Virginia City, NV (May 15, 2012) — Comstock Mining Inc. (the “Company”) (NYSE Amex: LODE) today announced selected unaudited financial results for the quarter ended March 31, 2012.
2012 First Quarter Highlights
- The Company obtained its final, critical permit, completed its prerequisite soil sampling on the Lucerne mine, commenced all final production-related construction activities and engaged key production suppliers and hired employees for commencing production.
- The Company also successfully advanced its drilling objectives by completing an initial phase of exploration drilling in the Spring Valley Target Area; and commencing definition drilling in the Lucerne Mine Area, providing information to optimize and extend the Lucerne Mine.
- Net loss for Q1 2012 was $7.3 million, as compared to $2.4 million for Q1 2011. The increase of $4.9 million resulting primarily from a $4.7 million increase in operating expenses.
- Operating expenses for Q1 2012 were $7.8 million, versus $3.1 million in Q1 2011. The $4.7 million increase resulted primarily from increases in mine development costs, including required soil sampling, permitting and related costs, drilling activities, labor and expense for granting restricted stock to employees.
- Net cash used by operating activities in Q1 2012 was $4.5 million, versus $2.6 million in Q1 2011. The $1.9 million increase resulted from higher administrative costs of $0.9 million, exploration and mine development costs of $0.7 million, and working capital of $0.3 million.
- Net cash used in investing activities in Q1 2012 was $2.5 million, including $3.3 million for purchases of mining, processing and laboratory equipment, mineral properties and other land and buildings and $0.6 million to increase the reclamation bond deposit, offset by $1.4 million in proceeds from maturities of certificate of deposits.
- Net cash provided by financing activities in Q2 2012 was $15.3 million, resulting primarily from the sale of common shares.
- Total debt at March 31, 2012, was $3.9 million as compared to total debt at year-end 2011 of $1.4 million, primarily relating to a $2.5 million increase in mortgage obligations incurred from the 95-acre purchase of four patented lode claims, known as the Dayton Resource Area.
- Cash, cash equivalents and investments at March 31, 2012 were $16.0 million compared to $9.2 million at December 31, 2011.
Comstock’s Chief Executive Officer, Corrado De Gasperis commented, “In the first three months of the year we strengthened an already strong, production-focused management team, obtained required permits, fortified our balance sheet and commenced final construction activities as we march into production. We are rapidly becoming Nevada’s newest gold and silver mining company!”
March to Production
Some of the more critical objectives on the Company’s March to Production include hiring experienced mining and processing staff, completion of the soil sampling program, installing a fire suppression/fresh water reservoir, installing a septic system, building the Lucerne mine, preparing the mine for excavating material, expanding the heap leach pad, installing the crusher, expanding the Merrill Crowe processing facility and constructing a fueling station.
We hired the first nine out of thirty mine processing and related staff. The first nine employees started in April, augmenting the existing mine operations team, including all of our heavy equipment operators, plus quality and safety managers. The next twenty-one employees, scheduled to start in June, represent the remaining processing staff, including crushing, Merrill Crowe, laboratory, maintenance and metallurgical process staff.
We have completed the soil sampling program in the Lucerne Mine, allowing us to complete the mine construction and commence mining. We have also received an administrative update to our Storey County Special Use Permit, confirming that there is no County limit on the amount of material (ore or waste rock) that we can mine, produce or place. Accordingly, last week, our mine operations team commenced mine preparation and will soon commence stripping material from the mine. We have nearly completed the earthwork and liner for expanding the heap leach pad from its three existing cells to five cells. We have installed the foundation and liner for our expanded Merrill Crowe facility. The new, expanded Merrill Crowe equipment is ready for shipment and scheduled to arrive this week. In addition, we have completed the construction of a new, one million gallon fresh water reservoir that we have filled to supply our fire-safety water 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 have commenced ground preparation, and we will commence installation of the crusher in the latter part of May 2012.
The sequence of these major activities include commencing preparation and excavating material from the Lucerne mine, completing the heap leach expansion, expanding the Merrill Crowe processing facility, 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.
Exploration and Development
In January 2012, the Company launched its 2012-2013, exploration drilling program. The program is anticipated to be the Company’s largest drilling program, anticipating about 300,000 feet of reverse circulation and 13,000 feet of core drilling, scheduled to last approximately 18 months at a total cost of approximately $12 million. This compares to the previous, 2010-2011 drilling program of 128,671 feet of reverse circulation drilling and 3,583 feet of core drilling.
The Spring Valley drilling began January 24, 2012, and was designed to follow up on the Company’s successful 2009 drilling program and to verify the continuity of the Dayton geological model southward beyond State Route 341 into predominantly unexplored Spring Valley. Two drill rigs were used in the Spring Valley phase one program, to drill a total of 14 reverse circulation (RC) drill holes, totaling 10,235 feet, and two core holes totaling 1,627 feet. This phase of drilling was completed March 22, 2012.
