Comstock Inc. (AMEX:LODE) Q3 2023 Earnings Call Transcript

Comstock Inc. (AMEX:LODE) Q3 2023 Earnings Call Transcript October 26, 2023

Comstock Inc. beats earnings expectations. Reported EPS is $0.11, expectations were $0.02.

Operator: Ladies and gentlemen, welcome to Comstock’s Third Quarter 2023 Business Results Webcast. This is Will Maze with RB Milestone. For those of you new to the story, Comstock is commercializing technologies that enable systematic de-carbonization towards the energy transition through three divisions – Comstock Fuels, which converts biomass into net zero renewable fuels; Comstock Metals, which recycles solar panels and critical metals; and Comstock Mining, which holds significant gold and silver resource in the target rich district in Nevada and plans to dramatically expand its reserves through generative AI-enabled mineral discovery. Comstock shares are listed on the New York Stock Exchange under the symbol LODE. Joining us today is the company’s Executive Chairman and CEO, Corrado De Gasperis, and COO, William McCarthy, who will be discussing third quarter results and an update of current operations, and will be answering questions at the end of the presentation.

If you’re interested in asking a question or logged into the Zoom app, you can submit questions to us directly in the Q&A module. Please note that this presentation is being recorded today, October 26, 2023, and will soon be made available on the company’s website at comstock.inc. If you are registered for the presentation, you will be receiving a brief survey by email from RBMG. Your response will be very helpful to Comstock in strengthening its investor relations efforts and providing growing transparency going forward. We appreciate your participation. Today’s call may contain forward-looking statements that are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements that are not guarantees of future performance of the company.

An aerial view of a city skyline, its buildings glittering in the sunlight, reflecting the company’s focus on real estate investments. Editorial photo for a financial news article. 8k. –ar 16:9

No assurance can be given that any of these events anticipated by the forward-looking statements will occur or if they do occur, what benefits the company will obtain from them. Also, some risks and uncertainties may be out of control of the company. Comstock has a full disclaimer contained in their presentation. Lastly, RBMG is not a registered investment adviser or a broker-dealer. For more information, please visit rbmilestone.com. Now it’s my pleasure to introduce Mr. Corrado De Gasperis and Mr. William McCarthy. Gentlemen, the stage is yours.

Corrado De Gasperis: Thanks, Will. Good afternoon, everyone. And welcome to Comstock’s third quarter 2023 financial results and business update. As Will just said, you have both me and Billy McCarthy on the call today. And we look forward to overviewing a very strong third quarter and taking a much deeper dive into our fuels business. A lot of good detail that we look forward to sharing with you and a very positive outlook on all of our businesses. We also appreciate everyone that participated in the RBMG investor survey. As Will said, the feedback really helps us in delivering on and managing your expectations. You can find the link to the survey on the Comstock, Inc. investor page. We open up the survey after each quarterly call, starting today, and keep them open until the end of the quarter to get all of your feedback.

And if it comes to the survey, it directly informs our Investor Relations strategy and communications, and we act on it. For example, we’re taking extra time today to better explain our fuels business based on the input and perceptions from that survey. Our update will also include the information from today’s press release and our recently filed third quarter Form 10-Q. You’ll find the press release at our website at www.comstock.inc, under Investors and in the Newsroom section. And hopefully, you’ve all had a chance to visit our new Comstock Fuels and Comstock Metals website with a direct link from Comstock’s main page under Businesses. Let me start with the corporate and financial updates, then I’ll move into the strategic investments, including GenMat, and then cover our Mining and Metals businesses before Billy provides a much deeper review for fuels.

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Q&A Session

As most of you know, we finalized the sale of the 2500 Peru facility, receiving a net of $14.5 million in cash over the past seven months and finally transferring title and closing in September. This resulted in a third quarter accounting gain of over $7 million. And we still have 600,000 plus dollars due to us in early December from guarantees to us associated with that stock. We’re very happy with the overall transaction, the expediency of our ABML stock sales, and all the proceeds that we’ve received to date. We’ve also successfully sold a small portion of our Green Li-ion investment for $800,000 in cash and a realized gain of about $600,000. More importantly, that transaction established a much higher valuation for our remaining investment at nearly $20 million and triggered requirement for us to mark the value of those remaining shares to market, resulting in an additional unrealized gain in our third quarter financials again of another $14.6 million.

These and other transactions definitely strengthened our financial position, with a nearly $20 million reduction in just our current liabilities since the end of last year. We also reduced our debt by $2 million, and we have no debt due in the next 12 months. These recent gains also resulted in the company recording net income of $13.7 million or $0.11 per common share for the three months ended September 30 and net income of $2.6 million or $0.01 per common share for the nine months ended September 30. We do have a plan for selling the remainder of our Green Li-ion shares, most likely over the next 12 months, and we’ve already received new interests for selling more of those shares. Additionally, we’re seeing a surge in activity in and around Silver Springs, and much more direct interest in our properties there.

