Comstock Mining Announces 2013 Year End Results 2014 Revenue Objectives Complemented by $10 million of Cost Reductions
VIRGINIA CITY, Nev., March 11, 2014 /PRNewswire/ -- Comstock Mining Inc. (the "Company") (NYSE MKT: LODE) today announced selected financial results for the year ended December 31, 2013. The Company will host a conference call today, March 11, 2014, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time. The live call will include a moderated Q&A, after the prepared comments by the Company. The dial-in telephone numbers for the live audio are as follows:
North American Toll Free: 1-866-544-4625
The audio will be available, usually within 24 hours of the call, and for 30 days thereafter, at http://www.comstockmining.com/investors/investor-library
2013 Highlights and Recent Events
- Published our fourth National Instrument 43-101 (NI 43-101) technical report (the "2013 Report") authored by Behre Dolbear & Company (USA), Ltd. ("Behre Dolbear"). The 2013 Report declared a mineral resource estimate of Measured and Indicated Resources containing more than 2,100,000 gold equivalent ounces1, a 25% increase over the previous Lucerne Measured and Indicated estimate.
- Completed first full year of operations, producing 186,482 ounces of silver and 17,739 ounces of gold or a total of 20,815 gold equivalent ounces, exceeding full year guidance.
- Received a major modified water pollution control permit, increasing our authorized capacity and processing rates from a previous maximum of 1.0 million tons per annum to 4.0 million tons per annum and recently expanded our heap leach capacity to accommodate expanded production plans.
- Restructured patented mining claims in the Dayton Resource Area, eliminating $2 million of debt and cancelling all future royalties payable with respect to the mining claims.
- Received strategic master plan and zoning change approvals from Lyon County's Board of Commissioners on critical mining claims and other properties located in the Dayton Resource Area, supporting accelerated resource development and feasibility assessments.
- Secured over 300 acres of private lands adjacent to the approximately 78 acre American Flat processing area, accelerating potential expansion options.
- Secured a new, lower cost $5 million Revolving Credit Facility. The proceeds of the Revolving Credit Facility will be used for working capital, including production ramp up and preparations for expansion of the Lucerne Mine, including targeted drilling on the east side of the Lucerne Resource Area.
2013 Financial Results
- Revenue for 2013 totaled $24.8 million, with gold mining revenues of $24.1 million. Realized an average selling price of $1,361.70 per ounce of gold and $21.97 per ounce of silver.
- Crushed and stacked 1,072,000 dry tons of mineralized material, delivering 22,192 estimated ounces of recoverable gold and 396,082 estimated ounces of recoverable silver to the leach pads.
- Cost applicable to mining revenues totaled $26.5 million, net of silver by-product credits, in line with expectations, and supportive of planned increased production growth in 2014.
- Reclamation and exploration expenses decreased $9.8 million from $18.3 million in 2012 to $8.5 million in 2013 as the Company fully transitioned into production in 2013.
- General, administrative, consulting and professional expenses were $9.6 million in 2013 versus $12.7 million in 2012, a decrease of $3.0 million, primarily from reduced external services as we stabilized production and reduced stock-based compensation expense.
- Interest expense was $1.2 million in 2013 versus $0.9 million in 2012, primarily due to the higher interest rate associated with our Revolving Credit Facility paid off in 2013.
- Net loss for 2013 was $21.3 million, versus $30.8 million in 2012, a decrease of $9.5 million, resulting from lower operating expenses and higher full year revenues.
- Net cash used by operating activities was $10.3 million in 2013 compared to $22.4 million in 2012. The lower use of cash results from the higher first full year of revenue and lower year over year operating expenses, somewhat offset by the higher cash cost of mining and use of $2.7 million of accounts receivable used to repay debt.
- Net cash used in investing activities in 2013 was $6.7 million, primarily as the result of capital asset purchases of $6.0 million and bond deposit increases of $1.3 million, offset by $597 thousand of proceeds received from the sale of equipment that was previously used in our mining development and production activities.
