Virginia City, NV (March 29, 2011) — Comstock Mining Inc. (the “Company”) (NYSE Amex: LODE) today announced selected unaudited financial results for the year ended December 31, 2011.
The Company will host a conference call today, March 29, 2012, at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time. The live call will include a moderated Q&A, after the prepared comments by the Company. The dial-in telephone numbers for the live audio are as follows:
North American Toll Free: 1-866-544-4625
Canada Local / International: 416-849-2726
The audio will be available within 72 hours following the call, and for 30 days thereafter, at http://www.comstockmining.com/investors/investor-library
2011 Full Year Results
- On September 30, 2011, the Company published its third National Instrument 43-101 (NI 43-101) technical report (the “2011 Report”) authored by Behre Dolbear & Company (USA), Ltd. (“Behre Dolbear”). The 2011 Report declared a mineral resource estimate of Measured and Indicated Resources containing 1,780,000 gold equivalent ounces, and an estimate of an Inferred Resource containing an additional 990,000 gold equivalent ounces, a 94% increase over the previous estimate.
- During 2011, the Company received substantially all of the required exploration and production related permits, including its new Mercury Operating Permit and modified other existing production related permits, including its existing Water Pollution Control Permit, and in February 2012, received the new Class 1, Air Quality Permitauthorizing the remaining construction and pre-mining work required for the production of gold and silver later this year.
- Net loss for 2011 was $11.6 million, resulting primarily from operating expenses associated with exploration, reclamation and development activities and, to a lesser extent, administrative activities. Net loss for 2010 was $60.3 million. The higher 2010 loss resulted primarily from a non-cash loss on extinguishment of debt of $26.4 million and a non-cash charge for the change in the fair value of derivative liabilities of $23.5 million.
- Operating expenses for 2011 were $16.0 million, versus $7.1 million in 2010. The increased loss resulted from an increase of $5.5 million in reclamation, exploration and test mining expenses relating primarily to our exploration and development activities in 2011, an increase of $2.8 million related primarily to general and administrative activities and related consulting and professional fees and an increase of $0.5 million for hotel operating costs.
- Interest expense for 2011 was approximately $0.1 million, versus $3.3 million in 2010. The $3.2 million decrease resulted from the extinguishment of our senior secured convertible indentures, promissory notes and associated interest obligations in October 2010.
- Net cash used by operating activities for 2011 was $11.6 million, versus $7.9 million in 2010. The increased use of $3.7 million in 2011, primarily resulted from the increased use of cash for exploration expenses of $3.8 million and general and administration expenses of $1.3 million, partially offset by a $1.3 million increase, in 2011 as compared to 2010, in cash provided in operating activities, primarily from changes in accounts payable.
- Net cash used in investing activities included $8.3 million for the purchase of property, plant and equipment, including approximately $4.1 million for mining vehicles and equipment, $3.1 million for processing and lab equipment and $1.1 million for land and buildings.
- Net cash used in financing activities in 2011, was $0.8 million, for principal payments on debt obligations, versus net cash provided by financing activities of $37.1 million for 2010, resulting primarily from raising $35.75 million in equity in October 2010.
- Cash, cash equivalents and investments at year-end were $9.2 million. In February 2012, the Company raised $15.3 million in proceeds, net of issuance costs, through an underwritten public offering of 9,078,948 shares of common stock.
- Total debt at year-end 2011 was $1.4 million as compared to $1.5 million in 2010, all relating to notes payable for property purchases.
Comstock’s Chief Executive Officer Mr. Corrado De Gasperis commented, “The last twelve months reflects three major advancements toward our stated goals. We established a strong, production-focused management team, issued our third NI 43-101 technical report, nearly doubling our gold and silver resources, and obtained every major permit or permit modification for commencing production in 2012. We also expanded our exploration permits in both counties where our Comstock properties reside.
