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Executives

Corrado De Gasperis – President and CEO

Analysts

Robert Shecker – Private Investor

Brian Post – ROTH Capital Partners

Carl Frankson – Private Investor

James Peck – Private Investor

Jack Albright – Private Investor

Don Phillips – Private Investor

Comstock Mining, Inc. (LODE) Q4 2012 Earnings Call March 14, 2013 11:00 AM ET

Operator

Good day, ladies and gentlemen, welcome to the Comstock Mining Announces 2012 Yearend Result and Business Update conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Corrado De Gasperis. Please go ahead.

Corrado De Gasperis

Thank you, Padlange [ph]. Good morning and afternoon, everyone. Good morning, I guess, everyone. We’re doing it a little earlier today. My name is Corrado De Gasperis, President and CEO of Comstock Mining, and welcome to our 2013 annual conference call.

I’ll provide a brief summary of the information included in our recent press release and also included in our current Form 10-K, which is scheduled to be filed timely this Monday on March 18th. If you don’t have a copy of today’s release, you’ll find a copy in our website at www.comstockmining.com, under News/Press Releases.

Please also let me remind you that I may make some forward-looking statements on this call. Any statement relating to matters that are not historical facts may constitute forward-looking statements. The statements are based on current expectations and those statements are subject to the same risks and uncertainties that could cause actual results to differ materially.

These risks and uncertainties are detailed in the reports filed by the Company with the SEC. They’re also identified in this morning’s press release. And forward-looking statements made during this call are subject to those same risks and other risks that we cannot identify.

Okay. So let me briefly review production first. Then I’ll talk just a bit about drilling and mine development and wrap up with a few corporate highlights before we move on to the Q&A.

Regarding production, as all of you know by now, we’ve been pouring gold and silver since the last few days of September and we’ve been pouring really ever since. During 2012, revenues totaled $5.1 million, with gold mining revenues of $4.5 million. Cost applicable to mining totaled $3.6 million, net of the silver by-product credits. In total terms, metal shipments including silver were $5.4 million in 2012.

From the commencement of smelting through last week, the Company has poured and shipped 44,760 ounces of Dore. That would be 4,264 ounces of gold and 40,176 ounces of silver. In addition, the Company delivered last year about 28 ounces of gold and almost 300 ounces of silver to the Northwest Territorial Mint, which facilitated the minting and really incredible success of selling out our commemorative Dore Bars, which celebrated our first pour.

Metallurgically, we’ve recovered 67% of the estimated recoverable gold and 51% of the estimated recoverable silver from the portion of the heap leach that’s been under leach the longest. Basically, that’s telling us that our preliminary lab tests, our results really suggest that the ultimately heap leach recovery is on expectation and we believe will certainly meet or exceed the estimated ounces of recoverable gold and silver that we have on the leach. So that’s a very critical point at this juncture of our production startup and ramp-up.

Through last week, we’ve now crushed over 465 dry tons of mineralized material. The leach pad itself has an ultimate capacity of almost 4 million tons, and we will expand to that full capacity some time later this year. Our existing five cells will expand to eight full cells once we get our final water pollution control permit modified, which is likely late this summer or early fall.

We finalize that permit application and that will not only authorize the leach expansion, but it will also allow us to sustain a production rate of well over 1 million tons per annum. In fact, the next category of permit modification goes from up to 1 million to a category of 1 million to 5 million.

We’re now adding new pads of ore regularly, actually at a rate of about two new pads per month coming under leach, which compares to one per month when we initially started up our production.

During February, as I think most of you probably know now, we had a really significant breakthrough with the BLM when they made a determination to allow us to move forward with the Class 1 Color-of-Title claim with respect to what I guess is now the same as Lot 51, a 25-acre parcel land up here on Gold Hill that was blocking our preferred access to our processing center.

The BLM is now allowing us to use the existing haul road segment that crosses Lot 51 providing a much, much, much more efficient connection to previously granted right-of-way.

To comply with that new allowance, that new authorization, if you will, the Company is now using 10 brand new 40-ton articulated Caterpillar haul trucks. This essentially shortened the distance while carrying a larger load and decreasing the overall traffic on our haul road, and eliminating the traffic on the State Route. So these vehicles really have unblocked the mine area, if you will, from a logistical constraint that we previously had, imposed on us, increasing our throughput, increasing our hauls per trip, and reducing cost significantly by reducing the length and number of overall trips.

The breakthrough does more than that for us. Really, the breakthrough now presents us with an incredible opportunity that we’re seizing to accelerate our planning, environmental and engineering assessments to ultimately present full feasibility for an expanded Lucerne Mine plan operation.

We already have sufficient drilling and geology to do this, so we’re currently pre-planning these activities. This should lead not only to an expanded mine plan with definitive economic feasibility for that bigger mine operation, but also to accelerate the planning and federal permitting processes that would correspond with that extended plan.

This was one of the major drivers for raising some of the additional capital this week so that we can much, much faster move from mining about 20,000 plus ounces per year to 75,000 to 80,000 ounces per year or more just from Lucerne.

We’re currently now mining and hauling at a higher rate, about 5,000 to 6,000 tons per day, which is a significant increase from just one month ago. We’ve actually stress-tested the entire system and we achieved sustainable rates of over 7,000 tons a day. And we’re very near completing the staffing and the rescheduling of operations so that the mine can haul, crush, mine, stack seven days a week.

This has all been enabled effectively, if you will, by the BLM breakthrough, but certainly by some absolutely outstanding operational management over the last three months on the ground.

I should introduce you at this juncture one of our new employees Dave Thomas. He’s newly appointed in our Company as Director of Mining and Processing, and has made a profound impact on increasing the speed, reliability, and throughput of our system over the last quarter. He was most recently with Newmont as country manager for Canada and one of their senior executives. But he’s been with us now for the last five months, and I couldn’t be happier having him on the team.

As most of you know, our plans have the leaching process, building us up to 20,000 gold equivalent ounces as a run rate per annum by late April. That is on track. Our grades are improving and that is for me a great profile for not only improving production, but improving our cash flow. We’ll be fully cash flow positive when we hit that 400 ounce per week run rate in April, enabling us to fund all the growth initiatives that we just discussed.

We’ve also updated our financial analysis to the Lucerne Mine and we anticipate annual cash operating cost including all the mining and processing cost of about $15.9 million per annum. Now that number for us is on expectation because it’s important to highlight that that number was calculated enabling us to ramp up production greater than 1 million tons per annum.

We’re not actually at that run rate now, but we believe within that run rate, we can ramp up to almost 50%, maybe 1.5 million ton per annum run rate. So we’re very excited about the more efficient infrastructure and the more productive throughput.

We’re ready, willing, able to deliver in this calendar year 18,000 to 20,000 gold equivalent ounces, and that means that we’ll be running at a rate of higher than 20,000 gold equivalent ounces as we go forward from April.

In summary, during our last call, I said that to grow we needed to obtain a new BLM right away and that we also needed to expand our existing water control permit. These were the two factors that were limiting us to that 1 million tons per year. We had to break through with the BLM and we are now complete with the engineering and permit preparation to file our water control modification next week.

In fact, we’ve already had multiple meetings with the relevant regulators. Once we’ve completed our internal engineering and our internal plan, then we feel very good about obtaining that modification timely, most certainly later this summer.

Let me turn to exploration now. I’ll be a little briefer on this point. The technical report was filed in February, we announced it. It was dated January 31st, and the report declared a mineral resource of 2.15 million gold equivalent ounces measured and indicated. It added another 870,000 of inferred, which put us some 3 million ounces of measured, indicated, and inferred and over 3.2 million total ounces in our resource deposit.

Most of the drilling that occurred in 2012 was infill and development in Lucerne. So Lucerne itself increased its measured in indicated resource by 25%, very significant for our most significant resource area. The drilling represented about 391 holes, almost 150 feet, at a cost of about $4.9 million, with an average cost per foot in that drilling of about $33 a foot.

So that area, the Lucerne area, which of course we’re mining in today, now has a modeled mineralization strike that covers over 5,400 feet or let’s say it another way, over a mile of mineralized strike length. So it’s really tremendous to have Lucerne at the very, very nucleus of our property position; very, very center of our property position. And in so many ways, we feel like we’re just getting started here, including the fact that we’ve only drilled about 60 holes on the East side.

And although we only drilled a limited number of those holes this year, that is 20 holes, the results led to the discovery and interpretation of the Chute Zone by our geologist. This intersection which hosts its own [ph] of incredibly enhanced mineralization maps to dimensions of anywhere from 100 to 150 feet by a 100 to 450 feet really has been recognized by our geological team and our Chief Geologist Larry Martin as enhanced grades of really incredible precious metal.

It’s just the beginning of what we’re discovering on the East side. We’ve had high grade hits across the entire spectrum, but to start to see these kinds of concentrations and start to compare these kind of discoveries to areas like the historic Woodville Bonanza could not be more exciting for us.

That technical report has been posted on our website fully. The actual report is 173 pages long. It’s outstanding. I think everyone should read it. I would just like to quote a few of the highlights from the report for you. Page 4, the report quotes – a significant discovery of higher grade mineralization termed by CMI geologist as the Chute Zone. The intersection zone holds elevated grades of gold and silver that consistently average a tenth of ounce of gold over drill intercepts of anywhere from 50 to 270 feet, with dimensions mapped to the levels that I just described.

Page 5, "Substantial resources have been identified to the south at the Dayton property and encouraging exploration results have been received at Spring Valley. Page 9, Behre Dolbear says that they believe the Comstock mine project represents a well-explored, epithermal, precious metal deposit with a world-class mining district. The geology of the project of the area is well described and understood through vigorous surface mapping and drill hole logging. The density of the geological data is high and the reliability is excellent."

It goes on and on. Even though it was just a resource report, they also quote on page 127 – and validate the current calculated metallurgical recovery rates and that they’re hitting and exceeding the initial metallurgical recoveries. And then they also speak on cost. They said that they verified the grades in our resource model and they also said forecasted operating costs were compared with the very preliminary results in the first three months of actual operations, which they’re talking about the fourth quarter of last year, and are considered by the author to be reasonable and that future operating cost should result in a strong profit margin for the Lucerne Mine at current metal prices.

