Replies to post #18202 on Comstock Inc (LODE)

[TMLonggun]

Digging 10-40 feet is not expensive... The viability of ore is not based primarily on debt (of which this company has almost none aside from mortgages post refinance) but more on depth,strip ratios, intercept length, and grade all of which this project has in spades. They will have reserves shortly by the book, but given the huge amount of data that exists I am comfortable with 43-101 measured and indicated resources. The whole no reserves argument is a red herring in my opinion that I have seen used on every junior I have ever invested in, and has never mattered nor prevented me from making large gains. You also say that the 400 feet stuff is not "economically practical" but again that is dependent on many factors. If you are arguing the $6000/t ore they discovered at about that depth cannot be mined because $13> $6000 I will have to disagree, especially given the mounds of ore above it. This is an open pit bulk tonnage operation with much lower costs than an underground mine. Most of their grades are decent, near surface, with long strike lengths aka pay-dirt.

And in regards to your other point about mining companies peaking during exploration, I disagree. You are correct to say they often spike and hit a couple year high during the exploration and this is often the highest price many of these equities will command; as the reality of huge costs/ capex / long lead time to actually mining causes many to fail and dilute. BUT those that do actually mine profitably will normally smash their exploration high to bits and trade at many multiples of that price, with a backdrop of reserves, expanding production/cash flow.

Speculating on exploration = High risk
Speculating on a fully funded project a couple weeks from dore with a massive resource discovery and huge potential for expansion= lower risk

[cpmill]

Clown-

The implication of your argument is that a company can't profitably mine (or create substantial shareholder value for that matter) without having "proven reserves". It is a flawed argument, as I showed here when someone else made the same argument:

http://messages.finance.yahoo.com/Business_%26_Finance/Investments/Stocks_%28A_to_Z%29/Stocks_C/threadview?bn=128163&tid=15361&mid=15438

While extensive feasibility studies (which convert resources to reserves) provide an added measure of certainty, it is not a pre-requisite for profitable mining.

And let me remind you that there is a category of reserves that is NOT "proven"- do probable reserves have the same magical powers you ascribe to proven reserves?

Are probable reserves more or less certain than measured resources?

And while I agree that exploration juniors have substantial speculative potential, producers have stability and sustainable value based on more solid metrics.

I will also point out that the markets have shifted (especially the Canadian markets, which are dominated by resource companies). Several years ago, institutional investors in the junior space only wanted straight exploration juniors. In the last 6-9 months, the interest has shifted to juniors that are near or in production. If this is a sea change, then the markets will have determined that the better potential is in production... which magnifies the upside on producers.

And you are mistaken about this company- with the exception of a few mortgages on acquired property, and some pending equipment financing, this company has NO debt. None. If you will recall, it was all converted to equity several years ago. Further, the company's covenants will shareholders prohibit them from taking on debt (with the exception of a small revolving account for working capital and equipment financing, which is very attractive right now).

Additionally, you don't need "continuous massive veinage" to mine profitably... there is plenty of ore much closer to the surface, including some substantial quarter ounce ore tonnage. And we are not talking about flat land... which means that if a drill was sitting on the top of Hartford Hill, and hit ore at 200 or 300 feet, it could be easily accessible laterally from within the pit.

In fact, the starter "pit" (which is more of a cut into a hillside) has no more than a 1:1 stripping ration- which helps profitability.

And we can extrapolate cost to mine quite easily through their cut off grade. Anything above the cut off grade is considered profitable- last I heard, they were using a .007 opt cut off, and using a $1600/oz valuation. Using those figures, we get $11.20 per ton to mine and process, including mine administration (but not corporate costs).


By all accounts, that is VERY reasonable cost-wise- especially when your average gold grade is .029 and silver is .28 on their measured and indicated resources. That's roughly a $20 per ton profit, given their expected recovery rates. At 1 million tons per year (their initial production rate), that's a good profitable company.