Comstock Inc (LODE)

[chunga1]

thanks!

The Company turned a corner in the first quarter of 2007 with the final settlement of the Parent litigation as continued financial and human resource drain which all but consumed the Company is finally over. Given the end of this litigation, change in Board composition and continued challenges in capital raising efforts, the Company’s management has determined that there is a need to reevaluate the Company’s business plan with a view toward the best way to maximize shareholder value and protection of our secured creditors.

In detail, this evaluation is covering the following matters:


· Expanding our footprint in the Comstock Region and other acquisition opportunities



2
--------------------------------------------------------------------------------




· Further exploration in the Comstock Region to accomplish the above

· Completion of the Plum Mine reserve report

· Strategic acquisitions in other areas of North America



Adjustments to this analysis have been made over the past few months, all with the goal to best utilize the Company’s limited financial resources to increase shareholder value and to focus on raising additional capital to reinstate operations.


Despite the mine shutdown in February 2007, the Company has had activity in ore body delineation, metallurgic testing and exploration. Ore body delineation has included plans to commence developmental drilling before the end of 2007, with drilling to be completed in three phases of 100 holes per phase. The goal is to map ore body and to prepare geologic cross sections to be utilized in mine planning and as a result, to be able to build a new mine model using geostatistics and extensive drill hole data.


There is also ongoing exhaustive metallurgic testing to attempt to maximize recovery of the high grade fraction of the ore and to determine optimum size to continue heap leaching. The Company is also assessing if a small mill could be added to increase overall recovery and to determine if previously leached ore has been adequately leached and to determine optimum heap height.


The exploration program, which is heavily dependent on funds availability had been scheduled to commence toward the end of 2007, resources permitting, with 12 targets developed at an average depth of 2500 feet; however, lack of sufficient funds has caused another delay in the recommencement of exploration.


Assuming sufficient funds are raised in a timely manner, the Company’s goal would be to reopen the Mine late in the first quarter of 2008 or during the second quarter if it can complete a reserve report with a qualified third party and complete a comprehensive mine plan and schedule, all of which is dependent upon ability to secure sufficient funds to procure the mining fleet.


In conjunction with the business plan reconsideration, the Company has taken steps to minimize operations in order to conserve cash flow and has presented a temporary Mine Closure Plan to the NDEP, which if approved, would call for closure through March 2008, at the latest.

There are also risks involved in the fact that one individual and his affiliates, as of September 30, 2007, beneficially own in excess of 50% of our voting stock. Pursuant to our recent financing agreement, this convertible debt holder and his affiliates with a 61 day notice can waive the 4.9% ownership restriction, allowing him to convert 100% of his convertible debt and related interest, which totals $8,264,650 at September 30, 2007, into our common shares. This group, if they waive the ownership restriction and convert all convertible debt and related interest into our voting common stock, may take actions that could conflict with your interests. This includes the election of Company directors, approval of actions generally requiring the approval of the holders of our voting stock, including adopting amendments to our articles of incorporation and bylaws and approving mergers, certain acquisitions or sales of all or substantially all of our assets, which could delay or prevent someone from acquiring or merging with us or limit the ability of our other stockholders to approve transactions that they may deem to be in their best interests.