Good day, ladies and gentlemen, welcome to the Comstock Mining Second Quarter 2018 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Corrado De Gasperis. Please go ahead, sir.

Thank you, Cassidy, and good morning, everyone. This is Corrado De Gasperis, Chairman and CEO of Comstock Mining, and welcome to our 2018 second quarter conference call. Last night, we filed our financial statements on Form 10-Q for the second quarter, including a clean review as is typical from Deloitte & Touche. I'll also provide a summary of the information that was in that 10-Q as well as the press release that we put out this morning. We are advancing diligently and technically both of our mine projects and as I discussed to some of the folks on the call at the Annual Meeting, we have also established a remarkable real estate and now expanded water rights portfolio, [indiscernible] the fastest growing industrial and commercial part of this country right now, there the U.S. Treasury and the State of Nevada also certified the areas where most of our property reside as qualified opportunity zones, and we're seeing tremendous amount of capital flowing there. Before I get into that, if you don't have a copy of today's release, you will find a copy on our website at www.comstockmining.com under news/press releases. And I'll take this moment to say that we're about to relaunch our website in the month of August so we're very excited about getting better, clearer and more data out there. Please also let remind everyone that in addition to the outlook, I may make forward-looking statements on this call. Any statement relating to matters that are not historical facts may constitute forward-looking statements. The statements are based on current expectations and are subject to the same risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties are detailed in the reports filed by the company and the SEC and in this morning's…

[Operator Instructions]. The first question comes from Jon Howe of Wedbush Securities.

When you talk about the non-cyanide alternatives I thought that you're experimenting with for the resource?

Yes. So let me just use one example. When you look at what we're doing with Itronics because they're further advanced in terms of the metallurgical testing that we've got and the cost aspects of it. We're already moving now to sort of screening level economics for example for a pilot plant. And so what's interesting about the timing of that is that as we're doing an analysis with preliminary economic assessment for Dayton. And then that analysis is based on the conventional cyanide-based processing that we're very experienced with. Like we have total history with, we have actual data with. The technical reports will reflect that, but if we advance the non-cyanide solution, there's actually an opportunity where for example in the Dayton PEA, you might actually have a cyanide solution and a non-cyanide solution economically assessed side by side. So we're really getting to a mature level with these, call them alternatives, clean technologies. And if the screening economics say it's profitable, it's going to be a home run, if they say it's even more profitable, that's better. And that's what we're going for. Like if I would answer, the most important part of your question is, look if the first phase of economic shows being with the value of $40 million to $50 million and that's my expectation rate is like with no increase in resource, just carving out reserves and the preliminary economic assessment, how much of this thing worth? How much cash will go up? Well, then what happens if we increase the yield, if we reduce the waste, if we eliminate reclamation cost because it's clean technology. What is the $50 million become? Is it $100 million? Is it $120 million? And I use those numbers directionally because that's what we're talking about in terms of a breakthrough and none of that is tied to expanding the resource through drilling, which we're very excited to do, it's the normal conventional way to go but we're feeling like we could establish good value day one, great value day two and then drill to expand that, right? So it's a safer, better way to go. So I hope that -- does that give some context in, Jon, in terms of what's the relevance of what we're trying to do with that?

Yes, it does. I guess I'll go back to the valuation of Lucerne property. Was that overstated?

So well, I mean in terms of our share price, the answer, in my mind, is absolutely no, right? Because our share price is still very extremely low. The resource in Lucerne, what we've said -- so first of all, the first resource that we published was unconstrained, meaning it had very, very low cut offs, et cetera. Since then, the 43-101 standard require sort of a concept of economic feasibility to put on every resource. So that's number one. The Tono guys will increase the cutoff. They could increase it almost double. And if you do that, then ounces that we saw there that were below a certain cutoff wouldn't be included in the resource because they would be deemed nonfeasible or noneconomic. We also learned quite a bit through the mining process and so one of the things that the Tono guys are doing are really reconciling, they're fully reconciling the original resource to the actual mining. And so I think if you get stronger, tighter assumptions, if you have higher cutoffs, if you have new information that allows you to reconcile, we're expecting, and I think they've been open, we've been open and that we're expecting a smaller resource. I mean it could be a 50% smaller. But if you're talking about 700,000, 800,000, 900,000 ounces, very, very strong, very tight, very well assessed for economic feasibility. And then you carve out of that 400,000 ounces, I'm sure they would want it to be 500 or 600 but like -- I'll just -- let's just get a starting point. Those would be proven and probable reserves. So we've never had proven and probable reserves. So the resource will be smaller. That doesn't mean you can't drill to then grow it further from that new base, but the reserve will be unprecedented. It would be new, it will be a first and that's fundamentally, there is a life cycle evaluation here where properties are valued, preliminary resources are valued and reserves are valued, reserves are the most certain, most definite, most tied to the cash flow. And there is work to be done, there is obstacles and risks to overcome. They're very real, but if you establish that kind of reserve, the valuation -- it's got to mark up dramatically. So if you combine the potential of a big Lucerne reserve and a small Dayton reserve, you're in a whole different world. And that's -- if it kills me or not, that's what we're getting to.

