Comstock Mining's CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 9.13 | About: Comstock Mining (LODE)

Comstock Mining Inc. (NYSEMKT:LODE)

Q2 2013 Earnings Conference Call

August 8, 2013 11:00 ET

Executives

Corrado De Gasperis - President and Chief Executive Officer

Analysts

James Dale - Private Investor

Carl Frankson - Private Investor

Mike Niehuser - Beacon Rock Research

Richard Desjardins - UBS

Jack Albright - Private Investor

Robert Shecker - Private Investor

Howdy Kabrins - Private Investor

Lawson Stuart - ACI-Standards

Jeb Handwerger - Mining Development Corp

Jerry William - Private Investor

Operator

Good morning ladies and gentlemen and welcome to the Comstock Mining announces Second Quarter Results 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 today August 8, 2013.

It is now my pleasure to introduce your host Mr. Corrado De Gasperis. Please go ahead.

Corrado De Gasperis - President and Chief Executive Officer

Thank you, (Kaylen) and good morning everyone. It is Corrado here, President and CEO of Comstock Mining and welcome to our 2013 second quarter call and mid year update. I’ll provide a summary and some color of the information included in our press release this morning and it’s also included in our current Form 10-Q which we will file timely later today. If you don’t have a copy of today’s release, you’ll find a copy on 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 are detailed in the reports filed by us with the SEC. The risks are also identified in this morning’s release and all forward-looking statements made during this call are subject to those same risks and other risks that we can’t identify.

Our prepared remarks will focus on production and mine development, since most of the first six months of this year have been fully dedicated to the initial ramp-up of production. We really made lead this quarter on building and operating a much bigger machine but I’d also like to highlight some keen developments and geology especially in the previously announced higher-grade Chute Zone Discovery where concepts for extending mining into the East side of Lucerne are starting to take shape. Then we can turn back to Kaolin for Q&A.

Just briefly though let me review some of the overall highlights for the quarter including corporate. Metal sales in the second quarter totaled $7.7 million with gold revenues of $6.8 million. Gold shipments were just under 5,000 an ounce in Q2 more than double Q1. Silver shipments were almost 43,000 ounces in Q2 nearly tripling Q1. Silver production has been an exciting evolution for us here in the Comstock.

Costs applicable to mining were $8.2 million. This number was higher than guided but mainly due to a few non-recurring items that we’ve now completed, including hauling efficiencies that we previously discussed from the first quarter that still flowed into our second quarter results from the prior BLM haul road issue and also lower cost their market adjustment to our inventory of just under $1 million due to gold prices dipping below 1200 right at the very end of the second quarter.

Let’s just talk about just a little bit more right upfront here. Our cost to mine as we ramp up production and continue to improve our efficiencies have gone from an initial cost of about 16.50 an ounce which is when we were producing at below our targeted rate in Q1 to about 13.50 here in the second quarter as we work to stabilize our operation de-bottlenecking and improve the activities. To about 1100 in the third quarter exiting the year below 900 and targeting between 725 and 795 per ounce in 2014. This reflects not only stabilizing and streamlining the system but improving grades and increasing production as we go forward. So from our perspective we’re marching to a very steady (drum) and we’re active every day on these items. I would say we’re more than pleased of course to report that we had no mineral or asset write-down that seems to be the norm in the mining industry this year so far nor do we foresee any of those things for us. This is a strong testament to the prospective economics of our project.

More substantially we completed our first phase of production ramp-up during the quarter sustaining and exceeding the initial targeted production rates of 400 ounces per week. This is where we’ve been spending almost all of our effort, solid results. In the meantime the company added 62% more ounces of gold to inventory or 5265 ounces during the quarter as compared to Q1, resulting in a profitably 20% lower average inventory cost per ounce at quarter end. We also completed a system wide de-bottlenecking effort resulting in increased capacity throughout our mining and processing operation. Our current constraint now is a permit modification not the operation and that’s probably the first time I can honestly say that.

We also fully reconciled our mine production to-date to our mine plan and extremely exhausting of productive effort and with great result. It allowed us to update our mine plan with improved grades, rates and tonnages and a much, much higher levels of confidence. We use that’s okay to supplement our internal team to do that again with outstanding result. We are now guiding on production with new targets of up to 600 ounces per week by the end of September 2013 primarily resulting from these de-bottlenecking successes. Especially I would say in the leaching and extraction processes where we really stabilize the metal co-process and the gallon per minute flow at the highest design level for ourselves.

And it also reflects the real improvements that we see now in our mine plan in terms of improvements for grades and really those activities are starting now and will continue for the next two years. We also expect to increase to 770 ounces a week or a new 40,000 ounce run rate by the first quarter of 2014. This results primarily from expanding production in the fourth quarter as a result of unblocking our permit and expanding our Heap Leach pad. Our results also show that we’ve already realized significant cost reduction in the areas of environmental spending, legal spending and G&A cost during the quarter. And this is in part due to the substantial completion of lot of previous efforts around the areas of soil sampling, regulatory issues with the BLM and the haul road other extensive external community regulatory and permitting effort.

The good news here is those things are all behind us. The heavy-lifting is substantially complete and it resulted in a tremendous tangible and I would say intangible assets for us here on the Comstock. We really haven’t ever been in this situation where we have more genuine local community state and federal support for this project. To support from my perspective personally is truly night and day even from just the year ago.