So just a tidbit of 172 pages, and from our perspective, just an absolutely outstanding representation of this geological district.

So let me just summarize and conclude with some corporate comments. Now that we’re fully transitioned in 2012 from an exploration and development company to a full-production company in 2013, our net loss for last year was $30.8 million or a loss of about $0.87 per share.

Cash used by operating activities in 2012 was extremely productive, over $22 million going into primarily cost applicable to mining, $3.6 million, and mine development, $13.3 million. Cash used in investment activity is also productive, over $13 million, $10 million of which was for the building of the crushing processing and metallurgical lab equipment, $2.2 million for the land and building, $1.2 million for mining vehicles.

So our cash on hand at the end of the year was $6 million. We had inventory of just about $5 million, that’s gold and silver inventory on top of the cash, and receivables of just over $0.5 million. Our current cash is fluctuating between about $2 million to $3 million at our current pour rates, which is now increasing. But yesterday, as most of you already know, we raised $10 million through a public offering. We didn’t use an investment bank. We did not incur any material administrative freeze, but we added an outstanding class of primarily new US-based institutional capital.

The proceeds to us is almost the entire amount, over $9.8 million. And as we said in the disclosure that we intend on using these moneys to accelerate these prerequisite environmental studies, engineering and permitting for the growth production through the commercial development of an expanded Lucerne Mine. But what we’re also going to do is commence certain pre-permitting activities for the Dayton Mine as well.

So from our perspective, the priority is very clear to grow production of the existing operation and to commence now the lead time activities required to grow both the existing mine and our second mine. Some of that ramp-up will occur immediately if it’s not already been occurring over the last few weeks.

Our debt at the end of the year was $13.7 million through March. Through today, we’ve already repaid $3 million of those debt obligations and we expect paying off a total of approximately $9 million in debt obligation this year, including the entirety of our revolving secured facility.

We anticipate spending about $2 million to $3 million in capital this year, substantially offer the heap leach expansion that I mentioned earlier, and some for related metal extraction process, primarily some enhancements in upgrades that we’re looking at in the Merrill-Crowe facility.

We’ve also calculated, as part of this year-end audit – we’re an accelerated filer this year, by the way, because of the growth of our business. We’re required to file, as I said, by this Monday our Form 10-K. But as part of that audit and as part of our accounting process, we’ve also completed our tax provision. We won’t pay any cash taxes this year that we see. But we also have federal net operating loss tax carry-forwards now in excess of $100 million. These NOLs don’t event begin expiring until 2023.

So let me summarize and in closing, our balance sheet and liquidity is very strong, our cash flow is ramping up, and there is a tremendous amount of positive activity throughout the network as we invested substantially all of our time over the last five or six months in debugging our new production system, stabilizing, and now increasing its capacity.

We’re fully commenced in all of the pre-planning activity for accelerating expansions, again, both for Lucerne and Dayton, including feasibility for an expanded Lucerne operation in 2013.

I think that is a good stopping point, pad launch for maybe moving to questions and answers.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) And the first question comes from Robert Shecker. Please go ahead.

Robert Shecker – Private Investor

Hi, Corrado.

Corrado De Gasperis

Hi, Robert, how are you?

Robert Shecker – Private Investor

I’m fine, thank you. I guess not as you said your team of geologists, how many geologists do you employ and are they full-time or just on a consultation basis?

Corrado De Gasperis

We have six full-time employees, we have four senior geologists, we have two junior geologists, and in addition to that, we have one person that is fully dedicated to be a mine engineer, not a geologist, but fully dedicated to the district-wide geological model, geostatistical model. When we’re in a full drilling mode, we also would have up to two, usually one to two geologists that would help us in all of our logging and cataloging of our results. Those resources are variable, so they’re not on staff as we are. They are on staff when we’re drilling, they’re not on staff as we’re not drilling. So it’s really six full-time guys led by our Head of Exploration Larry Martin.

Robert Shecker – Private Investor

I think you really got something there if you got that many people.

Corrado De Gasperis

Yeah.

Robert Shecker – Private Investor

I’m really confident. That increases my confidence. I know it’s a lot of money.

Corrado De Gasperis

No. Yeah, I mean, the way that we approach the drilling is that every drill rig that’s out in the field, we have a senior geologists logging every five feet assessing every five feet. I mean obviously our productivity has been incredible from my perspective hitting on literally every hole, but the way that they work in terms of the interpretations and the assessments is really outstanding.

It’s probably important to point out that as we’re not currently drilling, Leri [ph] is fully engaged as if though Mitchell, as is Steve Russell, as is the entire team, on supporting mine and mine development.

So what I like the most about the group is that they’re integrated in the new system completely.

When we’re exploring and developing with drill rigs, obviously there are 99% dedicated to that activity, but as we’re mining now, we have two geologists fully dedicating themselves just to ore control in the pit.

So the same guys that were discovering the metal, the same guys that were cataloguing the medal, are controlling the grades at every blast and at every haul which gives you, it’s not just dedicated experience which we acknowledge but there’s an intimacy across the whole process.

So when I see Steve Russell walking out of the metallurgical lab, or Will, or Steve, or Larry, going over grade processes, it does give you a sense of confidence.

Robert Shecker – Private Investor

That’s really great. Thank you so very much.

Corrado De Gasperis

Thank you, Robert.

Operator

Thank you, and next question is from Brian Post. Please go ahead.

Brian Post – ROTH Capital Partners

Good morning.

Corrado De Gasperis

Good morning, Brian. How are you?

Brian Post – ROTH Capital Partners

Good. A few quick questions if I may. First, you detailed some plans about the expansion of each pad [ph]. I just wanted to get your interpretation on, if there was an expansion, in the capacity of the current plant, is that sufficient to meet these run rates, the 80,000 to 20,000 annual production?

Corrado De Gasperis

It is, yes. Those rates are equivalent really to the targeting the million tons of run rate. We want it, we ensured ourselves that when we built the initial five cells, we’d have at least two years at that run rate to the extent that we can anticipate expanding the water pollution control permit and anticipate, and schedule ramping up to higher tonnages.

Obviously, we would incorporate into the schedule the most timely expansion of the cells. And it’s not a very disruptive process because it’s literally just a prepared extension of the existing tat [ph].

Brian Post – ROTH Capital Partners

Okay. And then somewhat related, on a cost guidance you gave, there was a little bit of delta from the numbers you put out earlier this year. You mentioned that it was reflective of just the ramp increase and production.

Is there any other underlying change of this assumptions, or is it just simple more volume there?

Corrado De Gasperis

No. There’s a couple of modifications. So were guiding somewhere in the mid 13s. Without these temporary haulage costs, right? And so effectively, we had eliminated those temporary haulage cost which we couldn’t be more relieved about, but we reconfigured the fleet partly to accommodate what the BLM was allowing us to do, so we did have an increase in our operating cost, for our truck fleet, but we effectively went from six trucks to 10.

Okay, so there was some slight increase in terms of those new operating vehicles, but then we incorporated the capacity, the human capacity to ramp up to these higher rates. So I think that for my assessment at the higher rates, will be at or slightly below, the cost per ton rate if you will for the operation.

So it’s a little awkward to sort of give the full guidance for the higher operating rate, but it sort of indicates that’s where we’re heading. That’s where we’re heading and that’s where we’re going to be.

Brian Post – ROTH Capital Partners

Okay, great. That’s helpful. And one last question as far as when you look in the 13, what direction, higher, lower, the same are your head grade is going? Is this going to be a higher grade year, a middle road, lower?

Corrado De Gasperis

No, I think it’s going to end up to be slightly higher if you’re talking from the base of the average of 0.03.

So a 0.03 ounces per ton, one gram per ton is the average for the resource of the mine, the initial mine plant except for some of the most immediate ore that we took out, most of December, January and February, averaged slightly below 0.02.

Let’s say March to August time frame gets much better than that ramping to 0.025, 0.026, 0.027 kind of thing, and then it gets a little bit stronger even in the year.

I think we would end the year just under 0.03 gold, and certainly over 0.03 gold on average with a silver content.

So I think the profile is right in the middle, but I think the most positive aspect is that it’s an improving rate profile. We have one bench, or not one bench, but one section of the mine that we call the Hartford, that had a meaningful amount of tons that were net relatively below the average.

And we’ve been working through that very effectively, it’s obviously a good ore, it’s obviously profitable for us to do it, but once we get through it, it starts getting better, and better.

Brian Post – ROTH Capital Partners

Great. And I appreciate the detail. And I will yield the floor to other questions.

Corrado De Gasperis

Thank you, Brian.

Operator

Thank you. The next question is from James Del [ph], please go ahead.

Unidentified Analyst

Thank you. Hey, Corrado, could you comment on the current state of relationships with the CRA, Comstock Residents Association and other local groups?

Corrado De Gasperis

Certainly, James. Thank you very much. I mean just right off [inaudible], you know, last night, I did a presentation in Silver Springs to about 150 people, and the presentation was on the macro gold industry and its implications to Nevada which went very, very well.

But then, one hour presentation turned into two hours of very, very productive discussion, I mean very exciting sort of economically developing discussion with a lot of ideas about how a mine becomes sort of the hub of a much bigger economic network.

A couple of the folks from the Comstock Resident attended, we always welcome that, and had a very civil engaged discourse throughout the whole thing. From my perspective, it couldn’t have been a more positive meaning.

I think overall, there was some realignment because there seem to be some common objective almost by everyone to get our smaller trucks off that state route. So the last two or three public scopings and public hearings we’d [ph] be on, have been very productive.

I just think from a broader community, and I’m talking about the broader individual communities of Lyon County, be it Silver Springs, where we were last night, be it the Vietnam [ph] House, be it Fernley, be it Phelan, we’ve been tremendously engaged in all corners of the county. We’ve been more engaged in Yerington as we start to think about actually engaging in some permitting processes for that. And I would say in Storey County, we are today, substantially all of our operations are – we could not have had a better engagement and better support.