One last question, please. So the purchase of the Silver Springs property or the option on that. How would you go forward with that and pay for it actually to own it? And then, just please speak to the burn rate for the year where you're at right now? And I'll just sign off.

Oh, no, no. There's no problem. Thank you for the questions. I appreciate it. So let me use the first one. So our burn rate, we have about $3.5 million of operating expense. People ask me how that breaks down, and I typically say, $1 million in public company costs, $1 million in payroll and $1 million in maintaining the platform, maintaining the mining permits, the insurance, all of the things associated with having a fully permitted infrastructure. You could say, $1.2 million for each if you want to tie out, right? And in the Tono agreement, they're subsidizing about 1/3 of that, right? And that makes sense because the idea was they would subsidize maintaining the primitive platform, and we expect a $1.2 million. But the $1.2 million is not linear. It's not like a $100,000 a month and by far the largest reimbursements are July, August and September. So I have to just think about the schedule. But out of the $1.2 million, we're probably going to get $600,000 in the next two months and maybe $700,000 in the next 3 months total. So that helps dramatically with the burn, I would say that the burn is, should be $300,000 a month if you're looking at $3.6 million. We're reducing now that with the subsidy, but it should be way better in the second half of the year than the first half of the year because of the timing. With the property, we've got a commitment for -- to issue preferred stock, if we don't have -- these are fourth quarter events so they're not eminent per se. We don't want to give, obviously, these over share prices. We think that this is ultimately accretive because of the value of the properties, it's not just that the --…

Our next question comes from [indiscernible].

Actually, he just covered most of the questions that I had. I did have one other thing. If you can simplify for me and probably others on the call the real estate portion, just with maybe a bullet point of what these real estate values are estimated at and kind of a general thesis or time line of when you expect they could conclude? Let's say, obviously, that's looking in the looking glass, but if you can give a general idea of that.

Sure. So let me do the land piece first. So we're looking at 98 acres and we -- and 160 acres. We're paying -- we paid actually, in which case, about $3 million, $3 million for 98 acres. That's $3.5 million for the 160 acres. So very comparable purchase price in those cases. What was stunning with the 98 acres is that we got 257 acre-feet of water as part of that purchase, right? So the -- we've already sold about 50 acre-feet at $10,000 an acre-foot. Obviously, if I laid it out, that's $20,000 an acre-foot because that's the deal that we did for our transaction a few weeks ago. So that puts an over $4 million valuation on those water rights. The 98 acres and the remaining 200-plus acre-feet of water are currently up sale at $14 million. And we would certainly sell the land separately. I'm not sure that it would make any sense to sell the water separately because developers are looking for land with water. So the two are combined in a listing of about $14 million. Obviously, we're trying to pair at the market with the comps that we're listing it at, but we're flexible to see what the projects are and what the needs are and how much water is needed, how much water is not needed. On the 160 acres, we're getting -- we have the right to buy 392 acre-feet at $5,800 an acre-foot. So we would put -- we're seeing properties, small properties like this, 40 acres, 60 acres, 100 acres, being marketed for $30,000, $40,000 an acre-foot, even -- I'm sorry, $30,000, $40,000 an acre and even higher if it's being subdivided and sold on a square foot basis. So we put the value, to summarize, on any of the water rights. The senior ones are over $20,000. The junior ones we would put anywhere from $12,000 to $15,000 today. On the -- so if you just looked at the 98 acres plus their water as a block, we've got a $14 million valuation on that. If you looked at 160 acres and their approved water as a block, we have a low range of $15 million to a high range of about $18 million on that. The total cost ultimately is for the 160, 400 -- just under 400 acre-feet of water and 200 units of sewer, which fully enables the project for the commercial development, for us would be about $7 million with, again, a value looking between $15 million and $18 million. So the goal is not to be a commercial developer, the goal is to package these properties and water rights for their ultimate development to a developer. Hope that helps, Tom.