Assay results have been received for the RC drill holes, showing that all 14 RC holes encountered intervals of significant mineralization (gold grades greater than 0.010 ounces per ton or silver grades greater than 0.100 ounces per ton, and length of at least ten feet). Of special interest is hole SV12-05, which encountered a total of 215 feet of significant mineralization in three zones: 90 feet grading 0.027 ounces of gold and 0.148 ounces of silver per ton, 30 feet grading 0.028 ounces of gold and 0.050 ounces of silver per ton, and 95 feet grading 0.041 ounces of gold and 0.093 ounces of silver per ton. Also of note are hole SV12-08, with 180 feet of significant mineralization in seven zones, and hole SV12-11, which encountered 100 feet of significant mineralization in six zones, including 35 feet grading 0.181 ounces of gold and 0.250 ounces of silver per ton.
Assay results and interpretations have not yet been finalized for the core holes. The first core hole, SVC12-01, initially twined the Company’s previously-announced Spring Valley discovery hole and then continued to substantially greater depth. The second core hole, SVC12-02, is located approximately 110 feet to the south, angled to intersect a magnetic anomaly interpreted from the Company’s 2011 ground magnetic survey in Spring Valley.
Following the initial drilling in Spring Valley, the Company began definition drilling in the Lucerne mine in March 2012. The definition drilling in the Lucerne mine will provide required information to optimize and expand the 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.
The 2012-2013 drilling program will then continue with three significant objectives: 1) step-out and infill drilling in the east-side of the Lucerne Resource Area; 2) infill drilling in the Dayton Resource Area; and 3) exploration drilling on high priority targets, including Spring Valley.
The step-out 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 a mine plan for expanded Lucerne mine. That mine plan will position the Company to complete an economic feasibility study and initiate permitting for the expanded mine.
The infill drilling in the Dayton Resource Area will provide detailed information needed to create a preliminary mine plan for the proposed Dayton mine, to be developed in parallel with the expanded Lucerne mine. With that plan, the Company will complete a feasibility study and begin the permitting process for the proposed Dayton mine.
In February 2012, the Company raised $17.25 million in gross proceeds (approximately $15.3 million, net of issuance costs) through an underwritten public offering of 9,078,948 shares of common stock at a price of $1.90 per share. The Company intends to use the net proceeds from the offering for exploration and development of the Company’s primary target areas, that is the Lucerne and Dayton Resource Areas, and in Spring Valley and other high-quality targets, as well as for working capital and general corporate purposes.
Cash, cash equivalents and available-for-sale securities on hand at March 31, 2012, totaled $16.0 million. For the three months ended March 31, 2012, we used cash from operating activities of approximately $4.5 million compared to $2.6 million in the same quarter of 2011. The increased use of operating cash flow of approximately $1.9 million, resulted from higher exploration and mine development expenses of $0.7 million, primarily for increases in soil sampling and related costs, higher general administrative expenses of $0.9 million, primarily for salaries, permitting and related legal costs, travel and related costs, and a $0.3 million an increase in cash used for working capital, primarily for prepaid construction costs and prepaid taxes. The Company paid its first net proceeds tax of approximately $0.2 million to the State of Nevada.
Net cash used in investing activities included $3.3 million for the purchase of mineral rights and properties, plant and equipment, including approximately $1.1 million for land and buildings, $0.8 million for processing equipment, $0.7 million for mining vehicles and equipment and $0.7 million for construction in progress, primarily related to additional processing and laboratory equipment. Additionally, the Company used cash of $0.6 million to increase its reclamation bond deposit.
We believe that our existing cash and investment and other capital resources, including the anticipated revenue from the commencement of production, provides sufficient liquidity to fund the operations and capital requirements for the next twelve months, including an increase in our reclamation bonding requirement of approximately $2.5 million and the remaining capital expenditures of approximately $4.8 million required for commencing production.
For the three months ended March 31, 2012, 260 shares of Series B convertible preferred stock were converted into 157,575 shares of common stock. Subsequent to March 31, 2012, and through May 14, 2012, preferred shareholders did not convert any convertible preferred stock into common shares.
On January 1, 2012, the Company declared and issued 1,220,003 shares of common stock in payment of dividends on the convertible preferred stock.
Comstock’s Chief Executive Officer, Corrado De Gasperis commented, “There is a tremendous amount of positive activity throughout the system as we march toward the first pour later this summer. Our immediate focus on production and production growth commits our drilling to expanding Lucerne and developing Dayton but these initial Spring Valley results indicate a promising geological connection with Dayton and positions further resource growth in our southern properties.”
The Company will host a conference call on May 15, 2012 at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time to report First Quarter 2012 results and business update. The live call will include a moderated Q&A, after the prepared remarks. The dial-in telephone numbers for the live audio are as follows:
North American Toll Free: 1-866-544-4625
Canada Local / International: 1-416-849-2726
The audio will be available following the call, and for 30 days thereafter, at http://www.comstockmining.com/investors/investor-library
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 in 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