There has just been two new commissioners that have been elected, and just across the board very vocal and very strong support. And specially as we were getting close to convincing the BLM about Lot 51, these commissioners engaged the BLM directly, urging, encouraging, even problem solving with them what do you need from us to fix this.

And we could not have felt better over the last two or three months. So I think that there was substance to the operations growing, but the substance of the support and the community is growing.

I spent a couple of hours just last Saturday with the sheriff, and a dozen other guys moving some boxes, out of the Forth Worth school into the sheriff’s basement, the jailhouse.

We’ve been very, very engaged, and the commentary is actually joyous is probably too strong of a word, but it may not be because people were so happy with the decision to let us use our whole road again.

Unidentified Analyst

Okay. So in general, you think they’re sticking the – Comstock Residents Association seems to be, meeting their objections?

Corrado De Gasperis

I think that the pervasiveness of it is last. We certainly haven’t been engaged by tens and tens and tens of people in our position. It’s a public scoping, it seemed like there was less than 10 in each case.

Even last night, there were a few of the community from them in attendance. So I think that in that regard, it’s certainly significantly less.

I think that the six to eight folks that are really concerned that what we do here is safe, that what we do here is productive, that what we do here is not destructive.

They continue to remain vocal, but I just don’t feel that there’s anything negative about that. I think in some ways that it makes it better.

Unidentified Analyst

Okay good. That’s it.

Corrado De Gasperis

Thanks, James.

Operator

Thank you. The next question is from Carl Frankson. Please go ahead.

Carl Frankson – Private Investor

Hi Corrado, how are you doing?

Corrado De Gasperis

Hey Carl, how are you? Been a long time.

Carl Frankson – Private Investor

Always listening in. A question for you, I certainly like the projections and I’ve heard the numbers and I like the 400 ounces in April of cash flow, et cetera.

A question, almost, I think it was, by two years in June that you had an investor meeting at the hotel. And at that time, you put up the 20,000 ounces a year, et cetera, et cetera, and you multiply it times the price of gold, and came up with financial projections.

Can I ask if cash flow would be sufficient to fund things that the firm wanted to do for, and you said yes. And since then, I lost track, there have probably been three or four equity transactions since then.

Is there any end to the dilution? Are you through with equity raising? Is there more to come to fund the other things?

Corrado De Gasperis

Good question, Carl. Thank you very much. Yes, so, the initial comment about getting cash flow, and those initial concepts, you know about the $20,000 and that revenue being sufficient.

For a certain remains our thesis, and probably before I hit the next point, let me say that the state of the union, the state of the system, I have never felt better about today. And allow me just to elaborate on that a little bit.

We started our production, we had one phase open in the mind to ore, and even though we have an outstanding strip ratio, one to one better most often it’s not always linear or consistent.

In other words, you might spend three or four days going through waste and then you get three of four days of ore rather than one to one, one to one.

So over the last few months, we’ve opened up three different ore phases, ensuring us a most consistent stream of ore to the crusher. These are common sort of start up and common optimization things.

We’ve scheduled the crusher to be working optimally 12 hours a day and maintenance being done off peak so that the crusher really has not constrained us in the last month at all. I mean we have instances of well over 7,000 tons a day crushed with the capacity to do more.

Of course the BLM, getting us back in haul road, unblock the huge constrain. And frankly, the last three of four weeks, the focus has been almost entirely on optimizing the Merrill-Crowe and the metal extraction.

We’ve worked on increasing the pump’s capacities, we’ve worked on improving the filter efficiencies.

And I feel like today, we’ve unblocked, some people might think of these things as normal, start up things, some of them were, some of them weren’t, but today, we feel like the system has been stress tested and capable.

So I would not only reiterate the projection of cash positive with 20,000 ounces. But the capability of it is here.

We’re sitting on it now, and so now, the variation most likely just comes with the normal sequence of grades that come through.

Now having said that, come back to your real question, so the real question is, is that sufficiency – sufficient to not require the raising of more equity?

And the answer is yes, because we are on top of that. So the reality of the situation otherwise, has been, we have invested in more assets than we had originally planned for certain.

We dealt some bigger facilities and we’ve expanded and brought more land than we had originally planned, those couple of years ago, we’ve also have spent more money over a longer period of time in drilling that we had originally planned, I believe productive results, we’re still driving towards our ounces, but we’re going to achieve those ounces in just the first two resource areas alone, and in fact, I’ve revised our goal statement to make it clear that we’ll get more ounces from less coverage of property, and that’s very exciting for us.

There’s other parts of it too that aren’t as productive in the sense that we did have some months of delay in getting our quality permit back a year and a half ago, and we had obviously the derailment that came with the BLM and it did also require us to reconfigure out fleet.

So to be fair to the whole picture, we haven’t been exactly on plan on every point, but at the same time, we’re now, not talking about getting the crusher built, or getting a system in place to do 20,000 ounces.

We’re literally talking about expanding that footprint even checking on some lands that we had an option on that gives us really opens the door to do the 80,000 to 100,000 ounces from Lucerne in a more immediate fashion.

So I think that there’s no question, some of these capital deployed puts us beyond the original objective of 20,000 ounces in three in a quarter million.

And when you talk about going from 20,000 ounces to 80,000 ounces the increase in cash, on the return on that capital deployed, is breathtaking, frankly.

So I think that it’s a very fair question. I think that we’re very, very strong fiduciaries. And I don’t feel – I worked for three companies, I think they’ve all had outstanding governance, I think that they’ve all had a particularly good financial acumen.

But I don’t think I’ve ever been involved in a group that is as strong a set of fiduciaries in the sense of Bob Rosse [ph], and Dan Kappes visiting the mine at least once a month, checking technically the metallurgy, checking operationally, the logistics, the cycle times, the fuel rates.

To have Bill Nance reviewing weekly cash flow, checking in, being supportive, and to have John insistent that we don’t want to dilute, but as fiduciaries, we have to have access to capital markets.

And being public, some people say it’s automatic. It’s not automatic. It’s not automatic, junior miners are not raising capital efficiently. They’re raising capital disastrously if they’re able to, at all.

And so frankly, I’m sincere when I say we don’t have plans to raise equity capital, but that doesn’t mean we don’t want to be positioned if we needed, god-forbid, to be able to do it efficiently, or if an opportunity presents itself.

I mean the BLM knocking us off our haul road, for me, it was the worst thing that happened in the almost four year now, I mean the fourth year that I’ve been here. It cost us, it delayed us.

But now, because we’ve had – I have to believe we’ve engaged with the BLM more than any other mine in Nevada for the last six month, and there’s a positive result of that.

The relationship at the state level, the relationship at the national level, and the relationship at the local level today, could not be stronger.

And the fact that we’re proactively planning on a weekly basis, not only the existing activities that we’re doing with them today for either drill notices or right away permits.

We’re pro actively planning with them how we accelerate the next steps. And I don’t think that’s so common. It certainly wasn’t common in our field [ph] before. So I believe that ultimately these activities will be accretive, I believe that just looking at historical valuation comps, and looking at75,000 to 80,000 ounce run rates, we’re in a scenario just from what we can achieve with Lucerne that the valuation will be over $1 billion. That’s easily validate with historical comps.

On the flip side, we’re at all time lows for comps. So the opportunity to have a cash producer with real substantive growth, cash growth profile, I think it going to be tremendously accretive.

I really, really feel good, not only about the ability to ramp up the operation, but the strength of the balance sheet as it sits today.

I really think that that’s going to give us a combination that will differentiate us materially.

And you know, frankly, I think it already is now differentiating ourselves in just the quality of our shareholder base. I’m ready to put it up against anyone now with the interest that we’re getting and maybe more than the interest with the real intimate understanding that those institutions are showing and what we’re doing.

For me, we already have an intimate understanding what we’re doing, but it’s gratifying for others to be seeing it as well.

So I think I take the point with the right constructive criticism, I think we take the point very, very seriously. I think that with hindsight, there are a few things that we would have, and could have done better, but we’re not static, we’re improving the team, we’re learning from these activities in an accretive way.

In other words, you can have an engagement with the BLM that isn’t desirable, but if the result is you have one of the strongest relationships with that federal agency from Washington to Carson City, well that’s pretty good, that’s a very good outcome.

The other thing that we’ve done is we’ve done a tremendous amount of soil sampling that wasn’t in the plan. And that was a breakthrough from an environmental standpoint.

And so the relationship with the Nevada Department Environmental Protection, and even frankly the National Federal Environmental Protection agency could not be stronger. So at the core, I think we really have something special here.

Carl Frankson – Private Investor

I mean it’s great that projections sound great, and that’s a good explanation and I appreciate that.

Corrado De Gasperis

I think, Carl, it’s a great question and it’s also great every once in a while to just reflect on the journey and what it’s been. But there’s...

Carl Frankson – Private Investor

Well as you mentioned, the capital raising, I don’t follow this all that closely, but I’m told the Toronto Venture Exchange, the company is up there, the index is down, what, 50% or 70% or something and their companies are just starting up there because they can’t raise capital.

Corrado De Gasperis

Yes. I think that it was very funny that I didn’t go to PDEC [ph] this year in part because the junior miners know I’ve had a gloomy year. I think that in that context, I don’t – I’m not very analogical, but without question, if you compare us with the junior index, we’re doing better.

I’m not happy with where we are, I’m not happy with the share prices. And I think we’ve got a foundation to really show and showcase to the right type of long term, the right type of permanent capital that this is a good company to invest in. I think that’s already started.

The question is, someone said, do you think that this is going to be survival of the fittest? And the response was, no, it’s going to be the survival of the finest because if somebody has an outstanding resource, and somebody has an outstanding management team, the capital is there.

Those projects will fund, and those projects will have tremendous return on equity. But the days of a car salesman selling the mine, they’re long gone. Those are long gone. They’re not going to be finance.

And so I think frankly, there’s going to be some very exciting industry activity with the majors and the intermediates, generating cash flow and valuations being at such a low point, I think it’s going to break. I think it’s going to break positive for all of us.