It does. And then just really quick, I mean, you touched on it, but what about the hotel? Where do you expect them to close at? What was the cost in the ranch?

Yes. So the hotel, we produced rights of about $800,000. And that's -- we [indiscernible] like $750,000 that's scheduled to close in October or earlier, October 19 or earlier, as what the script in the contract says. We're putting an additional deposit down because it was originally scheduled to close in August, but there is just a little time expansion, just getting some of the titles here, entitlements. Now that's straightened out with the county. There is no obstacles. We're 99.9% through. The ranch and the hotel, that's about what we paid for. It's a unique country and it's [indiscernible]. The ranch, we bought for $2 million, we have listed for sale for $4.4 million. We have one agreement for $4 million to buy it, but it's subject to financing, right? And the feedback, I'll just be very precise on this one. The feedback on the financing has been outstanding, and there was an effort to use a USDA process to get a loan for the development of that property further, which was very encouraged by the USDA, but they needed a personal guarantee. So it kind of threw the buyer a little bit, that they were looking for a personal guarantee. It wasn't required by previous Navada USDA folks. Now it's required. So I think there is going to be an effective workaround to satisfy everybody. We just haven't done -- haven't gotten it done yet. So I think unfortunately that the rate of -- kind of we're looking at a 90-day process from getting the letter of encouragement, and that's still the spot that we're at. So I'm very optimistic, it's just a phenomenal property, everybody that looks at it, right, almost saying how beautiful it is. We just got to be -- we got to be more aggressive in marketing. I've been spending most of my time, honestly, on the industrial and commercial properties, but now I will be focused on all of them.

Our next question comes from Paul Bornstein of Black Diamond.

You just had a question since obviously, a lot of the focus is on selling your real estate properties. If you could get that on the side because we don't know when that's going to happen. You look like you've got some good assets, but you never know on the timing. And -- but that's probably one of the reasons your stock isn't performing because people thought it would be done by now. So that's a negative on the stock even though it should be a positive because we don't know when it's going to happen. But I'm just curious on your mining fundamentals. You have a little money in the bank. You don't want to float any stock at these levels because your stock is at an -- almost near its low again. And I'm just wondering, is there any other people you're talking to, companies or other people that might want to put money into the project instead of going to the equity markets to raise capital if you need to move this along further? Because again, more money in the bank, you might be able to move this along quicker besides the resource report, which I think you have enough capital for, but in terms of trying to get the mining outside of the equation going a little faster.

So the answer is yes. I think that when we announced the Tono agreement, originally, there was valid wait-and-see sort of sentiment. And that sentiment is still valid but much less so now than a year ago. Since then, to answer your question precisely, we have 3 MDAs, and 2 of them were in dialogue with the similar notion, right? So we really do like the notion of good, competent technical parties like Tono investing real capital to advance the project that we'll all benefit from. So there are other discussions. I think I would say one is early stage, one is intermediate stage, and one is a little different, right? So I would say 2 of them look and feel -- like Tono one is very different, but we're very engaged.

Okay. Well, that's a good plan of action given in two years where I get some progress on the -- some actual progress on the real estate side of the equation. You might just have to do that to show the value of your properties. Hopefully, you get some momentum.

I know we will. I also believe that consistent with what I just said, the work that we're doing with Dayton to really bring fully up to speed and published technically, very efficiently, will not only advance the discussions that you just referred to, but they'll give us a much better posture in those discussions, right? Because we already have something very, very meaningful to start with. So I think that's consistent. Thanks, Paul.

Okay. Well, that's a good answer. So that's what I want to see even though your stock is way down. But some of it's not your doing. That's the marketplace on metal stocks, so I can't blame that on management. So looks like you're making the right steps.

Thank you. Well, we've got a lot of work to do, but we're chopping it. Yes. Thanks, Paul.

Next question comes from Ken Fan [ph], Private Investor.

The last few reports that you sent out talked about a $500 million valuation by 2020. That's not in this report. On the -- earlier this morning, the market cap was less than $12 million. I'm looking at a report now on Yahoo! of insider transactions. Over the last 6 months, there were 226,500 shares bought and 1,679,581 sold for net sell of about 1,453,000. That doesn't seem to add up to me. You mentioning before numbers for the gold of $50 million, $100 million, $120 million and tens of millions of dollars real estate value. Can you tell me what I'm missing here?