Having said that during the quarter we also implemented significant additional cost reduction action that will result in over $5 million in prospective annual cost reduction. I’d like to repeat that these actions have already been taken and will result in $5 million of future savings effective now but for our future benefit. They included reducing our staff by 20 mining and administrative people that work is done, they also included experiencing material efficiencies in areas like cement and zinc usage, zinc prices and those structural in some case is process and some case is supplier changes are done, other permanent administrative cost reductions primarily in the areas of external relations, legal, Sarbanes-Oxley implementation et cetera, those are all done. This doesn’t mean of course that we’re done identifying and implementing more improvements, we’re evaluating changes that could match the savings that we’ve already acted on. We are working diligently this quarter and next to evaluate those areas and implement further efficiencies and we look at that as the normal continues efforts to improve our system. We also during the quarter paid down almost $8 million in debt. I’m sorry we paid down $8 million in debt during the first half of the year including the full balance of our $5 million revolving facility. And we currently do not have any debt for borrowed money outstanding strengthening our balance sheet and our liquidity.

Cash and equivalents were about $2.5 million at the end of the quarter with the revolving facility undrawn and we’ve already received a significantly improved term for that facility. Just expanding a little bit on production the companies with certain mine production ramped up to an exceeded 2000 equivalent rate that I mentioned. This was really achieved not only by de-bottlenecking but really synchronizing all of the operating activities to maximize the existing permitted capacity.

It was a more meaningful effort that we thought but it was a it was quite rewarding to get there. As I mentioned earlier this is probably the first time we’re holding the machine back a little bit because we are regulating ourselves to our current 1 million ton per annum limit that is essentially dictated by our water control permit with the State of Nevada. Our existing heap leach facility and our processing capacity will be expanded actually once three specific permit modifications are received. The first two in engineering design change permit from the State of Nevada and expanded special use permit from Storey County Nevada have already been approved this past June and July right on schedule.

Storey County actually voted unanimously of both the planning and county commissioner levels for this expansion. The remaining water control permit is expected to be approved by the end of through September. We’ve already received written acknowledgments from the state on our water control permit application that it was complete inaccurately filed. We also received technical comments in writing that we’ve already fully responded to both formally and writing and informally. We really don’t see any obstacles in obtaining that final approval from the state. All together these approvals allow for expanded capacity and processing rates of our heat leach processing facility.

I understand we then will not have a stated tonnage limitation and this not only allows for increasing our production targets in the fourth quarter up to and even beyond a rate of $2 million tons per annum and this new 40,000 ounce run rate but it even position us better for larger future growth objectives that we have in mind for Lucerne. During the second quarter we actually crushed and stacked over 368,000 dry tons of mineralized materials that the 57% increase from the first quarter and we shipped exactly 4,921 ounces of gold and 42,992 ounces of silver.

Reflecting on the entire year overall so far and especially last four months. The team has been exceptionally productive, primarily in terms of building the mine and the mine operation. Although we’ve achieved the level of stability here finally we are still building an asset both in terms of geology and production capability that is much, much bigger than we are talking about today this year or even next. And I’ll pause for a second to acknowledge the team because not only has it strengthened not only has it advanced but I’ve not seen a stronger level of commitment and dedication our people are here we ground day round consistently working on and improving. It’s only led by a few individuals. Dave Thomas is our Director of mining and processing and the team that called left around achieving this initial target level really a stronger than I had imagined it would be.

We now believe our pressure in the broader system can produce more than $5 million and even potentially $6 million tons annually. We are still learning the some of the material flow can effectively bypass the crusher potentially further increasing our capacity and reducing cost to process our ores. We are developing and expanding this capabilities every day it comes from the core team. We are current with all our reconciliations of production for the mine plan for the entirety of the last 11 months and I have updated that mine plan accordingly.

We’ve improved the perspective great profile and position the system for significant revenue growth going forward. We are not high grading the mine. We are just now steadily moving into higher grade zones in the mine improving the average grades that we are mining as we move forward. Just as an example during the first quarter we averaged near the lower end of our gold grade profile approximately 0.017 ounces per ton on to the leach pad while still doubling the ounces that we produce from Q1. In that case mainly due to the processing high tons. This should improve nicely over the remaining I think nicely and steadily over the remainder of this year and next.

We anticipated averaging closer to 0.025 gold ounce per ton for the rest of the world and slightly higher next year and it’s just a continuously evolving mine. This alone dramatically improved our revenue and certainly the efficiencies of our operation. But at the same time we’ve invested meaningfully for the growth in the mine in production and in permitting not just to enable these near term expansion but also the future growth. While frankly most of the rest of the industry seems to be doing the opposite. We acted on cost once operations were stabilized by reducing people , eliminating ramp up, eliminating ramp up consulting support streamlining the existing process and operation and reducing any non-core supporting activities.

We previously disclosed just our mining and processing costs as we were finishing pulling the system together but we all see that is important o provide guidance on all of our costs especially all of the cost applicable to mining. During the first half of the year actual Lucerne mine cost applicable for mining is approximately $13.5 million with being $12.1 million when considering it’s over credit. Our inventory appears to be turning to just about two months. So many of the cost incurred in one quarter will flow through to cost of sales for mining in the subsequent quarter.