And I’m pretty excited about the position that we’re in, in that context.

Carl Frankson – Private Investor

That’s great. Well thank you. That’s a good explanation. I appreciate it.

Corrado De Gasperis

Thank you, Carl.

Operator

Thank you. The next question is from Lawrence Vani [ph]. Please go ahead.

Unidentified Analyst

Hi, Corrado.

Corrado De Gasperis

Hey there.

Unidentified Analyst

The second mine, I think that’s the Dayton, when do you expect to have that starting up?

Corrado De Gasperis

So that’s a great question, thank you. I didn’t elaborate more specifically on that. So let me say that where we sit today, although we have some drilling that we’re very excited to get to on the Dayton, we actually sit today with sufficiency of geological data.

And I would say this both for the Lucerne expansion, and for the Dayton to commence. Obviously we talked at length about accelerating the assessments, the engineering, and the permitting for Lucerne, and that’s very immediate and exciting.

But the Dayton also has sufficiency in the sense that we have enough geology, we have enough measured and indicated resource, we have enough scoping of those claims, and hoe we sort of drill the fences around that territory to be able to define a conceptual mind plan, and to be able to commence, and I say, the permitting and pre permitting activities.

I should say that from now, which just resource constraint which is only maybe like a month or two of work before we can get to that.

And so to answer your question, if we started permitting activities in the middle of this year for the Dayton, it’s only a 15 to potentially 18-month process.

The Dayton does not have any federal land positions on them, but I think what we’re going to do in the next couple of months, is fully engineer and assess the Lucerne, we’re going to push the envelope on what is truly possible there. And I’ll tell you what it looks like, it’s very exciting.

We don’t see a connection between Lucerne and Dayton, but we’re assessing everything from an operating and processing perspective. And then at the end of those couple of months with Lucerne defined and understood, and some of the interdependencies assessed, we’re going to move right into the Dayton permitting process.

So long story short, 15 to 18 months, that thing could be operational. And that’s very exciting for us too because in the grand scheme of things, by not having to sequence a six to eight months of drilling, in front of that, we can go a lot faster.

And so the drilling that we want to do for Dayton and the drilling that we want to do to expand the resource, will occur before the mining starts, but it does not have to occur before the permitting starts which is the longest lead time item which is, it’s not a scientific breakthrough, but it’s sort of a mini breakthrough for us in terms of the speed at which we can move forward.

Unidentified Analyst

Thanks. Now you touched on the seven days a week production. When do you think that’s going to be in?

Corrado De Gasperis

Well I concept, the Merrill-Crowe has always operated continuously. So that’s just to make a point about some subsets of the system.

We’ve already moved to a seven-day cycle for the crusher. And right now, the crusher is just an animal, it’s like an alligator, it just consumes everything that’s brought to it, and we love that.

And so we’re in the final stages of breaking the mining team to a four or three schedule or a three and half, three and a half schedule. We’re working out the final details, but we’re talking about just a couple of weeks before we’re actually capable of doing it.

So we’ve been on that, Dave’s been really, really pushing the system to become more reliable, more productive. And the changes are being made on a daily basis.

Unidentified Analyst

And one last thing. In terms of dollars, I know that before the favorable BLM development, I think it was costing you about 250,000 a month to a higher outside contractor and use their leased equipment, trucks. So how much do you think – I know you had to ramp up, and you got some more vehicle, but how much do you think it’ll save you given the recent development on a monthly basis?

Corrado De Gasperis

There was no question that it was costing us 250,000 a month, $10,000 a day, to $12,000 a day using those extra vehicles, okay. So those are gone, they’re eliminated from the system, but it’s also right to acknowledge that we had inefficiencies in addition to that.

So I’m going to use the best example is, we were using our caterpillars in the pit and we were mining, and wasting material, but the material we’re mining, they ore had to be loaded in a pickup point, and then had to be reloaded on to those smaller trucks.

So not only do you go from large to small, but you had the redundancy even right out of the chute. And so I don’t have it on top of my head, but there was at least $1 of inefficiency that we were incurring just because of double handling if you will and shortens slower cycle times.

So now, the caterpillars are going right, as soon as the ore is loaded, it goes right to the crusher. So not only do we have larger loads, shorter cycles, but going right through the crusher. And we measure the loads, we measure the cycles in minutes so we just had another mini breakthrough that were looking to take nine minutes off of a cycle. I mean that’s huge.

So if were at 13 and a half plus three, that was sort of 16 and a half, you might have another hidden one, 17 and a half were pulling that down to 15.9, but that number is going to be able to do a lot more tons.

So it’s really getting better, it’s really getting better.

Unidentified Analyst

But in terms of the out of pocket, I know you had to hire your own guys to drive now, and you had to ramp up with the purchase of the vehicles, but in terms of that 250, is that eliminated or is half of it eliminated? Or how do we look at that?

Corrado De Gasperis

No, it’s eliminated because we didn’t reduce our crew, we didn’t reduce our crew when we had to bring those trucks on because we had to have the double handling.

So we had our crew mining and wasting, and then we had a whole another variable cost to pick up and run. So that’s been eliminated. Now, we have increased since then, some of our human resource to have the seven days a week, and we have increased the fleet.

But those increases are going to give us more production. So I’m not sure if I’m being clear, but the 250 a month to $3 million a year, we’re not spending one penny of that money anymore. I mean it ceased two weeks ago.

Unidentified Analyst

Well that’s a relief.

Corrado De Gasperis

It’s a huge relief. It’s not just a relief dollars, it’s a relief productivity-wise which is a different point, we’re spending less money when we need more tons, and it’s a relief community-wise.

Less anxiety, less interdependency, less disruption.

Unidentified Analyst

Great. Thank you so much.

Corrado De Gasperis

Thank you, sir.

Operator

Thank you. And the next question is from Joseph Rigor [ph]. Please go ahead.

Unidentified Analyst

Hey Corrado. Thanks for taking my call.

Corrado De Gasperis

Hi Joseph.

Unidentified Analyst

I just wanted to get some more clarity on Dayton. You said 15 to 18 months once you begin permitting for it. So are we talking a 2015 start up? Or 2016?

Corrado De Gasperis

It depends on when we start. In an ideal situation, you can start these activities in May or June, and be ready before the end of ‘14, beginning of ‘15. That would be ideal.

There is some notions of shared facility that are very recent [ph] that we’re going to really study and engineer through in the next few months.

And so I think that three months from now, I will have a lot more clarity to that question and in the worst case scenario, I think it would be middle of 2015. I don’t see Dayton as a 2016 scenario in almost any scenario.

Unidentified Analyst

Okay. And then just a little bit on like initial size of production there, how many thousands of tons a year should we be thinking of in the basis and whatever you guys are thinking capital cost wise.

Corrado De Gasperis

Sure. So today, we have six million tons of ore. And that would compare to five and a half million tons of oil in the starter mine in Lucerne, just today.

And that’s not the entire resource. That’s just carving out small economic shell because we’ve only drilled about 63 of our own holes into the resource. So ultimately, let me say, ultimately, we expect there to be, and we know just going to be a lot more reserve to be mined.

But initially, there’s really no reason to think the Dayton couldn’t start up anywhere from 2.5 to 4 million ton a year operation, let’s say 2.5 to 3.5 million ton a year operation which puts you, we like to think in terms of 70,000 to 80,000 ounces.

So we started smaller on Lucerne for specific reasons, because we already had an existing infrastructure which we’re now ramping up and expanding, including, if you will the deep leaks that we have as Brian Post was pointing out earlier. It’s just as efficient for the small starter mine that we carved out, that’s not coincidental.

We looked at the existing footprint, we said, hey, we got 4 million tons of capacity, let’s carve off 4 million tons, let’s start going, let’s start getting cash flow and now let’s design this thing to be not 4 million tons total or a million a year, but four times that and sustainable, so 3 million to 4 million tons a year.

So that’s what we’re working on right now for the Lucerne expansion, to get it to be a 3 million to 4 million ton a year operation sustainably.

We wouldn’t design Dayton to start small for any unnatural reason, I mean we have a white piece of paper, how will we do it.

And so to answer your question, there’s so many scenarios that are possible. One that we’ve talked about is if you just replicated the existing footprint, at least design wise so that you had a crusher, a heap leach pattern Merrill-Crowe. You might be talking about a $35 million to $45 million now.

The metallurgy has already been tested in the Dayton. And so we already know that that’s feasible. So that’s a tremendous return with just the orders that we have, I mean it already justifies this. We expect with about $4 million of drilling, we’re going to define out a much, much bigger resource there.

But then we have to think about how are going to expand Lucerne. And is the expansion in Lucerne, something that could also support the Dayton ore or maybe initially support the Dayton ore.

So I think that there’s a lot of opportunity to enhance from just the base idea. And the base idea is not only feasible, it’s not only something we’re already doing, but it’s economically attractive.

No if we can enhance from that and get synergies from that, maybe we can, maybe there’ll be two separate attractive minds that make a lot of money, but maybe they’ll be better than that. And so that’s exactly the kind of thing we want to roll up our sleeves now, and do the right geological, the right environmental, and the right engineering study and design to accomplish.

Unidentified Analyst

Okay. Sounds good. Thanks a lot.

Corrado De Gasperis

Great. Thank you, sir.

Operator

Thank you. And the next question is from Richard [ph], please go ahead.

Unidentified Analyst

Good morning. Thank you very much.

Corrado De Gasperis

Hi, Richard. How are you?

Unidentified Analyst

Yes. You mentioned the chute zone with significant mineralization. When do you expect that – does that have to wait for the Dayton mine? Or when do you expect the development of that area?

Corrado De Gasperis

So yes. Great question. The chute zone is on the east side of the Lucerne resource area. So as we sit today, we’re mining on the west side of the Lucerne resource area.

And so I think that we couldn’t be more excited about the thickness of concentration of that mineralization, the potential.

