Comstock Mining Announces Second Quarter 2014 Results
VIRGINIA CITY, Nev., July 22, 2014 /PRNewswire/ -- Comstock Mining Inc. (the "Company" or "CMI" or "we") (NYSE MKT: LODE) today announced selected unaudited financial results for the quarter ended June 30, 2014.
2014 Second Quarter Highlights
- Nevada Mining Association's 2014 Safety Awards Honors Comstock Mining with a first place Safety Award. Barrick and Newmont were the only other winners in the medium-sized category.
- Mining revenue from the sale of gold for the current quarter was $6.0 million.
- Gold and silver shipments totaled 4,645 ounces and 48,621 ounces, respectively, in the current quarter, with silver netting $1.0 million in by-product credits.
- Weighted average gold grade was 0.034 ounces per ton and silver gold grade was 0.546.
- Net loss for Q2 2014 was $3.4 million, as compared to $5.5 million for Q2 2013.
The $2.1 million decrease in net loss primarily resulted from a $2.9 million decrease of costs applicable to mining and operating expenses, offset by lower revenue of $0.8 million resulting primarily from a lower average price of gold.
- Costs applicable to mining were $5.5 million for Q2 2014, as compared to $8.2 million for Q2 2013.
The decrease of $2.7 million from Q2 2013 to Q2 2014, resulted from lower mining, maintenance and material costs from specific cost reduction actions and stabilized operations since last years start up, more reliable production scheduling and a slightly lower production rate.
- Metallurgical yields improved to 76%, from a previous average estimate of 74%.
- Operating expenses, excluding costs applicable to mining, totaled $3.8 million for Q2 2014, as compared to $4.4 million for Q2 2013. The decrease is primarily the result of lower third party legal and advisory expenses, including external relations, and lower stock-based compensation expense.
- Cost reductions, when comparing 2014 to 2013, totaled $3.3 million, with a run rate for the second quarter achieving a higher rate and approaching our stated annual targets of over $6 million from mining and $3.5 million from administration.
- Cash and cash equivalents were $12.2 million at June 30, 2014.
2014 Year-to-Date Highlights
- For the six months ended June 30, 2014, the Company poured 9,152 ounces of gold and 97,979 ounces of silver, as compared to 7,182 ounces of gold and 58,591 ounces of silver during the same period in 2013, an increase of over 27% for gold ounces and over 67% for silver ounces.
- Net cash used in operating activities was $2.3 million for the six months ended June 30, 2014, as compared to a use of $8.4 million for the six months ended June 30, 2013, an improvement of $5.1 million. Operating activities during the second quarter, including working capital, provided a positive cash increase.
- Net cash used in investing activities was $1.9 million for the six months ended June 30, 2014, primarily as the result of $1.5 million purchase of land and mining vehicles, and bond increases of $0.6 million, offset by $0.2 million of proceeds from the sale of equipment previously used in our mining activities.
- Net cash provided by financing activities for the six months ended June 30, 2014, was $14.0 million, comprised of net proceeds of $11 million from sale of securities and proceeds of $4.6 million from the revolving credit facility (the "Revolving Credit Facility") with Auramet International, LLC, partially off-set by the pay-down of our long-term debt obligations of approximately $1.5 million.
Comstock's Chief Executive Officer, Corrado De Gasperis commented, "We achieved significant progress in four focus areas so far this year: lowering our costs, strengthening our balance sheet, enhancing our mine plan and operations, including grades and scheduling, and expanding our land position. Cash cost of mining for the second quarter was below $900 per ounce despite challenging strip ratios so far this year, boding very well for the second half."
During the second quarter of 2014, the Company poured 4,645 ounces of gold and 48,621 ounces of silver, averaging over 423 gold equivalent ounces poured per week. The Company mined approximately 944 thousand tons of material (mineralized material and waste) as it continued persistently moving through higher stripping ratios. Total mineralized material delivered to the leach pad was over 122 thousand tons and represented some of the highest gold and silver grades crushed to date.