Just this month, a company called Tract, a major hyperscale data center development company, announced that they had agreed to purchase land in the Tahoe-Reno Industrial Center, just 10 minutes from our properties, for a quarter of a billion dollars. Sierra Springs Opportunity Fund has also received multiple inquiries and solicitations for investment and for their properties, all at much higher values. These new comps have increased our estimates for monetizing our remaining non-mining assets to well over $40 million. We expect this to occur in the near term and during 2024 The entire Northern Nevada quadrant is proving out to be the next most valuable area of high tech industrial expansion. The magnitude of real blue chip economic activity that’s occurring here is truly staggering.

And it seems like our patience here is really going to pay off for the company and for our shareholders. Our strategic investments also include, of course, GenMat, who’s physics-based artificial intelligence has rapidly developed into a recognizable leader in this AI space. GenMat has developed ZENO, its proprietary physics-based AI, to accelerate the development of materials and the discovery of minerals. During this past quarter, GenMat has achieved its material simulation capability to TRL 7 by synthesizing and directly testing ZENO’s ability to predict existing material properties and has confirmed the precision and accuracy of those new materials simulations. GenMat has also now successfully tested its AI models for creating uniquely new structures, which is a breakthrough capability for simulating brand new materials.

This is actually what we always envisioned and planned for ZENO to be able to do. ZENO is now advanced to a readiness level that puts GenMat in active discussions with multiple potential customers and partners, including us, who will use its technology for advancing material science research and development. It’s becoming clearer and clearer to us that companies not using this type of AI for material advances are truly going to find themselves left far, far behind. Remarkably, GenMat has also received full regulatory clearances for the launch of its satellite and advanced hyperspectral imaging sensor and will launch its satellite in November, although we’re not allowed to be more specific about the exact date. This should enable us to enhance Comstock’s mineral composition data and integrate this new data with our existing historical geologic data and, ultimately, increase our ability to refine and better pinpoint our mineral targets.

Both the Comstock and GenMat technical teams are working together diligently today on these new mineral discovery capabilities. This is strongly aligned with Comstock Mining’s objective of dramatically expanding our gold and silver resources. We’ve already used geophysical surveys and much more intelligent data analytics to develop a practical, knowledge-based 2-plus-million ounce gold equivalent target. This would more than triple our existing resources from still just a portion of our Comstock properties. The work on this by our teams has truly been outstanding. In fact, based on all of these developments, Deep Prasad, GenMat’s CEO and I were recently invited to the New Orleans Investment Conference, one of the leading natural resources conferences, where for much of next week, we’ll be presenting and further discussing our joint collaboration on how we’re using this AI for much more efficient and effective mineral discovery.

Look, tragically for us, the world is on fire, further punctuating the importance of these precious metal resources in our portfolio. Gold sits today at about $1,985 per ounce. That’s up nearly $325 an ounce from just a year ago, with $2,000 an ounce right in its crosshairs. We believe that our mineral properties collectively contain billions of dollars of potentially recoverable metals and are planning to unlock that value with GenMat in the capital sensitive and intelligent way. Speaking of metals, Comstock Metals has been extremely busy over the past three months, readying the Nevada facility and marching towards production. We clarified on our last call that our metals recycling plan had pivoted away from batteries and was rededicating to commercializing a high growth, high impact and highly profitable photovoltaic market.

Frankly, we foresaw, now almost a year ago, the higher risk complexities and obstacles in the battery recycling market. We sold our battery facility and we pivoted. Our technology and processes are actually very well suited for recycling a broad range of electrification products. And we have simply and decisively chosen solar panels over batteries in large part for the following reasons. One, we have an immediate and regionally available solar panel supply. This is primarily the southwest region of Nevada, Arizona and California, with an existing large and rapidly growing market that we estimate is going to end up at over 75,000 tonnes of solar panel waste this year and rapidly approaching end-of-life solar panels, quickly taking that number to over 1 million tonnes in 2035.

The waste battery market is nowhere near the waste solar power market. These materials are also much safer to acquire, transport and store, while we receive immediate revenue and cash inflow from the upfront tipping fees, and we have very low capital expenditures, and we have extremely low operating expenses with, at least for the time being, dramatically less competition, which is enabling us to stake a commanding lead in this market and why we’re hustling so fast to do it. Substantially, all of these solar panels are now going into landfills and creating a major, increasingly unpopular, environmental hazard. Some states like California have already banned landfills from accepting solar panels. And they’re being sent east here to Nevada and other state landfills.

Our site in Silver Springs, Nevada is perfectly situated and has already been approved by the local county for this use. We’re reading the facility for the installation of our production equipment, all of which has been ordered with expected delivery during this fourth quarter. Once the final permits are received, we’ll start operating the demonstration facility at a rate of about 4,000 to 8,000 tonnes per year, ultimately transitioning it into our first industry scale site, which will be 10 times that size. The total capital expenditure for the startup, most of which has already been spent, is less than $2 million. All of these facts, all of these variables stand in a stark contrast to what we were seeing in the battery market. We then plan on deploying three to four industry scale facilities in just the next two to three years, and we believe our revised plan is faster, safer, and much more profitable.