During 2011, the company completed its management reorganization, including adding new vice presidents of operations, exploration and mine development and strategic resource planning. The Company also added directors of environmental and regulatory management, public relations and marketing, safety, mine planning, mine supervision, metallurgy and maintenance. In March 2012, we hired our new Senior Mine Supervisor and a Senior Maintenance Supervisor. Both are knowledgeable and highly experienced mining professionals that continue the company’s pattern of attracting the best quality talent from within the industry and bringing them to the Comstock. We also hired a new manager of investor relations, Kimberly Shipley, who joined us this week. We believe we have exceptional engineering, metallurgical, geological, geo-statistical, safety, environmental, regulatory, finance, mine operating and processing competencies on our senior team.
Exploration and Development
During 2011, the Company validated 2.4 million ounces of gold and over 20 million ounces of silver. That was made possible by the most efficient drilling program in the Company’s history, with a discovery cost of just $6 per gold-equivalent resource ounce. The 2011 Report declared a mineral resource estimate of Measured and Indicated Resources containing 1,780,000 gold equivalent ounces, and an estimate of an Inferred Resource containing an additional 990,000 gold equivalent ounces. The total of 2,770,000 Measured, Indicated, and Inferred gold equivalent ounces is a 94% increase over the previous estimate.
On January 24, 2012, the Company launched its 2012-2013, exploration drilling program. The program is the Company’s largest drilling program in its history, significantly exceeding the magnitude of the successful 2011, drilling program. The program anticipates about 300,000 feet of reverse circulation and 13,000 feet of core drilling, and is scheduled to last approximately 18 months.
The program began with limited Phase 1 drilling in Spring Valley, using one Reverse Circulation (RC) and one Core drilling rig. The Spring Valley program is designed to verify the continuity of the Dayton geological model southward into the predominantly unexplored Spring Valley properties. The Core drilling completed two core holes with depths of 800 feet each.
Following the Spring Valley drilling, the Company will complete definition drilling in the Lucerne mine area. The definition drilling in the Lucerne mine area will provide required information to optimize and expand the initial mine plan and extend its life. The Lucerne mine, on patented mining claims west of State Route 342, is permitted and scheduled to begin production in 2012. We currently have two RC drill rigs on these Lucerne mining claims.
The 2012-2013 drilling program will then continue with three significant objectives: development and in-fill drilling in the East-Side of the Lucerne Resource Area; infill drilling in the Dayton Resource Area; and, most likely in 2013, exploration drilling on high priority targets, including Spring Valley.
The development-drilling phase in the East-Side of the Lucerne Resource Area will test the continuity of mineralization to the north and south, and at greater depths to the east. The infill-drilling phase will then provide the detailed information needed to develop an expanded mine plan for Lucerne. That mine plan will position the Company to complete an economic feasibility study and initiate permitting for the expanded Lucerne mine. We anticipate publishing our next technical report at the conclusion of these activities.
The infill drilling in the Dayton Resource Area will provide detailed information needed to create a preliminary mine plan for the Dayton mine, to be developed in parallel with the Lucerne mine. With that plan, the Company could begin the permitting process for the Dayton mine.
For the full map of Comstock Mining’s Project Resource Areas, please click on the attached link:
Our strategic plan calls for a return to mine production. Some of the more critical objectives include hiring the mining and processing staff, completion of the soil sampling program and clearance, installation of a fresh water reservoir, updating the septic system, preparing the Lucerne mine for stripping, expanding the heap leach pad, installing the crusher, expanding the Merrill Crowe processing facility, constructing a fueling station, receiving the new metallurgical lab and procuring fuel, lubricants and spare parts.
We are hiring twenty mine and processing staff, in two phases. The first eight employees are scheduled to start on April 20, augmenting the mine operations team, including heavy equipment operators, and the next twelve employees, in May, for processing operations, including crushing, blasting and Merrill Crowe and metallurgical process staff.
We have completed the soil sampling for the mine and are awaiting final clearance for production. Once received, our mine operations team will commence preparation and stripping. We have commenced the earth work for expanding the heap leach pad from its three existing cells to five cells. We are currently installing the foundation and liner for our expanded Merrill Crowe facility. The new, expanded Merrill Crowe equipment is ready for shipment once the foundation and liner are completed. In addition, we have commenced construction of a new, one million gallon fresh water reservoir that we will fill and replenish from our existing water wells that supply our commercial and fire safety needs. We have received all major components of the crushing facility, including the jaw and cone crusher, the super stacker, conveyors and related components on site. We are scheduled to commence ground preparation for installation of the crusher next week.
