Comstock Mining Amends Tonogold for Accelerated Gold and Silver Exploration Drilling
VIRGINIA CITY, Nev., March 26, 2020 (GLOBE NEWSWIRE) -- Comstock Mining Inc. (the “Company”) (NYSE American: LODE) today announced that on March 20, 2020, the Company amended and restated its Membership Interest Purchase Agreement (the “Purchase Agreement”) with Tonogold Resources Inc. (“Tonogold”), increasing and accelerating certain expense reimbursements, accelerating certain exploration drilling and development programs, and extending and securing the remaining obligations due toward the purchase of the remaining ownership interests (the “Membership Interests”) in Comstock Mining LLC (“CML”), the entity that owns the Lucerne mine and related obligations.
Mr. Corrado De Gasperis, Executive Chairman and CEO stated, "Earlier this year we leased certain mineral rights to Tonogold, including the Occidental Lode (aka, the Brunswick Lode) claims, one of the least explored and more promising mineral claims groupings, running parallel to some of the most significant Comstock Lode discoveries. This amendment allows Tonogold to plan a broader drilling program, with our full collaboration and support. Tonogold has also reimbursed, and we have anticipated certain higher expenses, associated with this effort.”
In consideration for the sale of Lucerne, to date, Tonogold has made non-refundable cash payments of $6.025 million and non-refundable stock payments of $6.1 million and Tonogold received 50% of the Membership Interests of CML. For the remaining cash due, Tonogold issued a 12% secured debt note with principal amount of $5.475 million (the “Note”) dated March 20, 2020, with $1 million payable October 15, 2020, and the remaining $4.475 million payable on September 20, 2021, with cash interest paid monthly. Additional Membership Interest will be delivered to Tonogold proportionately to the cash principal payments received on the Note.
The Convertible Preferred shares (“CP shares”) can be converted to Tonogold common stock any time on or after May 22, 2020. The restated Purchase Agreement adjusted the conversion price for the CP shares to the lower of (1) $0.18 or (2) 85% of the 20-day volume weighted closing price. Tonogold can redeem the CP shares at any time prior to conversion, at a redemption price of 120% of the face value of the CP shares.
The Note is initially secured by the Membership Interests owned by Tonogold and will be secured by all of CML’s assets after the Company’s 11% Debenture has been paid in full and the liens relating thereto have been released. The Note can be prepaid at any time without penalty or premium. The Note can also be converted into common shares of Tonogold, under certain circumstances, at a conversion price equal to the lower of (1) 85% of the twenty (20) consecutive trading day volume weighted average price of Tonogold common stock or (2) an applicable price stepping up to $0.40, at the Note’s maturity date.
COVID-19
On March 12, 2020, Nevada Governor Stephen Sisolak issued a Declaration of Emergency to facilitate the State’s response to the COVID-19 pandemic. The Governor's guidance for the mining industry includes limiting gatherings to no more than 10 people, maintaining social distancing protocols where 10 or less are gathered, limiting travel, and working remotely when possible. The Company is currently operating in alignment with these guidelines for protecting the health of our employees, partners, and suppliers, and limiting the spread of COVID-19.
Liquidity & Capital Resources
The Company had total assets of $39.6 million, total current assets of $13.3 million, current liabilities of $4.4 million and net current assets of $8.9 million, including cash and cash equivalents of $1.0 million at March 25, 2020. The Company’s has approximately $5 million in debt due on January 17, 2021. Delays in management plans, including its asset sales, or accesses to the equity or debt capital markets, from extended market disruptions, coupled with the short term nature the Company’s debt, raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s current capital resources include the aforementioned cash and cash equivalents of $1.0 million, other net working capital resources, including Tonogold’s note receivable to the Company of $5.5 million, the Company’s Convertible Preferred Stock in Tonogold of $6.1 million (valued at $9.1 million at December 31, 2019), escrowed non-mining asset sales of over $10 million, expecting to close in the second quarter and other non-mining assets of over $4 million, plus equity agreements to issue securities, subject to limitations, and a loan commitment agreement with $10.0 million in unused capacity, ($9.5 million, net of fees).
Mr. De Gasperis concluded, “We are excited about Tonogold's plans for exploration drilling during the second quarter of 2020, and MCU’s deployment on both the Comstock and in the Philippines. Our entire staff is working progressively and diligently and we have not experienced any significant disruptions as a result of distancing and remote workplace disbursements that are critical for avoiding the spread of this terrible virus. We are open for business and moving all strategic projects forward, including the sale of our non-mining assets. We look forward to extinguishing our debt during the second quarter and funding these exciting growth initiatives.”
AI