Yes, absolutely. Thank you for the question. If you don't mind, I'd just like to just start on the trading, just to knock that one off. So yes, but the 226,000 shares bought, that was me. And if I'm not blacked out, I'm going to be buying more because I think the valuation in every mathematical way is stupid. And that's on you too, all right? So I got to break through and make sure people understand these technical reports will help me dramatically, but we can do a lot more regardless. The shares that were sold were technically not sold by an insider. They were by an affiliate, and we understand that there was a very specific tax-loss sale driving that for a June 30 fiscal year-end. So I don't think that, that investor is a seller. I feel really strongly they're not a seller, but they did sell in June. So if you adjust for that, I think that that's net insider buying, and I think it's going to continue because we're just dumbfounded -- we're not dumbfounded. I understand some of the technical complexities of getting reserves established. I understand some of the overhangs that come when you have debt and you're not cash producing. And I understand the expectation of monetizing these assets faster. And I just want to -- I want to footnote that before I come to the big valuation question, which is the best question so far, not disrespecting anybody else, but that if I were sitting here and the activity level in Silver Springs in the industrial parks and in the land and real estate and the water rights was the same as a year ago, I would have massively reassessed our assumptions and changed paths. But the opposite's really happened, and…

Well, I look forward to reading that.

Thank you, Ken. Thank you for the question.

Our next question comes from Kimberly Shipley from Private Investor.

I've got a couple of questions here for you. With regards to the cash available, you've got $1.5 million. Was that at June 30 or now?

Today.

Today, today. Okay, so if I understood...

Well, I don't -- when I say now, I'm probably talking like within the last 3 or 4 days, five days. So I didn't...

Yes, I get that.

Yes, yes, yes.

I'm talking about a month, okay. And then the question that Jon Howe asked with respect to burn rate and your drawn, you're using about $300,000 a month. Is that my understanding?

On average, correct.

Okay. And then through the five months left for the year, so that's $1.5 million. And then you expect to get about $700,000 from Tono?

That's correct.

Over the course of the next five. Okay, fair. Then so now that's...

No, that's actually over the next three months. And I think that's an important point to highlight because it's the peak of the reimbursement.

Right. Okay, yes. I'm just trying to figure out, towards the end of this year, what construct needs to get us through our 12/30 line. Okay, assuming, yes, it would be awesome if you told me that all this land sells tomorrow, but let's say, it doesn't. So now you -- and so you're looking at about $800,000 for all, but you've got money in the bank. Is that right?

Right. And we can't count -- your point is that we can't count on monetizing any one of these assets, first of all, because 100% of the proceeds first goes to pay down debt, and second of all, because the timing is not certain. But I just -- I want to emphasize that our plan is that we're managing it intimately, carefully but month-to-monthly, right? So it's -- if there is a break, then we don't have to issue equity. If there is a break, then we could -- it could be funded and maybe accelerate a project. So we're just going to manage it every month, but I want to try to be more clear on that, too.

Okay. And then so then your commitment in October for the new ranch is you mentioned that -- I couldn't find anything in the release that's about issuing preferred if you had to.

Right. We have a commitment for the amount of money that's required to exercise on the option. So that was important to me because otherwise, our deposits, we'd be putting at risk. We wouldn't do that. So there's no -- I don't -- capital-wise, we're stable. We have alternatives, but we're just trying to optimize it and minimize the solution. So that's the goal. If -- I wouldn't say this for the land, but I would say, for the water, there's a very likely scenario where that asset turns before we even have to pay for the last payment or two because the interest is very much focused on the water, and the land will go with the water.

Okay. And then your available resources through the ATM, I saw like $2.6 million, and then it looked like you entered into yet another agreement for another two-plus?

Yes, and thank you for asking that. So the agreement that we had was for $4 million. We're just going to reconstitute it, right? So in other words, we -- your number is probably correct, $2.6 million. Let's say it's somewhere around there. We're going to -- we've changed the terms a little bit. They're better for us, and we're going to sort of close out the existing one at wherever it is we're at and then put in another one for, like, basically the same remaining amount, right? So the point to your question is, yes, that's our capacity. Yes, it's available. You might see two little closeups go in and out just to update it. But from a dollar capacity-wise, it should be about the same number that you talked about.

Okay. And then I'm going to yield the line in just a second, but you have also a loan capability, I suppose, of $7 million, but you had an agreement that you can only do $5 million. Is that correct? That's the -- another construct that eventually, you can exceed $5 million, right?