Frankly, just from the physical landscape, the potential at the east side is not unlimited, but it’s enormously so that it seems that it’s unlimited. And as we’re engineering now, the expanded west side mine, the larger Lucerne mine, we are going to consider how and what on the east side could be accessible. So that will all be part of the study.

I think there’s really two outcomes. Some meaningful amount of ore can be accessible in the immediate expansion, and the rest of that isn’t. We would still like to scope that territory into the federal permit so that we could ultimately expand. But we’d have to drill some more and we have to develop some more of the East side, comparable, frankly, in concept to the Dayton but much, much bigger in terms of at least geographic span.

So I know I didn’t answer you precisely, but I don’t know exactly yet how to access it. But it’s going to be accessible at some point and we’re going to push hard now to see how much sooner rather than later.

Unidentified Analyst

What processing facility would you go to?

Corrado De Gasperis

I think that for almost all of the ore that we hit, substantially all of it, 98% plus has been oxide ores with known metallurgy. So we’re still talking about our existing American Flats facility, crushing, heap leaching, Merrill-Crowe processing. There has been some speculation that as we continue to hit higher and higher grades that we will be considering a mill versus a heap leach processing sequence. And we’re going to study that now, too, as part of this expansion process. But we have more insufficient space at Lucerne to build those facilities right there.

So it’s all connected. As the crow flies, it’s a mile and a half, maybe maximum mile in three quarters from Lucerne East up to American Flat where we would do all of our processing.

Unidentified Analyst

You’d be going across the existing highway.

Corrado De Gasperis

Yeah. Part of the engineering when you talk about the East side is, are there vein structures like the Chute that you could access underground, under the road. Is this surface mineral that you would want by moving the road? Those are all the consideration, and what’s just the logical sequence of doing that as you move from West to East. We don’t know exactly yet, but as far as we’re concerned they’re all feasible. We just have to think of what the most optimum one would be.

Unidentified Analyst

So what’s the timing on that situation?

Corrado De Gasperis

The timing that we’re putting forth now is that in the next two to three months we’re going to do all of that studying and all of that planning and all of that engineering, and with the solution, it will give us an economic and geologic model that we’ll then go to permit with the federal government, most likely. We have to finish the planning before. That’s certain, but we’re trying to get that bat as quickly as we can here.

Unidentified Analyst

So again, that’s out 15 to 18 months or so?

Corrado De Gasperis

Yes. Well, technically, if we kick in to a federal permitting process, we would expect it to be two to two and a half years. It’s different than the Dayton, because in Dayton you’re talking about 15 to 18 months to start something. In Lucerne, you’re talking about two to two and a half years to expand to something, and that’s exactly why our initial approach was to get at least four years of mine life so that you could allow for the time to, A, analyze what the expectation optimally would be and then permit it so that you could, in a non-disruptive way, expand into the bigger operation.

So in other words, the East side is not – I don’t perceive it as a third mine. I see that as adjacent coincident with the expansion of the Lucerne mine.

Unidentified Analyst

Okay, thank you very much.

Corrado De Gasperis

Thank you, Richard.

Operator

Thank you. And the next question is from James Peck. Please go ahead.

James Peck – Private Investor

Hi there. In terms of processing, what’s your maximum capacity as of today and sort of what’s the limiting factor here?

Corrado De Gasperis

Great question. I think that today the constraint would be the amount of fluid that we can process through from the Merrill-Crowe up on to the heap leach pad, so it’s the square footage of the heap leach pad. And it’s probably where you want the constraint to be, I think, in our situation because the Merrill-Crowe facility is the least expensive and the easiest to expand.

So to say it another way, I think we could mine, I think we could haul, and I think we could crush without question in my mind up to 3 million tons a year. So it’d be have to 2.5 million to 3 million tons a year today, and with just the modification of the crusher permit, I think we could ultimately get to 4 million tons a year. That’s exactly what we wanted to design, which was an infrastructure, a hard infrastructure that would allow for that level of operation.

So that’s all in place. Even with the trucks we have now, just looking at it, I mean, we could probably do that, which is a big statement, it’s a very important statement. The only thing that we’d have to expand outside of fluid capacity, so it’s a question of do you do 1,000 gallons per minute, do you do 1,300 gallons per minute, do you do 2,000 gallons per minute. It’s just a question of having that fluid capacity and that’s pumps and water containment, the heavy stuff, the trucks, the crusher, et cetera, even the infrastructure of the roads, the wells, the water, if it’s all in place.

The only thing that we would really have to expand would be ultimately the heap leach capacity. And that’s why it’s also an optimal time to think about heap versus mill in the overall equation just because it’s important to do that. And to us, there’s no bias, which gives you the most return on investment, which gives you the fastest, largest cash return on investment. It will tell us. It will tell us based on us now knowing all the other variables.

James Peck – Private Investor

And through the expanded Lucerne Mine, can you talk about the same thing you do with Dayton, estimated production and sort of capital cost that will take to get that up?

Corrado De Gasperis

Yeah. So the expanded Lucerne Mine really is consistent with what we were just talking about. So I think that if you just assume we’re going to stay with the heap leach and existing metallurgical process that we have today to get to 4 million tons a year, I think mainly the number one thing you need will be a new much, much, much bigger heap leach pad. And we’ve talked on depending on how you want to size that thing. It’s anywhere from just $6 million to $10 million. So literally for $6 million to $10 million, you can increase this thing’s production to 3 million, 3.5 million, 4 million tons a year, and that’s just a tremendous leverage in terms of cash flow in the system.

The only other constraint would be obviously expanding the permit onto federal lands to be able to access that magnitude of ore for that length of time. In that regard, that is the essence of this production/cash growth profile. That’s in a nutshell. Almost everything else is already in place and all we need is more leach capacity and the federal permit, conceptually, to open this thing up. Substantively, that means you do have to do some environmental studies, you have to do some engineering studies, and you have to determine feasibility economically of what’s the best. And that’s exactly what we’re doing right now, or kicking off like next week. But it’s exactly what we’re getting to know.

James Peck – Private Investor

Perfect. Thank you.

Corrado De Gasperis

All right, thank you, sir.

Operator

Thank you. And the next question is from Gerald Lennon [ph]. Please go ahead.

Unidentified Analyst

Hi, how are you today?

Corrado De Gasperis

I’m doing great, sir, thank you.

Unidentified Analyst

Just a couple of questions, and it goes back to the dilution, potential dilution by the continued issue of more shares [inaudible]. The fleet, the current fleet that you have, is that lease, operating lease, or is that with some of those lines purchased?

Corrado De Gasperis

Yeah. So we had purchased five Caterpillar haul trucks and because of this diversion by the BLM, we made the decision to sell those trucks and rent these articulated 40-ton Caterpillars. Pictures of the fleet is on our website, if you want to see it. They’re new.

Unidentified Analyst

Yeah. I noticed it.

Corrado De Gasperis

Yeah. And so, one of the reasons to do that was, obviously, it’s much more capital sensitive. Secondly, Caterpillar and Volvo got into a brutal bidding war, because this is a segment of the market that Volvo is actually making some pretty incredible head roads into Caterpillar and they didn’t like that very well. And so, we feel we got a great, great rate. But more importantly, as we’re about to do a couple of three months of studying for what the ultimate mine plan to look like, we didn’t want to lock ourselves into a smaller truck fleet. Rather, maintain the flexibility of this one.

It was the most capital sensitive and I think the most intelligent way to approach this until we know what the full final answer will be.

Unidentified Analyst

And probably more restriction, too, with renewable [ph] stand and on status, too. And secondly, did I understand you correctly to say that you’re projecting to pay most of the debt now by the end of the – late [ph] this year?

Corrado De Gasperis

Yes, that is correct.

Unidentified Analyst

And I would question why you would take that approach with where interest rates are and in terms of protecting, diluting and degrading and sort of a dilution.

Corrado De Gasperis

Yes. Yes.

Unidentified Analyst

And the reason I raised that is I think I recall earlier when you filed the shelf registration, there were statement made that there wasn’t any anticipation made to actually use it. You just wanted have it there in case you needed it. And then suddenly, out of the blue, we get an email about this [ph] press release earlier this week talking about the press or the current offering and it’s kind of disheartening to me, it’s kind of like they don’t listen to like local property tax [inaudible] thing. This is the last lever that we’re going to use and then six months later, they’re coming back asking for more money.

Corrado De Gasperis

Yes. So I appreciate you saying and saying it openly and bluntly. Let me just make a couple of comments there. I don’t think that as producers [ph] of the company that we would ever file a registration shelf and make a statement that we would never use it, okay? I’m certain I never made that statement and certainly, didn’t have any current plans to use it at all when we filed it.

And that was also true when we filed our first shelf over two years ago and almost a year when we buy before we even thought about using it. So the point is is that we are a capital intensive industry that’s in a ramp up in the startup and there’s a dynamic set of activities, not the least of which is the BOM impacting in some ways the speeding cost of our plan and in other ways the opportunities that are being presented.

And so just to be very specific about your first point, there’s no desire to prepaid debt. The Caterpillar financing that we have has very low interest cost, not only will we see it out through to maturity before 30 months but we’ve also been advised by Caterpillar now that we have additional credit that there are [inaudible] impact. I mean, they delivered $5 million worth of trucks three weeks ago with no money down, so we like that very well.

The ore unmet [ph] debt, the revolver, if you will, was short-term bridge that we did last July that’s due to be repaid by this July and so it’s good liquidity in the sense that it is a revolver but it was expensive and we have – with where our balance sheet is today and where our production is today, I would expect that we would have every financing alternative available to us going forward and I would agree with you 1000% that if there was a need now going forward from this point, low cost debt financing would avail themselves [ph] to us much more readily and that’s a strength – that’s just gives us more flexibility and I think that that’s where we want to be.

I may have misspoke. I did not suggest that we were going to accelerate or prepaid debt but I made the point that we’re going to pay off the debt that’s due and that debt in particular was expensive and so it served its purpose. We’ll pay it. We’ll pay it, we guys [ph] we’re supposed to and we’ll have a stronger balance sheet when we’re done.

