Virginia City, NV (August 8, 2013) — Comstock Mining Inc. (the “Company” or “CMI”) (NYSE MKT: LODE) today announced selected unaudited financial results for the quarter ended June 30, 2013.
2013 Second Quarter Highlights
- Mining revenue from the sale of gold for Q2 2013 was $6.8 million, as compared to $3.7 million for Q1 2013.
- Gold shipments were 4,921 ounces in Q2 2013, a 118% increase as compared to 2,261 ounces in Q1 2013. Silver shipments were 42,992 ounces in Q2 2013, a 176% increase as compared to 15,599 ounces in Q1 2013. Gold production more than doubled; silver nearly tripled over Q1 2013.
- Initial production ramp-up phase was completed, exceeding initial targeted production rates of 400 ounces per week. New targets are 600 ounces per week by September 2013 and 770 ounces per week, in Q1 2014.
- Net loss for Q2 2013 was $5.5 million, as compared to $9.0 million for Q2 2012. The decrease of $3.5 million resulted primarily from a $6.8 million increase in mining revenue, a $4.9 million decrease in all other operating expenses, offset by $8.2 million of costs applicable to mining.
- Costs applicable to mining were $8.2 million, reflecting less efficient operating rates throughout first quarter and the initial part of the second quarter, a $1 million lower of cost or market inventory adjustment due to lower gold prices at quarter end and a ramp up of certain operating costs in advance of production.
- The Company added 62% more ounces of gold to inventory, 5,265 ounces, as compared to 3,248 in Q1 2013, resulting in approximately 20% lower average inventoried cost per ounce at June 30, 2013.
- Operating expenses, excluding costs applicable to mining, totaled $4.4 million for Q2 2013, as compared to $9.2 million for Q2 2012. The $4.9 million decrease was due to a $3.4 reduction in exploration and reclamation costs as the Company shifted into full production and a $1.7 million reduction to lower compensation, legal and administrative costs.
- Paid down, in full, the balance of our $5 million secured revolving facility (the “Revolving Facility”) held with the Resource Income Fund (“RIF”), through Auramet Trading, LLC (“Auramet”) acting as gold agent, strengthening our balance sheet and liquidity.
- Total debt at June 30, 2013 was $6.4 million as compared to total debt at year-end 2012 of $13.7 million, primarily resulting from the full payoff of the Revolving Facility.
- Cash and cash equivalents were $2.4 million, with the $5 million Revolving Facility undrawn at June 30, 2013. The Company has received improved, indicative terms for its Revolving Facility.
2013 Year-to-Date Highlights
- Received unanimous county approval to expand processing capacity that allows for the doubling of planned production rates by the fourth quarter of this year, from 1 million tons per annum to more than 2 million tons per annum. Final State permitting approval is expected by late September 2013.
- Completed cost reduction actions through July 2013, resulting in over $5 million in prospective annual cost reductions, including approximately 20 mining and administrative labor reductions, material efficiencies and other permanent, administrative cost reductions, as compared to the first half of 2013.
- Completed a system-wide debottlenecking effort, resulting in increased future capacities throughout our mining and processing operations and expected increased production rates once final permits are received.
- Reconciled and updated the Company’s mine plan with improved grades, rates and tonnages, now targeting 30,000 ounces per annum by September 2013 and 40,000 ounces per annum by the first quarter of 2014.
- Net cash used by operating activities for the six months ended June 30, 2013 was $8.4 million, versus $10.1 million in the comparable prior period. The $1.7 million decrease resulted primarily from a lower net loss offset somewhat by higher uses for working capital and debt reductions made by gold payments.
- Net cash used in investing activities for the six months ended June 30, 2013,was $1.1 million, versus $7.5 million in the comparable prior period. The decrease resulted from the reduced purchases of plant and equipment, primarily associated with last year’s construction of mining infrastructure offset by $1.0 million in capital spent primarily for debottlenecking activities during Q2 2013.
Comstock’s Chief Executive Officer, Corrado De Gasperis commented, “In the first six months of the year we ramped up initial production to the currently permitted levels, built out and debottlenecked all major stages of production, prepared for expanding our leaching capacity and optimized the mining, crushing and processing operations, all enabling greater production capacity. We also significantly acted on our costs and reconciled and updated our mine plan, improving our prospective grade profile and positioned the system for significant growth and cost efficiency in the second half of this year.”
The Company’s Lucerne Mine production has ramped up to and exceeded the targeted 20,000 gold-equivalent-ounce annual production rate during the second quarter of 2013. This target was achieved by maximizing existing permitting capacity constraints around our existing heap leach processing facility. The Company’s existing heap leach facility will be expanded, once certain permit modifications are received. The Company has already filed for an expanded Water Pollution Control Permit and a proposed Engineering Design Change (EDC) for the construction of storm water diversion structures around our heap leach facility, both with the Nevada Division of Environmental Protection. The Company also applied for an expanded Special Use Permit (SUP) with Storey County, Nevada. The EDC and SUP Permits were approved in June and July 2013, respectively, and the Water Pollution Control Permit is expected to be approved by the end of September 2013. All together, these approvals allow for expanded capacity and processing rates of our heap leach processing facility. This increases our production target to 40,000 ounces per annum run rate by Q1 2014.