Gold and silver grades continued improving and the weighted average for the second quarter of 2014, was 0.034 ounces per ton gold and 0.546 ounces per ton silver as compared to a weighted average for the second quarter of 2013 of 0.017 ounces per ton gold and 0.284 ounces per ton silver. April 2014, represented our best month to date, with an average of 0.049 ounces of gold per ton and almost 0.749 ounces of silver per ton.
During the first six months of 2014, the Company poured 9,152 ounces of gold and 97,979 ounces of silver, as compared to 7,182 ounces of gold and 58,591 ounces of silver in the first half of 2013, an increase of over 27% for gold ounces produced and over 67% for silver ounces produced when compared to the first six months of 2013.
Throughout the first six months of 2014, the Company realized an average price of $1,269.35 price per ounce of gold and a $20.25 average sales price per ounce of silver. In comparison, commodity market prices in the first six months of 2014, averaged $1,291.25 per ounce of gold and $20.05 per ounce of silver.
During the first six months of 2014, actual Lucerne Mine costs applicable to mining revenue were approximately $12.2 million, $10.2 million net of silver credits as compared to $13.5 million, $12.1 million net of silver credits, during the first six months of 2013. Costs applicable to mining revenue include mining and processing labor, maintenance, drilling and blasting, and assaying costs, among others. Costs applicable to mining revenue for the first six months of 2014 and 2013, also include $2.6 million of depreciation and $1.5 million of depreciation, respectively.
During the second quarter, the Company continued reducing costs applicable to mining, targeting over $6 million in reductions for 2014, as compared to 2013, and an additional $3.5 million in administration and all other costs. The Company has already realized annual savings of approximately $3.3 million from reduced staffing in crushing, related maintenance, mining and administrative, drilling and blasting, logistics and administration cost reductions, with second quarter run rates well exceeding these achieved levels. Costs applicable to mining have been reduced over the past six quarters, with second quarter costs of sales, on a cash cost per ounce basis, at the lowest since inception, at slightly under $840 per ounce.
2014 Production Outlook
Through the end of 2013, the Company began transitioning into production at higher rates and grades with lower sustainable costs. The recently acquired permit now allows processing rates of up to 4 million tons of mineralized material to be placed on the leach pad per annum, and the Company's 2014 business plan calls for processing at the rate of 40,000 gold equivalent ounces. Two additional cells were constructed in late 2013 and stacking on these cells commenced during the fourth quarter of 2013. The Company is also fully permitted to add an additional cell when needed.
Under our current mine plan, we anticipate doubling the rate of ounces produced when compared to 2013, for both gold and silver, targeting a production rate of 40,000 gold equivalent ounces in the latter half of 2014. 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. The Company expects cash costs per ounce of gold mined of less than $750 per ounce. The Company updated its financial analysis for the Lucerne Mine and anticipates annual operating expenses, including all mining and processing costs, of less than $25 million per annum, a more than a $6 million reduction over prior year 2013. The Company has also identified $3.5 million of cost reductions in all other non-mining activities, including general, administrative and environmental areas.
Exploration and Development
The Company continues to evaluate high priority targets, including in the nearer term, the East Side of the Lucerne and Dayton Resource Areas and also the Spring Valley Target Area. Future programs would include the Occidental, Oest and the Northern Target areas.
The proposed evaluation of the East Side Target areas includes continuing infill drilling, metallurgical testing and geotechnical analysis to confirm the mineral potential and expand the mine plan on the East Side of State Route 342. In addition, the Company is designing 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 and mine plan development. The drill program is currently being expanded with approximately 100,000 feet of reverse circulation and 20,000 feet of core drilling, for both Lucerne and Dayton, planned at an investment of approximately $7 million.
