Comstock Mining Update — February 9, 2015

Bulletin — Highway 342 Closed through Gold Hill

What a contrast with its inflamed south end, where an inept group of locally unpopular “miners” (dba Comstock Mining Inc.) is tearing up the landscape in a desperate and unprofitable attempt to relive the past.

The company has been a constant source of disruption and irritation as it intrudes into the quiet communities of Gold Hill and Silver City, depressing real estate values and destroying the Virginia City National Historic Landmark, which it is digging up and hauling away to the leach pads, truckload by truckload, day in, day out.

Actually, Storey County has paid a stiff price to get the bragging rights that go with Tesla, forgoing sales tax and property tax revenues for many years. Anything can happen, and there is no guarantee things will go well, but at least the prognosis is good in the north. In Gold Canyon the future is bleak. CMI has yet to make a profit after five years of trying and may be in its death throes, but it is still capable of doing tremendous damage.

As it raced toward year’s end, the company had all the pedals to the metal in the haul trucks churning up out of the Lucerne Pit to American Flat and back. Having trimmed expenses to the very marrow of the bone, the company was hoping for a profit with all its hard corporate heart. An investment fund had been persuaded to buy $14 million worth of CMI stock, buying time, but then the share price began to tank.

On December 3 it fell below a dollar, and for much of the month it was struggling to stay above 60 cents until a surge on the last day of the year brought it back up to 81 cents.

81 cents! And then in an effort to share some good news the company announced on January 15 that it had licensed “an initial five metric tons of gold (or gold-equivalent) of validated, measured, and indicated resources to support the value of the initial 50 Million HOPE Gold Coins being sold.”

Say what? “The HOPE Gold Coin is a new cryptographic currency,” the company explained eagerly in a press release filled with bafflegab. It makes you wonder why Barrick and Newmont haven’t jumped all over crypto-currency as the coming thing.

Ten days before that, quietly and without alerting the press, CMI handed over 3,536,024 shares of stock to three California corporations controlled by CMI’s Chairman John V. Winfield in lieu of cash dividends on their shares of Preferred stock. According to the Form 4 Filing with the SEC, Intergroup Corporation got 349,724 shares, Santa Fe Financial Corporation 649,778 shares and Portsmouth Square Inc. 234,654 shares.The price of CMI stock bobbed up and down between 98 cents and a dollar on January 5th and then crept back up above a dollar on the last day eligible to avoid the dreaded Notice of Violation from Nasdaq, which would have confirmed CMI’s shaky status to the world. It was soon back down under a dollar again.

CMI’s 2014 year-end SEC reports showed a $1.9 million loss in the 4th Quarter and $9.6 million for the year, two more zeroes in the unbroken string.

On February 5th the company announced it had cut jobs — those jobs so highly prized and proudly pointed to by CMI’s supporters — to reduce expenses: “Our actions to date have reduced our workforce, sustainably, by over 30 people across the system, already achieving well over half of our targeted savings,” said Mr. De Gasperis. With these and other cuts to come, “The Company expects positive net income and positive cash flow from all operating and investing activities during the first half of 2015”.

To me that sounds like “All In” at the poker table. Is the Endgame underway?

But the Lucerne pit has already been dug as deep as it can go — or maybe a little deeper than that, as the highway is now showing signs of subsidence  — but in its 4th Quarter and year-end SEC filings the company reported revenues significantly below the 84,000 ounces of recoverable gold projected in the earlier Behre-Dolbear report.

Many meetings ago Corrado De Gasperis had promised that the company would stay off the highway once it had its haul road to use again. But in January the ever-accommodating, never-remembering board of Storey County Commissioners granted the company’s request for permission to cross the highway with its trucks 24/7 in order to mine the east side of the canyon.

In Lyon County Larry Wahrenbrock was replaced as a member of the Planning Commission.

Larry has been a useful and productive member of the Board, but he is from Silver City and the county commissioners have chosen to sacrifice Silver City to pit mining. Larry is not the only capable member of the Commission by any means, but his removal is another strong signal that no defense of Silver City (or of due process) will be tolerated. Read Nancy Dallas’ scathing observations here.

Also in Lyon County, Judge Estes made a preliminary ruling in the CRA complaint against CMI and Lyon County. He dismissed the complaint of undue influence, saying there wasn’t sufficient evidence presented to support the allegation against Vida Keller (who was defeated for re-election to the county commission). He also ruled that the enormous sums given to commissioner Hastings, including $7,500 from John V. Winfield’s three California corporations cited above, did not obligate him to recuse himself from the board’s deliberations.

He denied the complaint about public officers using private cell phones (and thus not subject to public oversight) for conducting public business, saying it was a separate cause of action that could be pursued apart from this complaint (It has since been refiled separately).

He ruled that the county commissioners, in their stampede to grant the Zoning change and Master Plan Amendment, disregarded procedure and should have referred the matter back for a Planning Commission report as required.

The Complaints of Open Meeting Law violation and Abuse of Discretion are continued.