- Net cash provided by financing activities was $13.4 million in 2013, comprised of approximately $18.8 million of net proceeds from equity, partially offset by the pay-down of our long-term debt obligations of approximately $4.9 million.
- Total long-term debt and capital lease obligations at year-end 2013 were $7.9 million as compared to $13.7 million in 2012.
- Cash and cash equivalents at year-end were $2.4 million.
The Company now owns or controls 7,447 acres of mining claims and parcels in the overall Comstock Mining District, representing a 26% increase since 2012.
"Over the past year, we have significantly increased the intrinsic value of our company and the communities of the Comstock. Our strategic land consolidation, responsible ramp up of operations and community-wide support network continue to grow in every respect. Our production expansion is still ramping up, with higher-grade materials now being delivered and scheduled to be delivered to the heap leach pad with a goal of doubling year over year production ounces while reducing unit costs and increasing cash flow," stated Corrado De Gasperis, President and CEO of Comstock Mining Inc.
During 2013, the Company fully established its operating infrastructure, including establishing our initial mine, ramps, roads and utility systems, completed the ramp up and stabilization activities of the production system, including significant improvements to the mining, logistics and metal extraction processes, particularly within the Merrill-Crowe facility. We invested approximately $1.5 million for productivity enhancing actions so that the Merrill-Crowe and heap leach facilities are now operating at sustained fluid processing rates of over 1,000 gallons per minute in 2014 thus far.
During 2013, the Company crushed and stacked 1,072,000 dry tons of mineralized material, delivering 22,192 estimated ounces of recoverable gold and 396,082 estimated ounces of recoverable silver to the leach pads with average head grades of gold to the crusher of 0.021 ounces per ton.
We also expanded our operating and physical leaching capacity by receiving a major modification of our water pollution control permit, increasing our authorized capacity and our processing rate from a previous maximum of 1.0 million tons per annum to 4.0 million per annum. This permit modification also authorized the completed construction of two new heap leach pad cells and the supporting ponds and related infrastructure. The system is now operational and new material is continuously being stacked, leached and processed.
The completed expansion and improvements represent the next major phase of growth for the Company, enabling production growth of 100%, with the goal of reducing per unit costs and increasing cash flow.
The Company has averaged over 400 gold-equivalent ounces poured per week in 2013. The Company continuously adjusted its operations to improve grade, maximize yields and increase tons crushed and stacked throughout 2013, and averaged nearly 500 gold-equivalent ounces poured per week throughout the second half of 2013.
For the quarter ended December 31, 2013, the Company realized an average sales price of $1,324.29 per ounce of gold and $20.68 per ounce of silver. In comparison, commodity market prices averaged $1,272.47 per ounce of gold and $20.76 per ounce of silver.
For the year ended December 31, 2013, the Company realized an average sales price of $1,361.70 per ounce of gold and $21.97 per ounce of silver. In comparison, commodity market prices in 2013 averaged $1,411.03 per ounce of gold and $23.83 per ounce of silver.
Operating Costs and Cost Reductions
During 2013, actual Lucerne Mine costs applicable to mining revenue were approximately $30.6 million, $26.5 million net of silver by-product credits. Cost applicable to mining revenue include mining and processing labor, maintenance, drilling and blasting and assaying costs associated with higher production rates and higher absorbed inventory costs incurred in advance of achieving the targeted production rate. The Company focused on reducing costs applicable to mining and leveraging the existing fixed operating expenses for the production of higher ounces in the latter part of 2013. Costs applicable to mining, dropped sequentially, on a per ounce basis, every quarter during the year. Overall, cash costs dropped 55% from the first quarter to the fourth quarter, starting at over $2,190 per ounce during initial ramp up down to $989 per ounce in the fourth quarter.
Costs applicable to mining revenue for the twelve months of 2013 include $1 million of non-recurring, higher hauling costs, $4.7 million of depreciation and a $1.5 million write down of inventory, primarily for lower grade stockpiles, to market value during 2013.
Management believes the system is now capable of operating at twice the production rates of 2013, while identifying cost reductions of annual costs applicable to mining from the 2013 levels by over $6.5 million, to below $25 million for the 2014 year.
