Comstock Inc. (AMEX:LODE) Q1 2024 Earnings Call Transcript

Comstock Inc. (AMEX:LODE) Q1 2024 Earnings Call Transcript April 30, 2024

Comstock Inc. misses on earnings expectations. Reported EPS is $-0.05892 EPS, expectations were $-0.04. LODE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Trevor Brucato: Good morning, ladies and gentlemen. Welcome to Comstock’s First Quarter 2024 Results and Business Update. This is Trevor Brucato with RB Milestone Group. Comstock’s U.S. based Investor Relations firm. I’d first like to thank everyone for joining at this earlier start time as we were trying to accommodate different time zones during this cycle. This presentation is being recorded today, April 30, 2024 and will be made available on the company’s website at Comstock, Inc. shortly after today’s event. Again, that’s comstock.inc. Comstock trades on the New York Stock Exchange under the symbol LODE and joining us today is the company’s Executive Chairman and CEO, Corrado De Gasperis, and its COO, William McCarthy. At the end of the prepared remarks, we will open up the call to questions that were submitted during the registration process and those that surface throughout this presentation.

If you have any questions, you could submit them in the Zoom Q&A module. Please note that the investor surveying period for Comstock’s Q2 stakeholder perception analysis report is now open. The survey can now be accessed on Comstock’s website at the top of the Investors section. We recommend filling out the survey throughout this presentation while the information is still fresh and completing it after receiving the full update provided by Corrado and Billy. The final report will ultimately provide trends on Comstock’s perceived strengths, weaknesses and milestones and will be published shortly after the end of the quarter like we’ve done previously. Your participation will be much appreciated as it will help strengthen Comstock’s investor communications efforts and will help guide the focus of future events.

Please note today’s presentation may contain forward-looking statements that are subject to risks and uncertainties that may be out of the control of the company, in this case Comstock, Inc. And it should not be construed as a recommendation or solicitation to buy or sell any security. For Comstock’s full disclaimer, please visit their website at comstock.inc. Lastly, RB Milestone is not a registered investment advisor or broker dealer. For more information on us, please visit rbmilestone.com. And now, it is my pleasure to introduce you to Comstock’s Executive Chair and CEO, Corrado De Gasperis. Corrado, the stage is yours.

Corrado De Gasperis: Thanks Trevor, and hello everyone, and welcome to our first quarter update. I’m going to allocate a little more time this morning to our strategic investments and innovations, then cover fuels, metals and mining. And after my comments, Billy’s going to provide a deeper insight into our now operating solar panel recycling business, including our view of the markets, operations, tactics and importantly, provide real guidance on the robust amount of net cash flow that we now expect metals to generate in just a few years. After that, we’ll turn to questions. Okay, let me start with the corporate update. Again, focusing on our strategic investments and how their own progress positively impacts both us and their own valuations before I then turn to our businesses.

From a corporate perspective, financially, our first quarter itself was very stable, with spending in line with plan and prior periods. Although, the mix reflects a higher allocation to investments in R&D and particularly investments in our technology partners. Our commitment to higher R&D investments like RenFuel, GenMat and now certain others are all based directly on specific opportunities that we have identified and now secured that further extend our leadership in this massive energy transition. The investments were also structured such that we could experience returns beyond just the direct impact that they may have on our businesses. RenFuel is a great example. We have now executed both an exclusive license for their technology in the Americas and just last week, completed the investment agreement with RenFuel effectively combining the power of our IP portfolio with theirs and bringing this world-class technology and team tightly into our innovation network.

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Q&A Session

This investment is senior secured. It was safely and intelligently structured to ensure our efficient access to RenFuel’s critical IP. We’ve already physically deployed RenFuel’s proprietary esterification process to refine our Bioleum Oil at our Wisconsin facility, and we are now producing our own samples for our own customers to test and ultimately use in their refineries for direct lending with their existing vegetable oil feedstocks. RenFuel’s technology is incredibly complementary with ours and has already positively impacted our commercialization activities. However, we haven’t stopped there nor can we. In fact, you’re going to see in our disclosures that we’ve made and are making additional investments into new breakthrough technologies with new development partners that can dramatically advance the efficacy of our solutions.

You might be wondering to what at. Well, our ultimate longer term goal and frankly, the goal of the whole renewable fuel industry is and should be what we internally refer to as the Holy Grail, which means to us achieving cost parity with petroleum. This notion was unrealistic just a few years ago. However, with the advancement in yields and costs that we’ve already established and the new pathways that we have now identified, we believe we have line of sight on breakthroughs for further increasing our fuel yields and further reducing our operating costs, all towards this ultimate objective of achieving cost parity with petroleum. I know and respect how huge of a statement this is. And we’re tempering our excitement internally because there is still real work to do.