Metal sales in the second quarter of 2013 totaled $7.7 million, with gold revenues of $6.8 million. We also produced $0.9 million of silver. Silver is accounted for as a by-product credit in costs applicable to mining revenue for financial reporting purposes. During the second quarter of 2013, the Company crushed and stacked over 368,000 dry tons of mineralized materials, a 57% increase from the prior quarter, and shipped 4,921 ounces of gold and 42,992 ounces of silver. Gold production more than doubled; silver nearly tripled over Q1 2013. Material placed on the heap leach pad remains under solution until recovery rates are optimized.
The Company continues preparations for ramping up its production and is now targeting up to 600 ounces per week by September 2013 and 770 ounces per week during for the first quarter 2014, or more than 40,000 ounces per annum for 2014. The Company’s internal mine development and production team, with the assistance of external mining engineers, updated and enhanced our future production plans, improving both grade and tons.
During the second quarter ended June 30, 2013, the Company realized an average price of $1,384.17 price per ounce of gold and a $21.65 average sales price per ounce of silver. In comparison, commodity market prices in the second quarter of 2013 averaged $1,413.64 per ounce of gold and $23.11 per ounce of silver. The Company has priced approximately 3,250 ounces of gold sales at an average price of over $1,300, reflecting sales through the remainder of August and most of September 2013.
During the first half of 2013, actual Lucerne Mine costs applicable to mining revenue were approximately $13.5 million, $12.1 million net of silver credits. Cost applicable to mining revenue includes mining, processing, maintenance, mine administration and support. These cost applicable to mining also included a lower of cost or market write down of inventory of approximately $1 million due to lower gold prices at the end of the second quarter, $1 million of higher hauling costs, including the previously incurred redundancy associated with our inability to use an existing haul road, transition costs associated with renting new haul vehicles while transitioning out of the existing temporary vehicles and ramp up costs associated with labor, leach expansion and associated costs incurred in advance of achieving the higher production rates. These costs also include approximately $1.5 million in depreciation and depletion.
The Company has completed various cost reduction actions through July 2013 resulting in over $5 million in prospective, annual cost reductions, including approximately 20 mining and administrative labor reductions, material efficiencies and other permanent, administrative cost reductions, that will be realized in future results. Management believes the system is now capable of operating at twice the production rates of the first six months and plans on operating at those higher levels once final permits, expected in late September 2013, are approved. Costs applicable to mining added to inventory during the quarter and, on average, in ending inventory, are lower than the previous quarter, on a per ounce basis, by approximately 20%.
Our expenses associated with mining operations do not include corporate general and administrative costs or exploration costs.
2013 & 2014 Production Outlook
The Company’s current financial analysis for the Lucerne Mine anticipates 2013 annual cash costs applicable to mining revenue, including all mining, processing, mine administration and support costs of approximately $26-28 million per annum with an anticipated production schedule ramping up to 2 million tons per annum run rate during the fourth quarter of 2013. The Company currently anticipates production rates beyond the 400 gold-equivalent ounces per week in the second half of the year, targeting 600 ounces per week by the end of September, or a run rate of 30,000 gold equivalent ounces per annum for the fourth quarter and 770 ounces per week, or a run rate of 40,000 gold equivalent ounces per annum, during first quarter of 2014, once production has been permitted to expand in the fourth quarter of 2013. This would result in an all in cash costs applicable to mining of approximately $725 – $795 per ounce run rate by early 2014.
Exploration and Development
“The author believes the Comstock Mine Project represents a well-explored, epithermal, precious metal deposit within a world-class mining district…….The geology of the area is well described and understood through vigorous surface mapping and drill hole logging. The density of the geologic data is high and the reliability excellent, particularly in the various Lucerne Mine areas.” BEHRE DOLBEAR, January 2013.
The Comstock Mining district is a well-known, historic mining district, with over 150 years of production-based history. We have access to extensive reports and maps on various properties in the district, particularly the Lucerne Mining and Resource Areas: but to-date, we have only conducted detailed geologic exploration and resource modeling on approximately 10% of our approximate 5,900-acre land position, primarily in the Lucerne and Dayton Resource Areas. We are conducting ongoing exploration programs to locate and test surface mineral targets as well as deep underground bonanza targets by using historic compilation, geological mapping, geochemical and geophysical investigations and drilling. Overall, the Company has already validated measured and indicated resources in the Lucerne and Dayton Areas containing over 2,000,000 gold equivalent ounces, including a specific, structurally bounded, wedge-like, zone hosting significant gold and silver. We call this structural intersection the ‘Chute Zone’. The Company believes that the structural intersection and geometric shape of the Chute Zone is similar to highly mineralized zones that were historically mined in the Comstock District as bonanzas. There were 33 mined bonanza ore zones located along the northern Comstock mineral belt.