During the third and fourth quarters, once production had stabilized, the Company also continued focusing on stream-lining the organization and reducing general, administrative, consulting and other related costs, resulting in a 23.9% reduction of these administrative cost categories, when comparing 2013 to 2012. The Company has identified another $3.5 million of these additional administrative cost reductions from the 2013 levels, for a total of $10 million in annual cost savings.
Under our current mine plan, we anticipate doubling ounces produced when compared to 2013, for both gold and silver, targeting 40,000 gold equivalent ounces of production this year. These increases come with lower costs applicable to mining due to focused cost reduction efforts, as well as lower non-mining operating expenses. Once stabilized at the 40,000 ounce per annum run rate, the operating expenses per ounce mined will be significantly lower in 2014 than in 2013. The Company expects cash costs per ounce of gold mined of less than $750 per ounce.
Exploration and Development
The 2013 drilling program (the "Drill Program") included a total of 22 drill holes and 4,065 feet. For Billie the Kid, we drilled six holes with an average depth of 340 feet. For Lucerne, we drilled thirteen holes with an average depth of 120 feet. For Justice, we drilled six holes with an average depth of 160 feet, and for Keystone, we drilled one well-positioned hole down to 120 feet. The Drill Program was defined for specific information and collected information that confirmed predicted geologic and attributes and metallurgical properties.
The Company has finalized its plans for near term, high priority targets, including The East Side, Dayton and Spring Valley exploration areas. The East Side Drill Program includes infill drilling, metallurgical testing, and geotechnical analysis to enhance the known mineralization on the East Side of State Route 342 for near term expansion. In addition, the Company has designed a new phase of exploration drilling to include its highest-potential targets, including scoping studies of the Chute Zone in the Lucerne Resource area, and plans for expanded exploration and development drilling in the Dayton Resource area that will allow for proper mineral assessment, resource expansion and mine plan development in the latter half of 2014.
Strategic Land and Mineral Right Acquisitions
The Company continues to increase its footprint in the Comstock District through strategic acquisitions. We consider the historic Comstock district central to our growth strategy. In late 2013 and early 2014, the Company secured over 300 acres of private lands adjacent to the approximately 78 acre American Flat processing area providing valuable expansion opportunities for leaching, processing, refining and potentially, milling solutions for the district. The Company now owns or controls 7,447 acres of mining claims and parcels in the overall Comstock Mining District, representing a 26% increase since 2012.
Earlier this year, the Lyon County Board of Commissioners unanimously approved breakthrough zoning changes on certain Company mining claims and other properties located in the Dayton Resource Area, enabling a more comprehensive assessment. These claims represent the Company's second largest classified gold and silver resource and include the historic Marble, Alhambra and Kossuth lode patented mining claims. The Company previously announced the positive restructuring of the debt and royalty obligations related to these patented mining claims. The restructured transaction eliminated $2 million of long-term debt and canceled all existing royalty obligations with respect to these mining claims.
Cash and cash equivalents on hand at December 31, 2013 totaled $2.4 million.
Total long-term debt and capital lease obligations at year-end 2013 were $7.9 million as compared to $13.7 million in 2012. For 2014, we plan on $2-3 million in capital expenditures, primarily to prepare for future expanded mining operations, including mining of The East Side of the Lucerne Resource. We will also pay down an additional $2.7 million in long-term debt obligations.
Comstock's Chief Executive Officer, Mr. Corrado De Gasperis, concluded, "We have grown our strategic resource in excess of 3 million gold equivalent ounces, established and are expanding production, lowered and continue lowering costs, all while expanding our land position in one of the most prolific geological districts. From a pure sources and uses perspective, we had an operating cash profit in the fourth quarter before capital expenditures, and we are positioned to grow that profitable base, through the remainder of this year."
About Comstock Mining Inc.