Yes. No, no, I'm familiar. So what happened was when we raised the debt facility, there were more commitments around it, like we could have done more. We didn't want to do more, so we always sort of had that as a fallback. But it is absolutely right to say we would need approvals from almost everybody to do the additional. It's just the point is that the capital is committed, that's really the point, and that's provides some comfort when people are thinking about things like liquidity and going concern and all that, right? So it's very important. It's very relevant, it's very correct, but there would be approvals, right? So that's correct. I think there would need to be approvals from everyone, the existing indebtedness, the committed indebtedness, however you want to describe it. And we're not looking to increase the debt, we're looking to pay it off. So it's still a relevant question.

Well, I just wanted to make sure that I was understanding the numbers correctly and that folks out there knew that you do have capital resources available while we're waiting on the land sale. And then legacy with the current debenture, I noticed the bonds actually went up, and that was because you exercised your option to increase that debenture while carrying forward. Is that right?

Yes. $430,000, we added base for the interest.

Okay, all right. And then expect the market forces to make that -- eliminate that completely?

Completely by the end of the year.

Our next question comes from James Dell, an Independent Investor. Next and final question comes from Carl Frankson, a Private Investor.

Corrado, you've touched on some of this in various questions before me, but I don't have a real, real simple question for you. We were -- GoldSpring were an exploration company. We became a miner under Comstock. We stopped mining to become an exploration company again. I think the biggest problem with the price of the stock is we don't have any revenues. When do we start mining again and have -- show mining revenues?

No question, sir. Thank you for the simple question, and it's a great question. I think you fundamentally hit the nail on the head. We -- so the answer is -- and I'm going to give you two different answers, one for Dayton and one for Lucerne. So with Dayton, I think that once we have the preliminary economic assessment, which we would like to have by the end of this year, we would have sufficiency of data to develop the scope of the mine plans and commence the permitting process. And in Dayton, because it's all private land, it would -- we've calculated -- I mean, if you did the theoretical minimum of the critical chain, it's like a year and three months, right, but we've allocated two years to get that into production. So I know people have heard me say two years away, two years away, two years away, but it's two years away from when we have the mine plan. So I would say the earliest, right, would be the end of 2020 for the Dayton. Lucerne is -- it's interesting, it's more variable because it's fully permitted at the state and county level, and it's already been in production, and it's fully infrastructured. So I believe -- and I will double-check with the Tono guys, but I believe that their schedule for this year is very solid. In other words, on top of the merit report and then the resource report, maybe that's for -- third quarter, fourth quarter, I think is what they're thinking in terms of those 2 reports. And then the next step would be preliminary economic feasibility and then full feasibility. So I think there's 2 answers for Lucerne because -- and I can't commit to a production date like that.…

That sounds fine. And we're talking two years. I'm being very simplistic about this, but companies need revenues to stay alive. Do you have two years' worth of selling water rights and land and joint ventures and stuff, two years of money to get you there?

I believe we do, right? I believe we do. Will there be some equity sold there? Yes. Can we minimize it by making these monetizations our number one priority? Yes. And I think it's incumbent on me, but I need to provide much more clarity here in the third quarter. And I don't need to mean to say, "Hey, I know the answer. I'm going to tell you soon." I mean to say, the work that's going to be done over the next 6 to 8 weeks is going to allow me to be much more specific with that because these transactions are happening.

Okay. And in terms of stock valuation then, do you feel that when the 43-101s come out, that there will be a discounting process going where we get valued maybe near term as an explorer in whatever kind of value you get to now, just so...

I believe what will happen because that -- some of the numbers that we talked about with Ken will come up much more specifically on the radar screen. And we want to be specific. We want to say this project is getting us to X value, this project is getting us to Y value, this project is getting us to Z value. Now we can show you how much discounting happens at the resource level, how much discount happening at the PEA level and how much discount happens at the full feasibility level. Obviously, at the feasibility level, it's very little, right? It's a discounted cash flow scenario, so it's little. And so that -- but I think that in our case, what I think you see is you see a markup on the first report, a markup on the second report, a markup on the third report. And we could probably guide to where we would expect that to be, and then to some degree, if you're very effective, incredible at communicating that, I don't want to say becoming [indiscernible], but you actually do manage to those ends, right? And that's what we're going to try to do.

Okay. Well, that sounds good. I suppose it also wouldn't hurt the price of gold going up either.

Yes. I know we're at a tough spot here. I mean, there's some cheap gold out that's out there. And I'm making my head spin, but I'm trying to keep my eye focused on the ball. So I'm going to cut it here. If there's any more people in the queue, I would be happy for them to call our direct line. I just sort of commit to keeping this within an hour, and I don't think we did that, but we're close. So thank you, everybody, for the call. I really look forward to the next 6 to 8 weeks of hard work and updating you as we go here from this point forward. Thank you.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.