Unidentified Analyst

Okay. I guess that pretty much addresses it. But just one comment, just unsighted [ph], I’m just hoping that maybe there could be a little bit more communication because I do get notices of the press releases but they’re very infrequent and I would think that you could use that facility to get your hold [ph] a bit more informed, more inclined [ph] point.

Corrado De Gasperis

Yes, I think it’s a very good point. I think that I personally feel like my capacity is growing. I think that’s tied directly to the great work that is now being done on the ground in terms of stabilizing the system. I think it’s tied to the fact that we have such good community support. I think it’s tied to the fact that the elections last year are behind this and we had – from at least, our preference is we bring [ph] success for the people who came in and so human capacity grows to look more externally to have better, clearer, more engage in best relations and I think – and I’d like to deliver on what you’re asking which is more frequent communications about operating results, we did have sort of unusual period where wheel [ph] from the first port to a long blackout period with year end.

And I think the combination of where we are operationally and where we are in the calendar is going to result in much more frequent communications like you’re suggesting. I look forward to that but I also look forward to being out in the road and giving people more direct updates. We’re going to be at the Roth Conference Monday and Tuesday of next week so I look very much forward to doing that as well, but it’s a good point that’s very, very well taken.

Unidentified Analyst

Okay. Well, thanks and I’m really excited about the growth.

Corrado de Gasperis

Thank you. Thank you, sir.

Operator

Thank you. And the next question is from Regis Monsor [ph]. Please go ahead. Mr. Monsor, your line is open. Please go ahead. Mr. Regis Monsor, the line is open, please ask your question.

Corrado De Gasperis

We may have lost him. Go ahead, Lange [ph].

Operator

Thank you. And the next question is from Jack Albright. Please go ahead.

Jack Albright – Private Investor

Good morning.

Corrado De Gasperis

Hi, Jack. How are you?

Jack Albright – Private Investor

[inaudible]. Very interesting on this. I got a couple of question here. First, on the recovery of the ore, I think you mentioned that 80% return on what you – of the ore that get stuck, pal [ph].

Corrado De Gasperis

We have our metallurgical test on average for the entire Lucerne Resource is about 73% for gold and just under 50% for silver on average. Obviously, there’s ranging depending on the ore types and we certainly do have ores that get in excess to 80% and so far, the ore that we’ve been processing, we’ve been expecting about 68% and we’ve been – all of our processing to be and mainly for the deposit [ph] that have been on the longest is coming out almost right on that for gold and a bit higher for silver. So I think metallurgically, we’re assuming pretty good that all of the test work that was done in advance starting up production is proving correct.

Jack Albright – Private Investor

And the ore that you don’t recover, what happen to it?

Corrado De Gasperis

The ore that we don’t recover remains in the heap-leach pad, so that’s a very interesting point. Typically, our economic assessment tells us at 70% gold and 50% silver, we make a lot of money so it needs a minimum threshold. There is notion that we saw [ph] a pretty higher great ores on to the heap-leach pad that we will segment them until a separate cell [ph] would be idea that if ever the company, for different reason, made the decision to go to the milling and milling, you can get anywhere from a load of high 90 recoveries.

I think our ore was tied to that 96%, then there is the economic idea to reprocess some of that ore and get almost all of it. But we don’t have that in the plan at this moment. The 70% plus is the expectation of the business plan. Everything else, although it resides there, it’s – there’s not a plan to get it.

Jack Albright – Private Investor

So someday, they might be recoverable?

Corrado De Gasperis

Yes. I mean, there’s two ways, I mean, if you had a mill, you would – with these prices, you do want to instantly recover it and if gold prices keep going up, something else might want to take it away and recover it.

Jack Albright – Private Investor

What’s the chance of gold prices going up?

Corrado De Gasperis

My personal opinion is very high. I don’t see anything structural in the world either from a monetary or physical policy perspective or frankly from a supply and demand perspective yet that shows any indication of relief. Obviously, there’s a lot of psychology that also overlays the fundamentals, but the fundamentals from our perspective in the longer-term were very bullish, in the shorter-term, it’s always impossible to predict.

Jack Albright – Private Investor

Okay. Now, last conference call you have – by the way, the press release this morning, I opened that five minutes before the call, that was – I really got that late.

Corrado De Gasperis

A little bit sooner? Okay, that’s a point well taken. We’ll try to be more advance.

Jack Albright – Private Investor

Okay. Now, we spoke last call, last one of these we have about dividend and you said, since we have a gold in the ground, you don’t see any reason why you shouldn’t be paying dividends.

Corrado De Gasperis

Right.

Jack Albright – Private Investor

The stock prices just haven’t been there for Comstock unfortunately and it’s been really quite rolling also to be going up or down too much. What the chances are that company pay me dividends for ours [ph] has poor stock or if we recover some on earnings –

Corrado De Gasperis

Sure. Yes. So through [inaudible], I think that we’re certainly now opposed to cancel the dividends. I think the prerequisites would have to be solid, stable, sustainable cash flow in excess of the investments that we need to make to grow to the size that we’ve grown. So certainly, in our view of the world, that will occur someday and I know that we will have enough cash flow to invest in our facilities, in our production growth, enough cash flow to invest in our exploration and development growth and some left over.

And when we get to the point where we have – and some left over, we’d love nothing more than to distribute it to shareholders either as cash dividends or maybe you never know, you could have some fund and maybe through some gold and silver, that will come back.

Jack Albright – Private Investor

When do you think that day will be? A far reaching question?

Corrado De Gasperis

It’s not that far reaching. We have looked at the horizon, if you’re just talking about getting certainty and on line [ph] and you’re talking about producing 150,000 ounces per year, we’ve been talking in terms would be in late 2014 or mid 2015, the federal permitting process [ph] to Lucerne expansion in the late 2015 or 2016 so you mature those growth out and all of the things being equal, you’ll have excess cash flow.

Jack Albright – Private Investor

Okay.

Corrado De Gasperis

But I didn’t just declare a dividend in 2017 but what I did say is that there is a horizon where we’ll have excess cash flow and we’re excited about it and we’ll have positive cash flow immediately. The difference means that we want to put a meaningful amount in those dollars into the ground either in production facilities to grow or in development of gold and silver in the ground because that’s the other side of this discussion is were sitting at the very frontend of a very, very long runway and we build on a tiny fraction of the Comstock. And then we expect that the ounces don’t – 3 million to 5 million is a very, very recent, very intermediate depth to something much, much bigger, so all that’s relevant.

Jack Albright – Private Investor

Okay. The chute here, it sounds very interesting, very exciting, exactly what is it?

Corrado De Gasperis

It’s a vein, it’s a concentrated vein representing – so the cross-sectioning of two structures, two geological structures that come together and create a channel, if you will, for what was once hydrothermal activity, material flowing and depositing gold and silver, so there’s a concentration on a vein that has thicknesses on one dimension, width from 100 to 150 feet to length of up to 450 feet.

And it’s got a lot of local excitement lately because it compares to one of the historic bonanzas, the Woodville Bonanza that also was in Lucerne Resource Area on the Comstock. So substantively, it’s a rich concentration of ore. We only drilled a tiny number of holes, yet our structural understanding of the geology and the holes that we drilled to validate it told us there’s already something big there, but how big, we have no idea because it’s a vast area and we’ve only drilled just a little bit so the potential is huge. But it already rates, it already rates with the Woodville Bonanza. If we had a lot of more holes and a lot more measured resource there, we’d be calling it a bonanza very loudly but we need to do a little more work but we already know the size of the resource is equal to a greater than the Woodville so it’s very, very exciting.

Jack Albright – Private Investor

Okay. You said about 150 feet wide and 150 feet long?

Corrado De Gasperis

100 to 150 feet and up to 450 feet.

Jack Albright – Private Investor

400.

Corrado De Gasperis

And that’s we what we know, Jack, right? We haven’t drilled that extensively. That’s only what we have been able to identify. That’s identified. It’s in a vast area.

Jack Albright – Private Investor

How deep is it?

Corrado De Gasperis

I think from the road level, it was about 400 feet or 400 to 500 feet, so it’s not that deep either.

Jack Albright – Private Investor

The Woodville Bonanza, where was that located at?

Corrado De Gasperis

It was in the, if you’re thinking about the Lucerne Area, it was just in the northern end of the Lucerne Area and between Devil’s Gate and the New York Mine.

Jack Albright – Private Investor

Okay.

Corrado De Gasperis

And in the context of historical Comstock, it would be one of the more southerly [ph] and may have been the most southerly bonanza coming down just to the northern tip of our Lucerne Resource Area. I’ll show it to you next time you’re here. I’ll show you the Woodville shaft. It’s visible.

Jack Albright – Private Investor

Okay. I like to see that or –

Corrado De Gasperis

Yes.

Jack Albright – Private Investor

– the map on it.

Corrado De Gasperis

Yes.

Jack Albright – Private Investor

If I have the map so I would check it as soon as we get going here.

Corrado De Gasperis

Sure, yes. Sure.

Jack Albright – Private Investor

How’s the Gold Hill Hotel doing?

Corrado De Gasperis

It’s doing really good. It’s doing actually a lot better. It’s getting warmer and there’s a tremendous amount of visitation occurring now, so it’s fine.

Jack Albright – Private Investor

Is it making it profit or still in a loss state?

Corrado De Gasperis

It’s been cash positive for the last few months, right, so we’ll see how it goes. We’re minimizing any need for a cash there, so it’s ramping up much, much better.

Jack Albright – Private Investor

I know it cost a lot of money to run that thing and to be in that business but I think you cost it too much.

Corrado De Gasperis

Yes.

Jack Albright – Private Investor

It made you profit [inaudible], okay.

Corrado De Gasperis

I appreciate that. Thank you.

Jack Albright – Private Investor

Now in the Sky, what are we doing with that thing?

Corrado De Gasperis

The Cabin in the Sky?

Jack Albright – Private Investor

The Cabin in the Sky.