Comstock Mining Inc. is a producing, Nevada-based, gold and silver mining company with extensive, contiguous property in the Comstock District. The Company began acquiring properties in the Comstock District in 2003. Since then, the Company has consolidated a significant portion of the Comstock District, amassed the single largest known repository of historical and current geological data on the Comstock region, secured permits, built an infrastructure and commenced production in 2012. The Company continues acquiring additional properties in the district, expanding its footprint and creating opportunities for further exploration, development and mining. The near term goal of our business plan is to deliver stockholder value by validating qualified resources (measured and indicated) and reserves (proven and probable) of at least 3,250,000 gold equivalent ounces from our first two resource areas, Lucerne and Dayton, achieve initial commercial mining and processing operations in the Lucerne Mine with annual production rates of approximately 40,000 gold equivalent ounces and significantly grow the commercial development of our operations through coordinated, district wide plans that are economically feasible and socially responsible.
This press release and any related calls or discussions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Comstock. Forward-looking statements are statements that are not historical facts. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements include statements about matters such as: future prices and sales of, and demand for, our products; future industry market conditions; future changes in our exploration activities, production capacity and operations; future exploration, production, operating and overhead costs; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); future employment and contributions of personnel; tax and interest rates; capital expenditures and their impact on us; nature and timing and accounting for restructuring charges, gains or losses on debt extinguishment, derivative liabilities and the impact thereof; productivity, business process, rationalization, investment, acquisition, consulting, operational, tax, financial and capital projects and initiatives; contingencies; environmental compliance and changes in the regulatory environment; offerings, sales and other actions regarding debt or equity securities; and future working capital, costs, revenues, business opportunities, debt levels, cash flows, margins, earnings and growth.
The words "believe," "expect," "anticipate," "estimate," "project," "plan," "should," "intend," "may," "will," "would," "potential" and similar expressions identify forward-looking statements, but are not the exclusive means of doing so. These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical and current trends, current conditions, possible future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees, representations or warranties and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements. Some of those risks and uncertainties include the risk factors discussed in Item 1A, "Risk Factors" of our annual report on Form 10-K and the following: current global economic and capital market uncertainties; the speculative nature of gold or mineral exploration, including risks of diminishing quantities or grades of qualified resources and reserves; operational or technical difficulties in connection with exploration or mining activities; contests over our title to properties; potential dilution to our stockholders from the conversion of securities that are convertible into or exercisable for shares of our common stock; potential inability to continue to comply with government regulations; adoption of or changes in legislation or regulations adversely affecting our businesses; business opportunities that may be presented to, or pursued by, us; changes in the United States or other monetary or fiscal policies or regulations; interruptions in our production capabilities due to unexpected equipment failures; fluctuation of prices for gold or certain other commodities (such as silver, copper, diesel fuel, and electricity); changes in generally accepted accounting principles; geopolitical events; potential inability to implement our business strategies; potential inability to grow revenues organically; potential inability to attract and retain key personnel; interruptions in delivery of critical supplies and equipment raw materials due to credit or other limitations imposed by vendors; assertion of claims, lawsuits and proceedings against us; potential inability to maintain an effective system of internal controls over financial reporting; potential inability or failure to timely file periodic reports with the SEC; potential inability to maintain the listing of our securities on any securities exchange or market; and work stoppages or other labor difficulties. Occurrence of such events or circumstances could have a material adverse effect on our business, financial condition, results of operations or cash flows or the market price of our securities. All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statement.
Neither this press release nor any related calls or discussions constitutes an offer to sell or the solicitation of an offer to buy any securities.
Contact information for Comstock Mining Inc.:
PO Box 1118
Virginia City, NV 89440
Corrado De Gasperis
President & CEO
Manager of Investor Relations
Tel (775) 847-4755
Tel (775) 847-0545
1 Gold equivalent ounces were calculated using January 31, 2013 London PM prices of $1,664.75 per ounce of gold and $32.03 per ounce of silver, as published by kitco.com. This resulted in a ratio of 51.97 ounces of silver per equivalent ounce of gold, without taking into consideration the relative recoveries of gold and silver. The Company's current estimates for heap leach recovery are 68% for gold and 48% for silver.
SOURCE Comstock Mining Inc.