Comstock land position

Comstock Mining located 30 lode claims and filed them with Lyon County and the Bureau of Land Management. The block of new claims adds 472 net acres to the company's land position in the historic Comstock District.

VIRGINIA CITY — Low operating costs, progress on debt reduction, strategic ventures and a stock split headlined Comstock Mining Inc.’s third-quarter report, announced Oct. 31 in a stakeholder conference call.

“Our third quarter was focused and productive as we progressed various strategic initiatives, especially the Joint Venture Option Agreement with Tonogold Resources, and consummated land and water sales at high values, and reduced debt,” said Corrado De Gasperis, Comstock executive chairman and CEO, in a statement.

Lucerne agreement

The Oct. 3 option agreement with Tonogold, a California-based company led by Mark Ashley, allows Tonogold to participate in certain activities, including engineering, development, drilling and test-work, toward completing a technical and economic feasibility assessment on certain properties within the Lucerne property near Virginia City.

“I just want to remind everyone that we spent a year putting this together,” De Gasperis said on the conference call, explaining that the agreement is phased carefully for the protection of the company and success of the joint venture.

The statement provided information on the project’s background and details of the joint venture.

During 2016, the company focused on exploration and development of certain properties within the Lucerne resource area, primarily underground core drilling, underground drift development, and underground sampling into the Quartz Porphyry (PQ) and Succor geological targets.

Future drill programs were being developed with a phased approach to extend the PQ mineralization and scope the Succor and Woodville targets, but the company suspended those plans due to the higher than expected complexity of the underground development effort and the uncertainty about the total capital required for delivering a commercially viable mine plan.

Ultimately, the company decided to assess, evaluate and pursue partners willing and able to commit the additional mining expertise and capital resources required to explore and develop a commercially viable Lucerne-based mine plan.

Under the terms of the option agreement, Tonogold can earn a 51 percent interest in the company’s presently wholly-owned subsidiary, Comstock Mining LLC, which owns the Lucerne Property, by making capital expenditures on the Lucerne Property of $20 million no later than 42 months following signing of the option agreement and direct cash payments of $2.2 million to the company within six months of such signing.

The initial cash payment of $0.2 million was paid by Tonogold to the company at the time that the option agreement went into effect. If Tonogold elects to proceed with the project, Tonogold would have to make another payment of $2 million within the six-month period following the date that the option agreement was signed.

If Tonogold does not elect to extend the option beyond the initial six months, it will be required to make a further payment to the company equal to $1 million less Tonogold’s actual expenditures on the Lucerne Property during such initial six-month period. In addition, Tonogold is granted the option to purchase 51 percent of certain equipment and property located at the company’s American Flat property for a purchase price of $25 million.

Tonogold announced that it was fully funded through the first phase of the agreement.

The option agreement calls for a Technical Committee composed of three Tonogold participants and two Comstock participants to oversee all of the engineering, development, drilling and test-work activities, and others, towards completing a technical and economic feasibility assessment. The Technical Committee was scheduled to review the first phase of the drilling program during the first full week of November 2017.

If all obligations and prerequisites are satisfied and subject to compliance with the agreement, Comstock and Tonogold may effect a joint venture for the future development and mining of mineral resources on the Lucerne property.

“We have been impressed by the commitment, diligence and frankly, passion, exhibited by Mark Ashley and the Tonogold team,” DeGasperis said. “We believe the success of Lucerne depends on this type of technical diligence, development and competencies that Mark and his team have demonstrated over the past year-plus. We have the right partner with the right capital support to maximize the value of Lucerne.”


In addition to describing the option agreement, the report covered selected strategic and operational and financial highlights:

Received the 2017 Nevada Excellence in Mine Reclamation.

Reduced spending in every major category, achieving record low operating expenses.

Projected lower operating spend rate of less than $3.6 million per year, before the estimated annual cost benefits from the Joint Venture Option Agreement of an additional $1.25 million.

Reduced long-term debt by over $1 million from the sale of various, small nonmining properties.

Completed federally funded column testing of Dayton mineralized materials, through Cycladex Inc., a strategic investee, for faster, cheaper, safer leaching solutions, yielding 82-85 percent gold.

Established a strategic collaboration with and funded by Itronics Inc. to assess reclamation cost reductions, increased leach-pad extraction potential and the metallurgy of mineralized materials.

Acquired 30 unpatented lode claims with 472 contiguous acres, increasing lands to over 9,284 acres.

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