Our current financial analysis anticipates 2013 all in cash cost applicable to mining of $26 million to $28 million but with a much, much higher anticipated productions scheduled. Jut to give some insight on that. We made the decisions in the second quarter to add a shift to mining. We did that in dvnace we are obviously getting our permit to expand to a million tons because we appreciate the lead time that it would take to get a quality crew and place. We appreciate the lead time that it would take to synchronize two different crew but more importantly Dave wanted to test the system and see what it really could reliably do. So from our perspective we’ve madse some capital and operating cost investments in the second quarter that have now positioned us for the much, much higher right.

I think that the way the production profile ramping no only week operating of course beyond the 400 gold equivalent ounces per week we actually shift over 500 ounes this week. But we are expanding metholgticlly into the branded. I think the third quarter will average 30,000 or slightly higher I think that will be at the 40,000 rate by the beginning of the next year and when we do all of that just to repeat our cash cost to product will be well below 8000 in ounce. Ultimately in the volatile price environment that we’ve been exercising in the last months that keeps to be the most critical success factor for us.

In the short-term and it’s what we forecast all of our time on. In the mean time we pried about three 3250 ounces as a gold sales at an average price of over 1300 dollars and we are happy to see gold staying at above 1300 dollars. We are reflecting sales like leases the remainder of this moth and mostly September. This protects us during really the most important timeframe of our ramp up.

Accordingly we expect to deliver on the upper range of our guidance for this year which means we’ll deliver 2000 or more for the full calendar year 2013 positioning us for solid second half performance and frankly positioning us to double ounce of shift in 2014 when we ultimately compare it back to 2013. I want to say that we would not stop our efforts when costs go below $800 of ounce or even $725. We are still a relatively smaller scale mine and we are excited about the prudential of not just producing 40,000 ounces or 60,000 ounces or we’re thinking and we’ve always been thinking about delivering at least (Technical Difficulty) from Lucerne and ultimately the Dayton too which is where we’re driving this company to be a producer of a 100,000 to 150,000 plus ounces from these two mines is more than feasible for us. So, let me just briefly talk about exploration and development. I mentioned it’s not the emphasis of our last five or six months but we do have some pretty exciting developments I mean as most of you know in early February we announced the highlights of our four technical reports.

The report which was an update resulting primarily from our 2012 drilling program declared a mineral resource of over 3 million gold equivalent ounces and over 2 million in the measured and indicated category most notably representing a 25% increase in Lucerne resource area. But with certain alone their models mineralization that covers over a mile of strike length. Let me repeat one of the Behre Dolbear highlights from that report. It said that the author believes the Comstock Mine Project represents a well-explored, epithermal, precious metal deposit within a world-class mining district. The geology of the area is well described and understood through vigorous surface mapping and drill hole logging. The density of geologic data is high, and the reliability is excellent, particularly in the various Lucerne Mine areas.

So thinking about it our biggest asset of course is the precious resource that we have in the ground. It’s a well-known historic mining district with over a 150 years of production-based history. We have access to extensive reports and maps in various properties particularly in Lucerne. But please remember that today we’ve only conducted detailed geological exploration and resource modeling and less than 10% of our 6000 acre win position. And primarily even those drilled fractionally in just the Dayton and Lucerne areas alone.

Our reserve modeling has purposely been limited to the initial mine operation despite the high confidence that our extended team of mine engineers including SRK provide us. We plan on conducting on going exploration programs to locate and test surface mineral targets as well as deep underground high-grade targets using this historic data that we pull together. The historical data provides us an asset that for us it’s difficult to exaggerate and part of this whole discovery success includes the previously announced Chute Zone which host significant concentrations of gold and silver.

We’ve discussed this publicly, that the structural intersection and the geometric shape of the Chute is similar to highly mineralized zones that were historically mined on the Comstock District as bonanzas. We’ve extended this historic Chute and plus mile Comstock’s mineral above to be almost six miles directing south with the Chute just south of the historic Woodville bonanza which was the most southerly of the previously discovered Comstock bonanza. Why I am going over some of this previous data is because we have got in pretty energized in terms of expanding Lucerne mine and we’ve explored a number of feasible opportunities obviously the one that’s occurring right now will helps us double production. We have very, very practical expansions of the mine to the east. And now the feasibility of accessing the Chute Zone is being explored and we’re getting very, very excited about it from two perspectives, one not only does it represent high-grade mineralization but it sits in a position that is somewhat central access wise from both the western Lucerne mine and the Dayton resource area.

And some of those graphic depictions that Devon and Larry had accessed are cadive to device for us and then I put in this press release show not only some ideas about getting down there but shows that the huge gaps in data that we have between these very, very highly mineralized areas of Lucerne and Dayton. And so for us it’s not just the question of potentially mining underground as the third way of expansion or going to the Dayton as a fourth wave of expansion but learning in tremendous amount of what would geological gaps in between. And so I would say overall we couldn’t be more excited about the potential district wide and most of the planning that we’re doing for discovery and development for that matter is now moved into a district wide mine set.

Let me conclude, hopefully that puts us up for some interesting questions but before I do that let me conclude by saying I believe that we’re really positioning ourselves in the best possible way in this market and then when I say market I mean the equity market. Many people are calling a bottom on gold equities are starting to and regardless of that we are clearly at historical levels in terms of equity valuations. But I think something even more profound of developing.