For further information on our recent production-related activities, please click on the attached link:
The sequence of these major activities includes commencing preparation and stripping in the Lucerne mine, completing the fresh water reservoir, expanding the heap leach, installing the crushing facility, crushing and stacking material. Once material is stacked, we will commence processing with an expectation of pouring Doré within sixty days of stacking the first material.
The Company has completed a financial analysis for the Lucerne mine and anticipates annual operating expenses, including mining, processing, royalties and mine administration costs of approximately $13 million per annum, with a production schedule that commences processing at a rate of one million tons per annum. These mining, processing and related costs do not include corporate administration or other general and administrative costs, nor do they include exploration and mine development costs.
In January 2012, we completed the purchase of the Dayton Consolidated property, effectively purchasing the four, patented lode claims totaling 95 acres that make up the Dayton Resource Area. The purchase price was $3 million and included $0.5 million in upfront payments. The seller financed the remaining $2.5 million with 0% interest seller’s note over five years.
In February and March of 2012, the Company purchased certain strategic mineral properties and some buildings for approximately $1.4 million, including the 18 acres on one patented claim with 50% of the mineral rights called Diez Senores, adjacent to the Dayton, effectively connecting the Dayton and Spring Valley Resource Areas. The purchases totaling $1.4 million were paid with approximately $0.6 million in cash and approximately $0.7 million by the issuance of seller’s notes. The remaining $0.1 million was paid in Company common stock.
For the year ended December 31, 2011, we used cash from operating activities of approximately $11.6 million as compared to $7.9 million in 2010. The increased use of $3.7 million in 2011, primarily resulted from the increased use of cash for exploration expenses of $3.8 million and general and administration expenses of $1.3 million, partially offset by a $1.3 million increase, in 2011 as compared to 2010, in cash provided in operating activities, primarily from changes in accounts payable. Net cash used in investing activities included $8.3 million for the purchase of property, plant and equipment, including approximately $4.1 million for mining vehicles and equipment, $3.1 million for processing and lab equipment and $1.1 million for land and buildings.
Cash, cash equivalents and available-for-sale securities on hand at December 31, 2011, (prior to the February 2012 fund raising), totaled $9.2 million. Cash, cash equivalents and available-for-sale securities on hand at March 29, 2012, totaled approximately $17.1 million. During the first quarter of 2012, significant expenditures included approximately: $2.2 million in capital expenditures, primarily for the crusher, the Merrill Crowe facility, heap leach and pond expansions and related infrastructure for our production start up; $1 million on land purchases, primarily for the exercising the option on the Dayton and the adjacent Diez Senores patent; $1 million for development drilling in the Lucerne mine and the first phase of core drilling in Spring Valley, and to a lesser extent, environmental and engineering work associated with the soil sampling and clearance for production of Lucerne mine; and $0.8 million in payroll. The Company increased its bonding in the first quarter of 2012 by $0.6 million, substantially all of which was for the production project.
The Company also paid its first net proceeds tax of approximately $0.2 million to the State of Nevada. At December 31, 2011, the Company had federal net operating losses of approximately $94.5 million.
For the year ended December 31, 2011, 1,710 shares of Series A-2 convertible preferred stock and 5,842 shares of Series B convertible preferred stock were converted into 2,625,514 and 3,540,749 shares of common stock, respectively. Subsequent to December 31, 2011, and through March 29, 2012, preferred shareholders converted 235 shares of convertible preferred stock into 142,423 common shares. From January 1, 2011 through January 1, 2012, the Company declared and issued 2,994,607 shares of common stock in payment of dividends on the convertible preferred stock. In February 2012, the Company raised $15.3 million, net of issuance costs through an underwritten public offering of 9,078,948 shares of common stock. Common shares and convertible preferred shares outstanding at March 30, 2012, totaled 39,482,791 and 58,981, respectively.