Corrado De Gasperis

Yes. It’s plain to see, we’re now expanding – well, let me say it better, we’re now planning to expand the heap-leach pad and we’re planning to expand the operation as we’ve just been talking about for an hour and the Cabin might be an ideal location not just for the frontend being a visited center, but the back meeting on some of our administrative officers in New York [ph] space. So we’re going to fully move, utilize the space for us [inaudible].

Jack Albright – Private Investor

How much land area?

Corrado De Gasperis

I think it’s about 4 acres, 4 or 5 acres. It’s over 3,000 square feet in terms of this facility.

Jack Albright – Private Investor

Okay. And my last question is –

Corrado De Gasperis

Sure.

Jack Albright – Private Investor

– the convention, when and where?

Corrado De Gasperis

The annual meeting?

Jack Albright – Private Investor

Yes.

Corrado De Gasperis

Absolutely will be here on the Comstock and it might be a little earlier this year. We’ve done it in June traditionally. We might hardly do it in either late May or early June and we’ll probably setting the date for that in the next couple of weeks once I get the 10-K filed, our guys will get focus on the record date proxy and the annual meeting.

Jack Albright – Private Investor

Okay.

Corrado De Gasperis

And we’ll let you know for sure.

Jack Albright – Private Investor

Okay. I’ll be looking forward to being there again.

Corrado De Gasperis

Yes, hope to have you.

Jack Albright – Private Investor

Enjoyed the last, it was wonderful. Okay. Well, that’s –

Corrado De Gasperis

I like it. Thank you so much. Thank you, sir. Have a great day.

Jack Albright – Private Investor

Keep up the good work.

Corrado De Gasperis

Thank you. Bye-bye.

Jack Albright – Private Investor

Okay, goodbye.

Operator

Thank you. And the next question is from Paul Front [ph]. Please go ahead.

Unidentified Analyst

Good morning. I have a few quick questions. What is your estimate for consulting in professional fees for this year?

Corrado De Gasperis

Well it’s significantly less. I think in total, the number was going to be about $900,000 and that would include primarily audit fees. We are actually accelerated finally [ph] this year. We’ve actually been through full servings approximately [ph] compliance audit and then those kinds of things.

Also we have established a lot of new work processes this year including things like inventory and inventory costing that are brand new to the effect of the company. But for most intents and purposes, the dollars there will be significantly less because last year we dealt with the BLM. Last year we dealt with the BLM appeals. There was a tremendous community development push. That was very incredibly successful. But most all of that is behind us.

The nature of those dollars are going to change. It’s more towards environment and engineering work and we’ve engineered about $1.2 million just for the Lucerne expansion and activities that we were just talking about.

Unidentified Analyst

Oh sorry [ph].

Corrado De Gasperis

So meaningfully less, but I think in terms of the color of the money much, much more productive perspectively.

Unidentified Analyst

Great. And general administrative last year was $5.5 million. What’s your estimate for this year?

Corrado De Gasperis

Say that again?

Unidentified Analyst

General administrative expenses last year was $5.5 million and what do you expect this year?

Corrado De Gasperis

Yes, yes. It’s closer to $4 million.

Unidentified Analyst

Okay, great. In terms of selling the gold forward, do you have any plans to sell production forward to lock in the price?

Corrado De Gasperis

We don’t currently have any plans to do that although we’re always assessing the ability to optimize price. And right now we’re open. We did fund the revolving loan by selling gold forward about $1,600 and so to the extent that gold is below $1,600 it does effectively hedge us. So we deliver the metal at the $1,600 rate for us.

Unidentified Analyst

Right.

Corrado De Gasperis

We can do better but other than that we haven’t done any forward selling.

Unidentified Analyst

All right. In terms of exceeding the production estimates of 18,000 ounces to 20,000 ounces this year, what kind of capital expenditures above and beyond what you’ve got planned would be necessary to take you above that 20,000 level?

Corrado De Gasperis

Well we are going to spend about 2 million expanding heap leach, in here we have only about $700,000 to $800,000 [ph] of what I would call capital improvements, nothing individually material. So this year that will give us the expanded heap leach for the continuity of the existing operation but it also allows to ramp up the rates a bit above the 20,000 potentially up to a 30,000 rate. So that’s intermediate.

The only other capital would be the establishment of a larger permanent and a larger, longer heap leach which I said earlier depending on the size could be $6 million to $10 million.

Unidentified Analyst

Right.

Corrado De Gasperis

Now, there’s an important point and I don’t know if it’s not coming across as strong as it should is that all of the capital that we need is already in the ground except for the management of this heap leach capacity.

Unidentified Analyst

When you say the management of this heap leach capacity?

Corrado De Gasperis

Expanding as we need it, right?

Unidentified Analyst

Yes, yes.

Corrado De Gasperis

So there’s a little expansion this year which is a couple million and then ultimately and coincident would be expanded mine plan we are going to have something that’s [inaudible]. We’re the first heap leach which just requires a minor expansion this year was designed to the initial mine plan. The next heap leach will be designed to the ultimate or the bigger mine plan.

But other than that, the crusher, the fleet if you know, the water, the outlet facility, the generation it’s all in place.

Unidentified Analyst

Yes. So in terms of making the jump from 20,000 to 30,000 is the water in fact dependent on getting the water permanent sometime this summer?

Corrado De Gasperis

It does, yes, it does.

Unidentified Analyst

Okay.

Corrado De Gasperis

Because that will allow us to do a rate of more than a million per annum.

Unidentified Analyst

Got it, okay.

Corrado De Gasperis

Yes.

Unidentified Analyst

Let me just see here, in terms of the management team that you’re dealing with at the BLMs, has that changed over the last year?

Corrado De Gasperis

Yes, you mean the management of the BLM?

Unidentified Analyst

Yes, in other words, there’s a national level, then there’s I guess there’s a regional level and then the local level?

Corrado De Gasperis

Yes. So the state level has been most stable. Amy Looders [ph] is the Nevada State Director and so we know her very well. Neil Cornzy [ph] who’s actually a Nevadan believe it or not is acting as the head of the BLM nationally. His dad was and still is very much engaged in the mining industry up in the Crowe Trend [ph].

But the local management teams in May and I’m only laughing because that’s what happened when we got sort of mapped off our hole road, it was a new relationship. It was a surprise circumstance. And now we would say it’s a very strong relationship by way of electrical shock.

We engaged in it very, very directly and now the yard came up much stronger in the end, but there’s a little bit of a bumpy road there, no point intended.

Unidentified Analyst

Yes, all right. Thank you very much.

Corrado De Gasperis

Thank you, sir.

Operator

Thank you. And we have our next question from Alexander Goran [ph]. Please go ahead.

Unidentified Analyst

Hi, Corrado.

Corrado De Gasperis

Hi, how are you?

Unidentified Analyst

Fine. This earned Dayton Spring Valley, about what percentage did that represent to the total land mass?

Corrado De Gasperis

Yes, good question. So it’s a tiny percentage. Well, let me answer it two ways as I’m doing the calculation in my head. I mean I would say at least R&D and being in [ph] Spring Valley, it’s like maybe less than 20%. Lucerne is 10%, 15%.

We’ve only drilled though, Alex, we’ve only drilled on a tiny, tiny fraction of that percentage I mean probably in surface context much less than 10%. And when you consider depths, gosh I mean I know it’s miniscule but you can say certainly less than 4% or 3% because we’ve only drilled the depths of on average 500 to 600 feet and we know in the north the old Comstock miners went the depths of well below 3,000. We’ve hit ore at 14,000 feet already and now is the deepest ore that we’ve drilled. So now even half of what the old timers were mining at.

So this is a very profoundly rich, profoundly deep ore body and the discovery of another Bonanza. I mean it’s just staggering what the potential is. And we’re shy to even try to quantify it but we shouldn’t be shy just to talk about the geometrical dimensions. I mean they’re huge.

Unidentified Analyst

If we talk of the northern target, the north extension in the occidental area instead of – when do you envision now in many years that you maybe developing those?

Corrado De Gasperis

Yes, good question because let me make a different point before I answer it. We have 10 what we call 10 highest grade Bonanza targets. We have 10 defined, okay? That’s just based on what we know, 10. One of them was near the Woodville, right. One of them is in the Dayton and the remaining eight are in the north.

So the impression that most people have is that, "Oh the north was mined out and you guys are not heading south and you’re hitting on every hole." The reality is they missed more in the north than they found as far as we can tell from the mining.

So the reason we started in the center and moving south is that there is mineralized evidence immediately at the surface and drilling 50 foot, 100 foot, 200 foot holes is very, very efficient, in other words inexpensive rates of discovery.

In the north where we have more concentrations of higher grade targets and there’s more information, there’s more data. So that’s why we have most of our targets up there. I would never suggest there couldn’t be an equal number to the south it’s just that we have more data to the north.

The geology gets down and some of the targets start at 700 feet, 800 feet, so the drilling is more expensive but no less probable because we have more data there. So it was really capital sensitivity that led us to try to validate first of the most near surface, most mineable ounces.

And that we need capital sensitivity to answer your second question, like how fast can we go structurally. There is no reason we couldn’t have six drillings deployed versus three drillings deployed which is more normally what we would do.

But once we’re generating cash from this initial, we can drill faster. And we’ve had a lot of investor say, "You hit on every hole, why don’t you drill faster?" It’s at the question of getting that cash flow. And we would like to do that, but all in a very highly probable – we’re not speculative in our DNA. We’re very conservative.

And what attracted me to this company was that they spent so much time studying the geology before they started drilling. I mean I just love the discipline.

Unidentified Analyst

You wouldn’t care to speculate possible ounces why this is all developed?

Corrado De Gasperis

Okay, so I wouldn’t care to speculate, but I have to have geologist and even financial institutions with geologists saying, "Rationale extrapolations of what you already have should be from $15 million to $20 million," okay.

I don’t know how I can support that with you today, but the geometry and the historical geology could nearly support it. It’s really, really exciting in that regard.

Unidentified Analyst

One more question. I think I read something some time ago that the State of Nevada was interested in selling some of the land?

Corrado De Gasperis

Yes. There are two discussions going on. One I think is that 80% plus, I don’t know the exact percent of the land in Nevada is federal BLM. And the BLM has launched programs to sell their land. They’re just slow about it.