The growing companies that will win is in our opinion in this environment must be able to produce a real cost. I think the ride off these breathtaking ride off that are incurring across the landscape, are exposing the true non economic potential of some of these massive projects that the majors are promoting for a decade. I think that the growing companies not only must produce at a low cost as we’ve outlined for ourselves but we frankly believe Nevada is the place to be for the some of these all in lowest cost operations as the market is educating itself more and more but how dramatic infrastructural costs are, how dramatic energy costs are, how dramatic access to water is, how the rule of law or the lack of permitting reliability implicates total cost.

Nevada is clearly evolving as the leader in every way. The majors as I said have written off a substantial portion of their previously planned pipelines the numbers are just staggering to me. On a more positive note though they’re focusing on lowering cost almost across the spectrum of their operations and stabilizing their profitability which they would I feel do for their existing project especially in North America and no doubt in our mines primarily in Nevada. There is an entirely new leadership in almost every major mining company and the industry needs the new cost disciplines that they are now starting to talk about.

In addition, there are fewer and fewer quality juniors developing quarterly projects like ours and even fewer that control an entire well understood geologic district like ours with such high-grade potential. These are the companies with focused management, strong balance sheet, exponential growth potential and access to growth capital. These are the companies that will reward their communities with responsible mining and their investors with superior returns. We could not be better positioned for sustainability and growth in this market.

Once the majors restore their health in profitability, valuations will churn and the majors will not only support but promote that because they’ll need to replenish their, their pipeline. It will be very interesting in the next 12 to 18 months from here and I very much like where we will be – where we are now, where we are positioned now and where we’ll be in that timeframe. There is a little bit more that I could say but I think Kaylen we should turn to questions and answers at this point. Kaylen?

Question-and-Answer Session

Operator

(Operator Instructions) And we’ll take our first question from James Dale (Private Investor).

Corrado De Gasperis

Hi, James. How are you? (Technical Difficulty), do we lose James?

Operator

Mr. Dale, your line is open. Please check your mute button.

James Dale - Private Investor

Hello.

Corrado De Gasperis

Hi, James. How are you?

James Dale - Private Investor

Thanks. Sorry, I dropped the call there. Well done sir, keep it going, don’t let it stop. No questions this time. I thought I’ll check here.

Corrado De Gasperis

Thanks James. Thanks. Appreciate it.

James Dale - Private Investor

All right, keep going. Bye.

Corrado De Gasperis

Have a great day.

Operator

And we’ll take our next question from Carl Frankson (Private Investor).

Carl Frankson - Private Investor

Hi, Corrado

Corrado De Gasperis

Hi, Carl, how are you?

Carl Frankson - Private Investor

Great, great. I'm asking as the mining dummy I'm going to ask you probably to repeat your - what you have said before because it kind of went over my head.

Corrado De Gasperis

Sure.

Carl Frankson - Private Investor

I thought the most interesting thing that you said with how we’re decreasing the cost of extracting gold from whatever it was like 400 to like 700 or something.

Corrado De Gasperis

Right.

Carl Frankson - Private Investor

Which is obviously and incredibly positive. Could you just please give the reader’s guide just version again of how you go about doing that?

Corrado De Gasperis

Yeah. So, frankly we really have timing that – if I think back in the last six months nothing about what we were doing was steady state of operations I mean we were aggressively and I would – I’ll be honest with you in some regards in November, December, January and even leading up to February when we finally got resolution with the BLM reactionarily, that’s on my shoulders because I really feel like we were behind the April around Thanks Giving, it was kind of like after the honeymoon of the first four reality funk in and it wasn’t for some of the new people that we brought in including Dayton as – I don’t know that we would have reacted anywhere nearest that as we did. What you see in the first quarter in a lot of the second quarter was not just operating and ramping up but I have to throw into that bucket all the inefficiencies that go along with that, you’re not steady-state, you’re catching up on maintenance, you’re rescheduling me and so we’re the scheduling the mine, you’re synchronizing the mine with crushing.

You’re just starting to understand the yields on the Heap Leach pad, you’re realizing that sustaining the fluid flow in the Merrill-Crowe wasn’t designed exactly the way you wanted to, that’s the bad news. The good news is that we were addressing it all real-time every day. So that led to the first quarter with a lot of let’s say suboptimal activity and low production with a cost that was $1600 $1700 an ounce, not really meaningful as a snapshot just a progression point.

In the second quarter, the biggest big though in my opinion was getting the production up to and exceeding the 400 ounces per week. That number is important because it’s gloriously big but because it was the number that we were regulating to with a 1 million ton rate limit. And to be frank our grades in the initial part of the mine plant we’re at the lower end of our average in particularly the Hartford patented in Lucerne mine. And so, despite averaging the lower end of our grade profile, we were able to deliver those ounces how, mainly we ramped up production even above the million ton rate in part because we had some capacity to do it and in part because we were testing the system harder. But then again all the inefficiencies that you have with those kinds of activities some of the marketing efficiencies they’re just in that you need project management you need supporting consultants, you need to do self diagnostic of initial operations so that you can understand and improve that.

