end of May 2020.
Regarding the valuation, the mercury business will most definitely be a global business, with domestic (e.g., the Comstock and other western mining districts) and international projects. Our objective is to target projects with greater than $100 million in value potential, but every project will be different, including ownership and structuring. Comstock will ultimately own 25% of Mercury Clean Up LLC (“MCU”), but Comstock also has the right to invest, directly, into 50% of every project.
This typically means we could own a minimum of 25% (if we chose not to invest directly in the particular project opportunity, but rather enjoyed our existing 25% ownership passively) to a maximum of 62.5% (if we chose to invest in, up to, an additional 50% of a project directly, in which case we would own that 50% directly plus 25% of the other 50% (or 12.5%) for a total of 62.5% of that project’s economics.
We changed the low end of the ranges to me more conservative, effectively reflecting the asset value of the MCU systems we are invested in (and secured with), until they are up and running and generating cash flow. We modified the upper end based on the potential that we have foreign partners (for example, in the Philippines, we are working with a local partner, as required by law). In all cases, we feel we will only approve and participate in projects with tremendous upside for impacting the environment and sustaining strong returns and values for our stakeholders. The global scope of these opportunities is truly tremendous and as we learn and structure more projects, differently, protectively, we will refine our estimates and continue growing the portfolio.
We could not be more excited about the global business opportunities in mercury remediation.