Comstock’s Chief Executive Officer Mr. Corrado De Gasperis commented, “There is a tremendous amount of positive activity throughout the system as we execute our production schedule and march toward the first pour this summer. Our drilling programs for Lucerne and Dayton should position us for growth in 2013, and beyond.”
Gold equivalent ounces were calculated using September 30, 2011 London PM prices of $1,620.00 per ounce of gold and $30.45 per ounce of silver, as published by kitco.com. This resulted in a ratio of 53.20 ounces of silver per equivalent ounce of gold, without taking into consideration the relative recoveries of gold and silver.
About Comstock Mining Inc.
Comstock Mining Inc. is a Nevada-based gold and silver mining company with extensive, contiguous property in the Comstock District. The Company began acquiring properties in the Comstock District in 2003. Since then, the Company has consolidated a significant portion of the Comstock District, amassed the single largest known repository of historical and current geological data on the Comstock region, secured permits, built an infrastructure and brought the exploration project into test mining production. The Company continues acquiring additional properties in the district, expanding its footprint and creating opportunities for exploration and mining. The goal of its strategic plan is to deliver stockholder value by validating qualified resources (at least measured and indicated) and reserves (probable and proven) of 3,250,000 gold equivalent ounces by 2013, and commencing commercial mining and processing operations with annual production rates of 20,000 gold equivalent ounces.
This press release and any related calls or discussions may contain forward-looking statements. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements include statements about matters such as: future prices and sales of and demand for our products; future industry market conditions; future changes in our exploration activities, production capacity and operations; future exploration, production, operating and overhead costs; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); future employment and contributions of personnel; tax and interest rates; capital expenditures and their impact on us; nature, timing and accounting for restructuring charges, gains or losses on debt extinguishment, derivative liabilities and the impact thereof; productivity, business process, rationalization, restructuring, investment, acquisition, consulting, operational, tax, financial and capital projects and initiatives; contingencies; environmental compliance and changes in the regulatory environment; offerings, sales and other actions regarding debt or equity securities; and future working capital, costs, revenues, business opportunities, debt levels, cash flows, margins, earnings and growth.
The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “should,” “intend,” “may,” “will,” “would,” “potential” and similar expressions identify forward-looking statements, but are not the exclusive means of doing so. These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical and current trends, current conditions, possible future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees, representations or warranties and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements. Some of those risks and uncertainties include the risk factors set forth in our SEC filings and the following: the current global economic and capital market uncertainties; the speculative nature of gold or mineral exploration, including risks of diminishing quantities or grades of qualified resources and reserves; operational or technical difficulties in connection with exploration or mining activities; contests over our title to properties; potential dilution to our stockholders from our recapitalization and balance sheet restructuring activities; potential inability to continue to comply with government regulations; adoption of or changes in legislation or regulations adversely affecting our businesses; business opportunities that may be presented to or pursued by us; changes in the United States or other monetary or fiscal policies or regulations; interruptions in our production capabilities due to unexpected equipment failures; fluctuation of prices for gold or certain other commodities (such as silver, copper, diesel fuel, and electricity); changes in generally accepted accounting principles; geopolitical events; potential inability to implement our business strategies; potential inability to grow revenues organically; potential inability to attract and retain key personnel; interruptions in delivery of critical supplies and equipment raw materials due to credit or other limitations imposed by vendors; assertion of claims, lawsuits and proceedings against us; potential inability to maintain an effective system of internal controls over financial reporting; potential inability or failure to timely file periodic reports with the SEC; potential inability to list our securities on any securities exchange or market; and work stoppages or other labor difficulties. Occurrence of such events or circumstances could have a material adverse effect on our business, financial condition, results of operations or cash flows or the market price of our securities. All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statement.
Neither this press release nor any related calls or discussions constitutes an offer to sell or the solicitation of an offer to buy any securities.
Contact information for Comstock Mining Inc.:
P.O. Box 1118
Virginia City, NV 89440
Corrado De Gasperis
President & CEO
Manager of Investor Relations
Tel (775) 847-4755
Tel (775) 847-0545