That resulted in our cost being somewhere around 1350 I think 1357 was the calculated number. And when gold did below 1200 an ounce in the middle of all that, we have to ride-off a little bit of inventory because it was absorbing those higher costs. We also spend a lot of time de-bottlenecking, we brought the refinery down twice for targeted de-bottlenecking activities and they were both successful. So, then we now would see the steady-state where we not only producing consistently the 400 ounces a week but in many cases more. And so with now to answer your question after all that context right, what we’re seeing now is table operation with the right sized organization.

So, we don’t need to redundancies of people, project managers, advising consultants, number one. Number two, we de-bottlenecked and we’re getting optimal fluid flow to the Heap Leach. So, we’re seeing the better yielding or flowing maybe it’s the better word of that metal out in from the system. And that’s how we take another step change in that cost per ounce but now what we’re starting to see and we’re just at the very front-end of it with the new mine plan. And then the new mine plan it’s wrong to say grades just got better, we refined our ore control, we refined our mining, we’ve gotten much more precise in segregation of what we would call our processed ore, our lower grades with free stock pile and then our waste. And so that takes a little more effort for mining effort but we’re starting to see grade improvement.

Now, we’re just starting to see it, right in ways of head grades into our solution pond. And so as the grades that we mine get better I mean there is nothing else changes let me be extreme. If you’re processing 0.015 ounces per ton at a $1600 cost per ounce and your grade goes to 0.03 your cost profit going to be 800 I mean nothing else will change, you’re just going to double the output. And so that’s – if you look at every variable, strip ratios, yields of metallurgy and their potential to vary noting has a bigger impact in grade because it could double and triple, right. So, what we are looking at is stabilizing at these higher average grades which in the grand scheme of the Comstock are still relatively lower but they’re very, very good in the context of our size.

So, frankly we’ve been struggling let’s just say with the worst of our circumstances, right a notion in maturing system a correlating team and lower grades, right and that makes worse, tough pour sometime. The group independently came up with a new slogan which I love because it’s sort of a no nonsense no excuse kind of notion which is the proof is in the pour right. So, we meet every single day and the proof is in the pour, we pour it literally almost every single day. So, we’re getting there. I'm not declaring any kind of victory, I'm just acknowledging our motives in our progress. We still have a lot of work to do.

Carl Frankson - Private Investor

Good. I appreciate it. Thanks Corrado.

Corrado De Gasperis

If you take all of those variables and you translate it into streamline system, true reduce cost of operation, increased production capacity in terms of tons and improve grades you will see a below $800 announced performance. And again 40,000 is not end state it’s almost on start state which I think is the – in the grand scheme it will take about a year to get there but that’s our real starting point of stability where we feel protected from price volatility in the market. We feel protected from liquidity things I mean we really position the company then to do some great things, that’s what we’re trying to accomplish.

Carl Frankson - Private Investor

Sounds, great. Thank you, Corrado.

Corrado De Gasperis

Thank you, Carl.

Operator

And we’ll take our next question from Mike Niehuser with Beacon Rock Research.

Mike Niehuser - Beacon Rock Research

We’ll I'm in fact waiting.

Corrado De Gasperis

How are you?

Mike Niehuser - Beacon Rock Research

Very good. I want to ask my first question which will just make you repeat what you just shared but I got to tell you from (Technical Difficulty) of the accomplishments with the kind of a contrary instances of increasing production, reducing cost in a start-up situation. And reducing staff and moving ahead it’s somewhat contradictory but I know it’s my luck and I hope to talk about that later offline. But the question I have is with these remaining credit line that you have in cash on hand you will see any working capital issues in the next quarters. So, given the current price environments and get your mine plan and that’s pretty much my only question but I did want to congratulate you, it’s a really quite an amazing year for you.

Corrado De Gasperis

Thanks, Mike. I appreciate it. I will say that we have no concerns in terms of liquidity. I think that the cash-in, cash-out has stabilized itself in a way that it removes drama from our heart with our quest and our existing capital structure. So, no debt for borrowed money on the balance sheet and so a little bit of a equipment financing reflecting of our debt. We couldn’t be in this more flexible position. We pay attention to it daily, weekly but no we don’t have concerns about it and we’re making improvements even as we go with working capital, we had an idea yesterday $50,000 $60,0000 of investment will yield potentially $1.5, $2 million more revenue. I think that generate cash for us and like.

Mike Niehuser - Beacon Rock Research

Well, on a softer side can I get you to comment a little bit about the local community sentiments and political here in Nevada. I know that you did a lot of work isn’t leading up to ahead of the mine opening on and but it sounds like things have continued to improve and that’s my last question and that our relations?

Corrado De Gasperis

I appreciate it very well, it’s the best part of the story in terms of the maturity of our achievement I think that I had a nice casual update last week it was Senator I'm meeting Mark Amodei on Monday as he goes to his a post-Congressional session from Washington tour of Nevada I think he is up in Elko right now he’ll be on the Comstock on Monday. I think those are great things to point out from a federal perspective but the more substantive point is how engaged we are with the local community the local county commissioners not just Storey County which has been overwhelmingly diligent, responsible and supportive but also a Lyon County who really is eager for responsible economic development so out of those things are going better and better everyday I’ve not ever felt better about them I think what’s most encouraging is that it’s not me right I mean just Wednesday night about 15 or 20 of our people participated at Miner’s Park and of the community event and the center, payable was high. So rather than being sort of the orphan child in the corner afraid to join the party we’ll stood at in the center on this now and it’s emotionally that’s the biggest change that we’ve had in the last year going from may be a little anxiety and a little defensiveness to be very positively engaged here in the community, so I appreciate that point.

