VIRGINIA CITY – Comstock Mining Inc. announced Oct. 5 that it has entered into an agreement for a mining joint venture on the permitted Lucerne Mine Project with Tonogold Resource Inc.
The agreement includes an up to $20 million investment from Tonogold in engineering, drilling, development and test-work toward completing a technical and economic feasibility assessment and re-commencing production in Lucerne. The deal enables an “earn-in” of 51 percent of the Lucerne properties when all prerequisites are completed and grants a second option to acquire 51 percent of the Lucerne Mine infrastructure, including the American Flat property, plant and equipment for an additional $25 million.
“We have been extremely diligent in establishing our first collaborative agreement with a strategic mining partner with strong technical expertise and well-aligned incentives to advance Lucerne back into production,” said Corrado De Gasperis, Comstock executive chairman and CEO. “The agreement immediately accelerates the evaluation, drilling and development activities, without share dilution, while lowering our annual costs by over one-third.”
The strategic option and joint venture are expected to accelerate drilling and development activities of $1 million in the first six months, provide potentially $2.2 million to Comstock and subsidize $1.2 million in annual operating expenses.
Under the agreement, when Tonogold completes its $20 million investment, and other related prerequisites, for the evaluation and mine development for Lucerne’s economic feasibility and mine production plans, Tonogold and Comstock would then effect a joint venture for the future mining of mineral resources on the Lucerne. The agreement also provides up to $2.2 million in direct funding for Comstock and approximately $1.2 million per annum in subsidized costs.
By electing to enter the second phase of the arrangement, in addition to paying Comstock $2 million, Tonogold is required to spend a total of $7 million during the next 18-month period to enter the third phase. In the third and final phase of the earn-in period, Tonogold is required to invest an additional $13 million (cumulative investments of $20 million) with the goal of completing an assessment that includes a commercially viable mine plan, mine economics and production schedules.
“Comstock Mining has done an excellent job consolidating an historic, world-class mining district and then entitling it for productive development,” said Mark Ashley, CEO of Tonogold, a U.S.-based mining company focused on advanced exploration properties in Nevada and Mexico.
“We see an opportunity to develop a significant, profitable and sustainable operation within the next three years.”
If Tonogold does not elect to extend the option beyond the initial six-months, it will be required to make a further payment to Comstock equal to $1 million less actual costs incurred on the Lucerne Properties during the initial six-month period.
The evaluation program is directed at producing a robust resource model for Lucerne, as well as assessing a series of geological targets in the Silver City Branch of the Comstock Lode, including the Succor vein systems, the historic Woodville Bonanza system and the PQ target. These initial targets represent the core of a broader geological corridor. Previous surface drilling in the area suggest more than 1,000 feet of mineralized strike in the Succor zone, lying generally adjacent to and below the Lucerne Cut, with good potential to yield high-grade gold and silver. The 1,000-foot plus Succor Vein Target has an average true width of 15 feet and an average dip of 65 degrees. The structure has reported historic mining grades of approximately 0.54 ounces per ton of “recovered” gold per ton and is open to the east and at depth, along the entire structure.
The nearby Woodville Bonanza structure includes the same supporting historical mappings with reported historic mining grades of 0.749 ounces of gold per ton. The Woodville has significant current drill data including 116 intercepts of at least 10 feet, grading over 0.22 ounces per ton gold and 1.59 ounces per ton silver.
Tonogold is a U.S.-based mining company that is focused on advanced exploration properties in Nevada and Mexico. Tonogold’s team is working to build a portfolio of mineral properties that will give its investors a leveraged exposure to gold, silver and other minerals and metals allowing them to benefit from its exploration, mining and financial expertise.
“We understand the Lucerne resource much better since mining and processing over the past five years, including excellent metallurgical yields,” De Gasperis said. “This venture will focus on developing a sustainably profitable mine from a smaller, higher-grade resource than previously targeted. We feel the potential of Lucerne depends on this type of technical collaboration, with the right partner and capital to enable it. Ultimately, plans to invest almost $50 million for 51 percent speak for themselves.”