The Company completed a successful phase of exploration drilling in Spring Valley in 2012. The drilling in the northern portion of Spring Valley was partially predicated to confirm buried mineralization by drilling specific magnetic geophysical anomalies that had similar magnetic signatures as defined by mineralized drill holes, drilled prior to the geophysical surface survey. The drill program is currently being expanded to test the full extent of the geophysical target with approximately 35,000 feet of reverse circulation and 5,000 feet of core drilling planned at an investment of approximately $2 million.
The total 2014-2015, drilling programs, including Lucerne, Dayton and Spring Valley would represent approximately 135,000 feet of reverse circulation drilling, and approximately 25,000 feet of core drilling at a total investment of approximately $9 million. The drilling would be planned to start in the latter half of 2014.
The Company had total current assets of $15.5 million at June 30, 2014. Cash and cash equivalents on hand at June 30, 2014 totaled $12.2 million. Inventories, stockpiles, and mineralized material on leach pad totaled $1.1 million.
For the six months ended June 30, 2014, the Company incurred an operating loss of $6.5 million, used $2.3 million of cash in operations, and used $1.5 million for debt repayments. The Company continues its efforts to increase production, reduce costs and working capital needs, improve efficiencies, and maximize funds available for working capital.
In May 2014, the Company raised $11.9 million in gross proceeds (approximately $11 million, net of issuance costs) through an underwritten public offering of 7,475,000 shares of our common stock at a price of $1.59 per share.
During 2013, the Company's first full year of production, it was limited, by permit, to up to 1 million tons of stacked and processed mineralized material. In late November 2013, the Company modified the permit, increasing the limit to up to 4 million tons per annum, and accordingly, the Company's current business plans reflect increased production, reduced costs and improved efficiencies, and generating prospective, positive cash flows. The Company continues reducing costs applicable to mining, targeting over $6 million in reductions for 2014, as compared to 2013. The Company has already realized annualized savings of approximately $3.3 million from reduced staffing in crushing, related maintenance, mining and administrative, drilling and blasting, logistics and administration cost reductions. The Company's 2014 goal remains doubling the rate of year over year production ounces and increasing cash flow, while reducing costs and achieving a cash cost applicable to mining of less than $750 per ounce.
For the remainder of 2014, the Company plans on spending up to $3.0 million in capital expenditures, primarily infrastructure and development needs for the expansion of the Lucerne Mine and related heap leach processing capacity. The Company also plans to pay down an additional $5.3 million in debt obligations, including $3.9 million on the Revolving Credit Facility.
Land Enhancements and Zoning
During the second quarter, the Storey County Board of Commissioners unanimously approved important zoning changes on certain mining claims and other properties located in the Lucerne Resource Area, enabling a more comprehensive mine plan and completing a critical prerequisite for proceeding with a request for an expanded Special Use Permit. These rezoned properties are situated in the Lucerne Resource Area, that includes the historic Justice and Keystone mining claims and near the Historic Woodville Bonanza. Earlier this year, the Lyon County Board of Commissioners unanimously approved break-through zoning changes on certain Company mining claims and other properties located in the Dayton Resource Area. 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. All the zoning in the Company's resource areas are now zoned consistently with the Company's goals and objectives. These zoning changes position the Company for immediate permit expansion in the Lucerne Resource Area and intermediate planning for similar permitting opportunities in the Dayton Resource Area.
Comstock's Chief Executive Officer, Corrado De Gasperis concluded, "Our second half mine plan is significantly enhanced, with continued good grades, lower strip ratios and significantly lower costs. The recent zone changes in the district reflect tremendous local support for our responsible efforts and have positioned us for further growth in 2015."
As previously announced, the Company will host a conference call on July 22, 2014 at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to report the Second Quarter 2014 results, business update and outlook. The live call will include a moderated Q&A, after the prepared remarks. The dial-in telephone numbers for the live audio are as follows:
North American Toll Free: 1-866-253-4737
Canada Local / International: 416-849-4292
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
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
SOURCE Comstock Mining Inc.