I would like to add that to your point about us being different. It isn’t luck because you might be shocked to hear this but there were debates in January, February file do we ramp down, do we slow down, what’s happening in the market. And I frankly it was the conviction of knowing where we would end up that’s said, no let’s go faster. If we end up here okay, then it doesn’t matter where the gold prices, we’re going to be profitable. So we’re not there yet, we’re half way there right in terms of 2013’s objective, but we did make different decisions I think and it’s just execution and our execution in the last five or six months in the ground has been good but it’s getting better and it could keep getting better and that’s why we’re here for.

Operator

And we’ll take our next question from John LaSarge with (Technical Difficulty).

Unidentified Analyst

Hello?

Corrado De Gasperis

Hi, John how are you?

Unidentified Analyst

Good morning to you guys. Good job with the progress just question for you. Where do you see your company in say two years from now, what will be the, what’s best expectations for you guys?

Corrado De Gasperis

Could that in two years we will have an expanded Lucerne mining operation I could easily see producing between 50,000 ounces and 70,000 ounces from Lucerne and I could absolutely see day-in being on mine and replicating that kind of performance we, we’re seeing some opportunities because of stress test that we put on the system and because of the positive result that may be day-in and Lucerne can have central process bank because the existing pressure has cause such good performance and capacity because we have a land position that could accommodate and that’s an accelerator to what we thought previously. And I would – that we would have really been able to foresee the district-wide plan, we’ve been able to develop the district-wide plan and we’d be able to submit a plan of operation which we’re, we see -- quite foresee now but we’re starting to see the possibility up that will allow us to submit for federal permitting. And then that takes us from doing a 100,000 ounces between two mines doing more than that and more efficiently and more optimally thing is that I’d love to and we don’t have the specific plan for this it looked to be briefing underground mining by that point in time. So, a lot of tremendous opportunity that is frankly all above and beyond any of the numbers that we’ve talked about here over the next 18 months to 24 months.

Unidentified Analyst

Thank you.

Corrado De Gasperis

Thank you, sir.

Operator

And we’ll take our next question from Richard Desjardins (NYSE:UBS).

Richard Desjardins - UBS

Corrado, congratulations I think good management seems to begin to show. What are your plans for this Chute Zone, when do you think that might occur?

Corrado De Gasperis

Let me just talk out loud I'm not sure if I can answer the timing question, but I can tell you what we’d love to see. There is, this thing fits about 5 to 700 feet below where we’re mining right now. It’s fits about a 1100 feet below the very top of the surface of the area where it’s located. So we walk through three options, do we keep drilling from 1100 feet which has been as an side highly successful today in discovering the zone. Do we drop a shaft from an area where we have some geologic information but not a lock in between there in the Chute by day-in. and our view of that is that there is tremendous mineralization structurally we have intelligence in that regard between point a and point b and so in other words, instead of spending x number of dollars to drill you could spend that or less to actually access the ore and learn as much or more in between, and then, your position to explore from there rather than from afar. I hope that’s clear.

And then third, rather than going from a spot where you’ll learn a lot in between point a and point b, what if you go from a spot as an example the existing Lucerne mine and you drop down to the e size of and where the Chute is and you’re going through a lot of known ore between point a and point b. so, you’re actually mining it while still learning at the same time, we’re still developing at the same time while still excess in the Chute at the same time. So, all these, all those three are possible we haven’t engineered or validated we haven’t cost it and we haven’t scheduled the project. So, but we see that now and that will be part of our district plan without a question. One, one very interesting point is, thinking of the third or any of the three frankly but, that third one we could do with existing permitting, existing you know that removes a tremendous obstacle in terms of accessing the ore which is very exciting to us. And frankly already even though we haven’t quantified it or specified it extends the existing lives of the initial line.

Richard Desjardins - UBS

You showed one internal like 4,000 feet long what would be the capital expenditure to do something into that nature?

Corrado De Gasperis

It depends, on the structure and the, you could be talking in the ranges of the various shares or development that we looked at you could be talking anywhere initially from $5 million to $10 million, if you’re talking about 4 to 10,000 kind of feet of development but again I would emphasize that, that’s in the loophole of drilling right and that’s in many cases bringing ore out from what you’re doing. So, it’s pretty attractive.

Richard Desjardins - UBS

Thank you.

Corrado De Gasperis

Thank you, sir.

Operator

And we’ll take our next question from Jack Albright (Private Investor).

Jack Albright - Private Investor

Good morning Corrado.

Corrado De Gasperis

Hi Jack, how are you? Let me apologize in advance for not returned to your call last week I will guess I will love to talk to you offline to well thanks for calling in here.

Jack Albright - Private Investor

Well, I wanted to talk to that about really but further to talk offline if you promise you’ll call me I won’t talk about this subject.

Corrado De Gasperis

I will absolutely. I just a little crazy last week and I got your message and I have it down here, but I just didn’t get a chance to get back to you, my fault.

Jack Albright - Private Investor

Okay and now you totally screw up my whole conversation today so. Let me ask a question about the Chute.

Corrado De Gasperis

Sure.

Jack Albright - Private Investor

You say that it’s 700 feet below the mine you’re talking about further which ever where east or west?