However, our leading and now expanding IP, our pioneering innovation team and our expanding development network has brought this objective closer and into much plainer sight for us. We’ll have more to say on this and the specific developments as they occur. But I can assure you, these new allocations have been extremely diligent and support our biggest goals in this energy transition. Our existing solutions are already changing the renewable fuel game, but to sustain and grow our technology leadership, our strategy must ensure that achieving our goal actually wins the day, and that is what these innovations are designed and intended to do. Let me move over to GenMat because our investment in GenMat is motivated by the same goal, accelerating these commercializations of these energy enabling breakthroughs.

I’m thrilled to announce that we have realigned our investment in GenMat, taking something rather complex and simplifying it. We’ve invested $15 million over the past three years, and we now own 32% of GenMat, full stop and hopefully with no confusion. We also retained the rights for using GenMat’s AI for both biofuels exclusively and mineral discovery and mining, positioning us to lead in these fields of use. This restructured investment puts our initial valuation at $47 million, and we believe this should already easily reflect at least a 10x return when compared to other comparable commercial-ready AI companies, although it’s nearly impossible for us to find an AI company capable of what GenMat is currently demonstrating to the market, and they’re proving it in the market as they are now in discussions with several early adopters, including globally recognized stakeholders in high value applications, starting with batteries and semiconductors that will leverage their physics-based AI for material development application.

Remarkably, GenMat’s also developed and deployed a fully operational and new proprietary mission control software for managing GENMAT-1, its low earth orbiting satellite and hyperspectral imaging system. GenMat’s also now engaged with even more customers for their imaging and predictive mineral discovery algorithms of which, of course, Comstock’s very interested in and also with customers signing up for satellite control system software. So, they built their own satellite. They deployed their own hyperspectral imager. They built encryption technology, programmed it themselves into the system and then developed an entire software control system to control the missions of the satellite. And other companies who are putting satellites into orbit are saying, we’d like to pay you for leveraging your system.

Our restructuring positions GenMat for both their commercialization and monetization efforts in every single way and it was designed to support their ability to raise much more capital from third-party sources at much higher valuations, which we expect will occur later this year. This would both validate their technology with third-parties and their valuations. And ultimately, that would terminate our future funding obligations, which will reflect the powerful win-win-win all the way around. It should be clearer and hopefully, clearer and clearer that our innovation system, this extended innovation system, which includes GenMat, which includes RenFuel and now includes new partners is already world-leading for technologies that are enabling the energy transition.

And amazingly, each and every one of them independently is commercializing. Green Li-ion is another example that we’re proud to highlight. Green Li-ion just launched their first commercial scale facility in North America, and they have differentiated themselves in a very difficult EV recycling market with a very high-value product proposition. Their Oklahoma plant is now producing battery-grade precursor cathode active materials and we understand that they’re receiving offers for more capital financing at even higher values. This is in line with our plans to monetize some or all of our Green Li-ion investment this summer. In fact, Green Li-ion and Sierra Springs Opportunity Fund were both very early-stage investments for us. We were literally in the seed round in both cases, and both have seen enormous appreciations in value over just the past three years, yet both are also directly supporting and/or have advanced specific aspects of our individual lines of businesses.

Our initial Green Li-ion investment alone has grown over 10x and Sierra Springs values growth has been even higher. Some of you may not realize it, but Sierra Springs Opportunity Fund has the only large-scale manufacturing complex in Silver Springs, and Comstock Metals has secured this capacity for both its existing production and its next industry scale facility. Silver Springs with all of its new highways and infrastructure provides immediate access to California and to Las Vegas, which is perfectly suited for Comstock Metals. Our sale of 2,500 Peru last year and our ability to pivot so quickly to a new solar panel operation would not have been possible without the availability of this Nevada platform. Silver Spring’s also just received and executed an LOI for the purchase of one of its properties that more than doubles the last known transaction value, and hence, correlates and doubles the underlying value of our most recent investment and represents another significant increase in the value of Comstock’s original investment in this equity.

These two advancements position us to monetize both our Green Li-ion investment and our directly owned real estate, Comstock’s directly owned real estate in Silver Springs at over $60 million in cash proceeds. And again, to be clear, that $60 million does not include our equity investment in the Sierra Springs Opportunity Fund, but just the 250 acres of land that Comstock owns separately in Silver Springs. Also to be clear, the LOIs for lands owned by the Opportunity Fund, for one parcel of land adjacent to our Comstock properties there. Let me turn to our businesses and just give some brief updates. And as I mentioned, Billy will take you through a deeper dive with our metals recycling business. So let me start with mining and fuels and then I’ll segue and wrap with metals.