The previously announced discovery of the Chute Zone is the result of drilling, analysis and interpretation by the Company’s geological team. The Company expects to gain a deeper understanding of the controlling geologic attributes of the Chute Zone, allowing for even more efficient identification of such structures in future exploration programs along the Comstock. Below is the first three-dimensional (3D) depiction of this discovery.
This image (looking west), depicts the Chute Zone in 3D (yellow). The green colored shapes are historically mined stopes, the horizontal (green) traces are historic underground tunneling. The larger green shapes left of the Chute Zone include the historic Woodville Bonanza (the southernmost bonanza discovered on the Comstock) and the Justice respectively. The grey vertical and near vertical traces are drill holes with intercepts greater than 0.05 ounces per ton (higher grade gold highlighted in red).
“Based upon the structural controls of the newly discovered higher grade Chute-zone, CMI has recognized structural similarities in higher grade zones at Dayton and other mineralized areas within the CMI property position. Expectations are high that further drilling at the appropriate azimuth will allow for important extensions to these higher grade zones.” BEHRE DOLBEAR, January 2013.
The Company is currently assessing how best to develop and ultimately mine this mineralized material, as it represents the first substantial opportunity for an underground mining development by the Company.
This image depicts conceptual decline designs for accessing the Chute Zone, again in 3D (yellow). The green shape to the far left is the historic Dayton stope (within the Dayton Resource Area) with the same color configuration for drill holes, historic workings (etc.) for this image as the previous image. The left to right decline is approximately 4000 feet in length.
The next phases of our exploration, discovery and development program will continue with two primary objectives: 1) step-out, development and infill drilling in the east-side of the Lucerne Resource Area, including the Chute Zone, and 2) step-out, development and infill drilling in the Dayton Resource Area.
The Company had total current assets of $8.4 million at June 30, 2013. Cash and cash equivalents on hand at June 30, 2013 totaled $2.4 million. Inventories, mineralized material on leach pad, and stockpiles totaled $4.3 million.
Total debt and other long-term liabilities were $6.6 million at June 30, 2013, a decrease of $7.8 million during the first half of the year, from $14.4 million. We will also pay down an additional $1 million in debt obligations during the second half of 2013. The Company has received improved, indicative terms for its Revolving Facility. The Company continues its efforts to increase production, reduce costs and working capital needs, improve efficiencies, and maximize funds available for working capital. The Company’s current capital resources include cash and cash equivalents and other working capital resources, cash generated through operations, and existing financing arrangements. The Company’s certificate of incorporation permits it to incur indebtedness for money borrowed of up to $5 million at the discretion of the Board of Directors. The Company believes that it could access, on more favorable terms than in the past, existing facilities that have not terminated or one or more other credit facilities. The Company currently has no indebtedness for borrowed money.
For the next six months, we also plan on spending $3-4 million in capital expenditures, primarily to expand our heap leaching and related production capacity.
Comstock’s Chief Executive Officer, Corrado De Gasperis concluded, “The first half of 2013 brought our mining and processing systems into stability, putting us squarely on track for achieving our first full year production goal of 20,000 gold equivalent ounces and enabling us to invest in future production and resource growth. We significantly reduced our mining and administrative costs, $5 million per annum so far, and our higher targeted production rates position us for significant growth and cost efficiency for the rest of the year.”
As previously announced, the Company will host a conference call on August 8, 2013 at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to report the Second Quarter 2013 results, business update and outlook.
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:
U.S. / Canada Toll free: 888-713-3589
International Toll: 913-312-1469
The audio will be available, usually within 24 hours of the call, and for 30 days thereafter, at http://www.comstockmining.com/investors/investor-library
About Comstock Mining Inc.
Comstock Mining Inc. is a producing, 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 commenced production in 2012. The Company continues acquiring additional properties in the district, expanding its footprint and creating opportunities for further exploration and mining. The near term goal of our business plan is to deliver stockholder value by validating qualified resources (measured and indicated) and reserves (proven and probable) of at least 3,250,000 gold equivalent ounces from our first two resource areas, Lucerne and Dayton, achieve initial commercial mining and processing operations in the Lucerne Mine with annual production rates of approximately 20,000 gold equivalent ounces and significantly grow production through the commercial development and expansions of both the Lucerne and Dayton Mine plans.
This press release and any related calls or discussions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Comstock. Forward-looking statements are statements that are not historical facts. 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 and timing and accounting for restructuring charges, gains or losses on debt extinguishment, derivative liabilities and the impact thereof; productivity, business process, rationalization, 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 discussed in Item 1A, “Risk Factors” of our annual report on Form 10-K and the following: 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 maintain the listing of 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 constitute an offer to sell or the solicitation of an offer to buy any securities.
Contact information for Comstock Mining Inc.:
PO Box 1118
Virginia City, NV 89440
Corrado De Gasperis
President & CEO
Manager of Investor Relations
Tel (775) 847-4755
Tel (775) 847-0545