Corrado De Gasperis

Yeah it’s east, it’s on, the Chute in and itself and if you can see the three dimensional picture in that, in the press release the Chute itself is a 150 feet by 450 feet down dipping east right. So, if we’re literally sitting at the, double geared level of Lucerne, you’re talking anywhere from 450 to 650 feet below that point. So, it’s not that deep, I was commenting that if you’re sitting on the top or down at itself your grow holes could be a 1100, 1200 feet.

Jack Albright - Private Investor

Again that was totally confusing me. So, underground if you’re standing on top of the Chute, how far the ground is then?

Corrado De Gasperis

Okay. so, it depends on where you’re accessing it from is what I meant. So, if we’re accessing it from the existing mine right vertically down it’s about let’s say 600 feet okay, so not too deep. You wouldn’t access it vertically right you would access it sort of an horizontally dipping trajectory and so as the pro forma gentlemen was pointing out I mean, the engineering to get down there could be 4,000 to 8,000 feet. Not going straight down, straight down you’re talking 600, but going towards that on let’s say a 15 degree decline right, you’re talking about 4 to 8,000 feet and those link are not necessarily minimum there sort of optimal pads like what pads would we want to take to get there based on what we could learn geologically or what we could mine from gold and silver perspective. So, there is a lot of options I guess is what I'm saying, there is no one, yeah there is one answer.

Jack Albright - Private Investor

I understand. Okay, now you assume 100 feet to about 400 feet, how deep you’re there at the Chute Zone?

Corrado De Gasperis

So, it’s, I would say it ranges from the road level again to a depth somewhere between 450 and 600 feet.

Jack Albright - Private Investor

No I meant, once you get to the drop down in the Chute Zone, the zone itself.

Corrado De Gasperis

Yeah.

Jack Albright - Private Investor

You said about 100 feet about 450 feet one.

Corrado De Gasperis

Yeah, well that’s only, what we have validated there is a huge potential beyond that because we if you, can look closely on that picture and you might need a magnifying glass quite frankly you see that our drill holes are just sort of tipping to the top and the center of the zone, we haven’t gone anywhere near knowing what’s all around it in other words, the resource is potentially open all sides and to depth. So I don’t know how big it could be, it could be significantly bigger.

Jack Albright - Private Investor

So, okay. So…

Corrado De Gasperis

We just don’t know enough.

Jack Albright - Private Investor

This pitch….

Corrado De Gasperis

How far we have to do or how long, but obviously once you’re there your hope it goes forever.

Jack Albright - Private Investor

That’s gorgeous well now I want to go and join with them. Okay, the gland that the pitching I call the gland and I'm sure this thing now you have at Tennessee dip down, now do you get to the pitch I mean, (inaudible) x-ray or something…

Corrado De Gasperis

So what happens is we, the number one evidence is our drill holes, we have a well over a dozen drill holes into the zone and many, many more around it in the structure and so what happens is when you have measured or indicated or inferred estimates of the gold based on your drilling you then extrapolate some of those probabilities based on the structure. And we’ve had two different firms externally validate our estimate of what we know right, so there is no technology that would allow you to stand at it’s really you have to cut shape, assess the structure, assess the controls and then using various geological prep to practices you estimate the magnitude of it and those estimates tend to be conservative based on the data that you do know and the structure that you do know and even, at the end of the day when we’re mining there is still some variation in those estimates but it tends to be much less at that point.

Jack Albright - Private Investor

Now it sound good and just like excited about it. Okay, I see gold price climbing that we’ve been talking so that a good sign.

Corrado De Gasperis

Yeah, yeah.

Jack Albright - Private Investor

Okay climbing next not this, not today, but next week if you can.

Corrado De Gasperis

I will look forward to talking to you Jack, thank you.

Jack Albright - Private Investor

Okay and thanks (inaudible) well send me that pictures.

Corrado De Gasperis

Yeah she is there yeah I’ll tell her, thank you.

Jack Albright - Private Investor

Okay, thank you, have a great day, good bye.

Operator

And we’ll take our next question from Robert Shecker (Private Investor).

Robert Shecker - Private Investor

Hello?

Corrado De Gasperis

Hi, Robert, how are you?

Robert Shecker - Private Investor

I'm fine, thank you. I just had a question on the permitting, everything you’re doing so far is on private land and is there, do you have to get like two permits one from the state and one from those federal government and you’re moving on to the BLM properties?

Corrado De Gasperis

Sort of. So, we have to get one permit from the county, we have to get essentially one permit from the federal government there are literally dozens of permits that you get from the state, the state is the primary regulator so today we have county permit to produce and to explore we have all of our permits from the state produce and to explore and we have a couple of minor permission from the federal government mainly for right-of-ways and for exploration but we don’t have a permit to mine federal end and there is a tremendous amount of work that we have to do before the plan that would go towards the land permit is foreseeable. Having said that, we really feel like we’re getting close to be able to doing that work and engaging the BLM on that, but we’re just not there yet, and we’re not there yet because we just we’ve been focused on doing other things. So, today we’re able to mine that mining actually is all on private land as you said, we do traverse certain federal lands within our portfolio and we have right-of-ways up in other words permits from the BLM to do that.

Robert Shecker - Private Investor

Very good.

Corrado De Gasperis

All right, sir.

Robert Shecker - Private Investor

Thank you, goes up $27 as we speak.