And the State of Nevada just introduced a bill into its state senate to acquire from the federal government the land because it is slower to permit federal land than it is to permit the state land. And the state sees an opportunity to accelerate economic development as they can be more in control.

I don’t have global mining acumen in every jurisdiction and I don’t want to because in Nevada, it’s incredibly pro business and pro mining. They do it the right way. They do regulate it, but they do it with the intention of economic development and so it’s really, really a good place to be.

Unidentified Analyst

So the consequence is we may be able to buy eventually some of this land?

Corrado De Gasperis

Yes. The BLM offers programs to sell it. Harry Reid and Senator Heller, the two Nevada Senators are very active in proposing land bills that convert the federal land to private land. They’re actually doing it right now for the copper mine in Lyon County which is where we also participate.

So there is almost like a grass roots movement coming from two or three different places to both federal and state and I would say even local counties to try to convert federal land to private land so that the speed at which it can be used productively goes up. And I think some of those things will actually start to bear fruit.

Unidentified Analyst

Okay. And I imagine that will reduce the cause of the difficulty in getting permit?

Corrado De Gasperis

It would be exponentially faster for us. So we are focused and I would say despite our current size, we’re growing of course, our relationships at all levels of government including federal are very, very strong with very positive support behind us.

Unidentified Analyst

Any idea as to when we might expect to be in a position to be able to buy some of this land?

Corrado De Gasperis

I think that in the next two to three months, we could have some more relevant discussions about the opportunities, I do. Because as part of our expansion planning, we are going to prioritize these kinds of opportunities, in other words, it’s time now. If it’s possible, it’s time now to try to affect it.

Unidentified Analyst

Okay, thank you very much.

Corrado De Gasperis

Thank you, sir.

Operator

Thank you. The next question is from Dr. Dennis Hof [ph]. Please go ahead.

Unidentified Analyst

Hi. You’ve done a really great job by I think both giving us color and information about what you’ve been doing and what’s going on and I appreciate that very much.

Corrado De Gasperis

Thank you, Dennis. I’d like to interject before you say your question that the nature of the questions and the number of questions to me is very heart warming. I mean there is a real serious interest across the spectrum and I appreciate it very well.

Unidentified Analyst

Well I’d like to, and if I could, I noticed this is probably the general question about what’s going on with precious metals and also with the miners is probably out of your wheel house, but I know you have an interest into that and some thoughts.

Corrado De Gasperis

I do.

Unidentified Analyst

First of all, I’m sure you saw in the Wall Street Journal today that they’re investigating manipulation at a worldwide level of spot drilled and silver prices and much in a way they did with LIBOR. And there has been of course a lot of concern in this country about commercials pushing down prices when it soothes them.

Corrado De Gasperis

Yes.

Unidentified Analyst

And I was wondering if you have any sort of gut level feeling about precious metals whether you think they’re being manipulated and well for my view maybe held down, because in terms of a lot of global things going on, it’s hard to understand the direction of precious metal.

Corrado De Gasperis

Actually yes. So I don’t obviously have any knowledge of any of it.

Unidentified Analyst

Sure.

Corrado De Gasperis

But I do. I am surprised with the recent lack of correlation to what’s going on fundamentally, right? And I think that when you look at the level of central bank buying, when you look at the persistence of negative interest rates against the US currency, when you look at the debasement of the US currency, when you look at the absolute lack now shifting from monetary and fiscal policy to supply and demand, when you look at the absolute lack of the industry to get any kind of traction to grow a production, okay, it’s struggling mightily to grow production.

When you see 8 to 10 CEOs in the major links being replaced, when you see only 3 million ounce new discoveries in the last five years, so you’re in an absolute net depletion mode and the emerging economies of the world including India with 1.2 billion people, in China with 1.3 billion the demand, the appetite for the resource without question is only going up. And the supply is very questionably not going up.

And the fiscal and monetary policies with primarily in my opinion the debasement of the US currency which is I don’t see how it could possibly be reversed. I don’t understand. I do understand, I do understand the lack of correlation, but it’s also proficient [ph].

And I think you’re starting to see its interesting lap. There are a lot of physical gold funds. There’s a lot of ability to buy metal, but there’s a lot of paper moving around too. And so I wonder if everyone called their paper contracts and monumental delivery what the heck what happened tomorrow because that’s what you get.

Unidentified Analyst

And also, there’s quite a contrast you could see maybe the individual buyers, I don’t know how they’ve done money [ph], but it’s incredibly immense, I mean the trouble of keeping up with the demand for physical gold and silver.

Corrado De Gasperis

The northwest territorial is towards silver, they just couldn’t get any. I was done trying their back at it.

Unidentified Analyst

Yes so what’s going on? So let me ask a similar question about the miners as you’ve been pointing out the Dure [ph] miners had a lot of difficulties. But it’s not just in the Dure miners it’s been in all miners. And I noticed that the hedge funds have not only sold positions in miners, a lot of them have gone short.

And in fact the hedge funds that are short only or long short, they’ve been getting there heavy hand into every sector that they’ve gone short except the miners.

And when I look at level two quotations and I see the way the cell side just balloons outage, it moves down, it’s obvious that it’s not somebody simply trying to exit the position what you tried to do as carefully as possible, but rather they seem to be trying to force prices down because they are short.

Have you and your stock seen any kind of a building of a position?

Corrado De Gasperis

Yes. So I think overall we’ve had sort of in the first quarter some building of a short position. I don’t think it’s overwhelming but the only read I can have on that is somebody betting it for company making it. I think that’s ridiculous personally in terms of context and it doesn’t distract us at all.

I do think that as a broader point of the industry, there is a tremendous nucleus of quality, but it is absolutely the minority in terms of having very, very good resource definition with great potential. I think one of my guys just send me a note saying that in answering Alex’s earlier question just there be and then with certain resource models alone represent just under 10%.

So that’s mind boggling in terms of what the potential of our already good 3 million plus ounce resource is. But good management, good project management discipline, good coordination, those companies I think represent tremendous upside value when they have assets that are historically at the lowest end of any valuation multiple full stop.

I’m not even talking about relative to gold. Everybody wants to say relative to gold, it’s just relative to themselves full stop, okay, they’re at the bottom. But all you need to do is read through the guys that they just don’t have the resource that will only get into production or they don’t have the management team that could ever get into production.

So in the first case, the resource that we’re now getting to production, of course, it’s just going to die. The resource that should have gotten to production, but the management wasn’t capable it’s going to get acquired, okay. The strong will get stronger frankly because in fact the capital that’s out there is going to be abundant for those guys and it’s going to be scarce and nonexistent for the other guys. That’s how I see it.

And I think that there’s some confusion in the market. If you’re an index follower, if you’re GDXJ follower, right, you’re sort of following your [inaudible] index when you have a thousand companies and only a dozen are attractive.

Unidentified Analyst

Right.

Corrado De Gasperis

So obviously I’m heading with this. I put this right at the top of that group and that’s why I like where we are and I’m biased. So draw your own judgment.

Unidentified Analyst

Right. No, you’re welcome to be biased. I’d be disappointed if you weren’t.

Corrado De Gasperis

Yes.

Unidentified Analyst

Well thank you very much, I appreciate that.

Corrado De Gasperis

Great, call. I appreciate it.

Unidentified Analyst

Those two issues do impact us. And I think, I’m not a conspiracy theorist by nature, but in this case, it makes me wonder.

Corrado De Gasperis

You do want to wonder. I mean you don’t even have to be a conspiracist to say if you’re a CFO of the federal government, of course you want interest rates to be zero negative. So that has to be one.

Ultimately to me if you’re devaluing the currency, if you’re printing money and you’re keeping interest rates low, why hasn’t more capital flowed into the metal? It is flowing into the metal and I think it’s going to grow.

Unidentified Analyst

I predict at some point that we are short squeeze. That will be pretty significant, I mean pretty incredible. But that’s just my belief, my bias. Okay, thank you, sir.

Corrado De Gasperis

Thank you very much. Thank you.

Operator

Thank you. And the next question is coming from Don Phillips. Please go ahead.

Don Phillips – Private Investor

Hey, Corrado. How are you doing?

Corrado De Gasperis

Hey, you’re a patient man. How are you?

Don Phillips – Private Investor

I’m easy. When I go reassurance, I go buy the first [inaudible].

Corrado De Gasperis

Great to talk to you, my pleasure.

Don Phillips – Private Investor

Yes. My concern is all of these horizon with the jigsaw puzzle on 342, it sounds like what you’re saying with the shoot, you can initially do anything you want by an underpass, correct?

Corrado De Gasperis

No question. I don’t even think we need a permit if we access the ore body from the existing mine. We go right into it. So if engineer that geometry, there’s no reason we couldn’t extract high grade ore that way.

Don Phillips – Private Investor

But eventually the long-term horizon would be a federal permit on the east side.

Corrado De Gasperis

Yes, I think. Well there are some pretty strong areas of resource there already that are on private land, but I think the most optimal efficient thing is get this pre-planning done, draw the right economic visibility conclusions and that’s going to put you into neat [ph] by the broader place.

We got to do the steps the right way but what we’re saying now is we want to move forward as fast as possible because then that gives you every flexibility and every option, right. And you can be more optimal.

Don Phillips – Private Investor

Okay. Well we’re all looking good. You have $2.07, $2.08 with 130,000 shares.

Corrado De Gasperis

All right, good. Thanks, I appreciate it.

Operator

Thank you. There are no further questions at this time. Please continue.

Corrado De Gasperis

I want to just thank everyone for the absolute amount of attention and consideration for the company. I see that as a very positive sign. I think we have turned the corner. I think operationally we’re feeling the wind start to turn to our back. That is a good feeling, but we’re no less dedicated every day.

And I do take the communication points very, very constructively. You’ll see a higher frequency from the company and you’ll see a more direct communication from me. And I very much look forward to that.

And thank you all. Have a great day and a great weekend hopefully after tomorrow.

Operator

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.

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