Corrado De Gasperis

:Love that.

Robert Shecker - Private Investor

On the way.

Corrado De Gasperis

Okay. Thank you, sir. Thank you.

Operator

And we’ll take our next question from Howdy Kabrins (Private Investor).

Corrado De Gasperis

Howdy, is that you?

Howdy Kabrins - Private Investor

That’s me. I just want to from everything that I understand I just want to go to my way to complement Dave Thomas was a hard work…

Corrado De Gasperis

I love for you to meet him Howdy and I miss talking to you.

Howdy Kabrins - Private Investor

Yeah that’s really that.

Corrado De Gasperis

We’ve been, so busy but look forward to having you come out soon.

Howdy Kabrins - Private Investor

Great.

Corrado De Gasperis

Thank you, sir.

Operator

And we’ll take our next question from Lawson Stuart with ACI-Standards.

Lawson Stuart - ACI-Standards

Good morning Corrado.

Corrado De Gasperis

Lawson, how are you?

Lawson Stuart - ACI-Standards

Doing good. Hey, a question for you on the share price, aside from all of these great geologicals and the noted production increases which are certainly worthy a congratulations I think it lays optimistic ground for solid fundamentals going into the future. What can you tell me about your management team’s efforts to be more aggressive in highlighting the Storey and from what having LODE out there in the investor community to drive the share price higher, in terms of the attractiveness of continuing to own the Comstock as an investment I'm wondering what kind of strategies your teams has together to go out there and really begin to push the news and promote this concept to work the share price side of the equation?

Corrado De Gasperis

It’s a great question, it’s very timely so I, let me first say that when I think back to last 12 months I absolutely feel like that’s one area that I personally in and whatever resemblance of our team is responsible for at where we’ve under-addressed it and certainly it wasn’t because of being last few days ago. But I feel like the amount of time especially in 2012 in the first quarter that we spent on engaging the community, supporting the positive pro-economic politics, growing support by sincerely and ethically bringing people to the mine and educating them about what we’re doing the right way. I think it was Herculean for our team. Dave even complained once in a while because we have so many tours of non-miners coming, so, but he knows just as well as I, I do that, it’s important for people to see how we’re doing it not just what we’re doing because that’s where our real support comes from.

So, having made that excuse to you I really do feel the capacity coming online to be more externally focused from an investment community perspective. I don’t think we’ve ignored it but there certainly is a notion of minimum compliance and minimum maintenance versus proactive communication and proactive marketing. And I would give the lower score, lowest score probably on the latter.

I don’t think that means we have a bad capital base. I actually reflect that it was not conventional, it was, it feels like it was brick-by-brick but when you look at the top eight or 10 institutions in the company right now what you’re seeing I think in the industry - industry wide but absolutely epitomized in us is the smartest most educated resource investors are aggregating to the highest quality junior companies. So when you think about companies like Sun Valley Gold or Gabelli Gold or U.S. Global Investors I mean these are all very good firms (Technical Difficulty) investments, but they’ve taken position (Technical Difficulty) so I feel like we have a foundation, real good foundation but a foundation (Technical Difficulty) both in terms of broadening we have a narrower following even though its extremely high quality broadening the following, broadening the message and but probably my biggest disappointment has been not having the time to get more research coverage on the company.

So, I feel that capacity coming online and I’m committed in the second half of the year probably it will be good timing for us anyway given where the markets are. But yeah we have some work to do there and I have now a fully dedicated person for external relation in addition to investors relation support so I think and when I say that very much straight. Those same resources we’re dealing with community, dealing with permitting I just couldn’t free us up to look forward and I feel like now we’re able to, now we’re able to and we have plans forward in place we just now have to spend more time doing it.

Lawson Stuart - ACI-Standards

Well I appreciate that perspective I think that everybody on the call would probably agree that the market is certainly full of - lots of fantastic sounding stories but don’t have real good future potential and fundamentals underneath them. But at the same time with a story this good with increasing production and reduced cost and all of these kinds of pieces that are coming out so favorably and I think evidence of good management certainly worthy of congratulation and encouragement to continue in that direction. Just a concept you mentioned of reducing staff by about 20 positions or so I think those things are great and certainly as you get pass some of the big regulatory hurdles and all those other things that have occupied so much time and attention.

I would certainly as an investor encourage your team to not under-staff on that side of the equation and in fact may be you shift some of those staffing investments into getting the right folks in those roles to really get the story out there and push it and promote it because you can increase the value ton-by-ton pulling it out of the ground but I think there is these other intangible ways to increase that value for everybody that’s invested in it and I’d love to see it, so keep up the good work and I appreciate the perspective and the answer. Thank you.

Corrado De Gasperis

Thank you. I’ll just re-summarize the - I mean this is obviously very logical statement but if we didn’t have production where it is, if we didn’t have our cost moving in the direction that they were moving, I wouldn’t have anything to promote. And I know that sounds obvious but I would add to that color to say that in almost four years I have been associated with the project now for almost four years. The most difficult period there were two. One, was two years ago when I was just getting a simple exploration permit and that resistance in the community was so strong and it hadn’t settled me and I think for sure what we’ve done in the last two years has been very positive in changing that but the last five months might have been the hardest so far.

So, although the update is good and it feels good it was very, very difficult, it’s a very difficult industry, its an industry that we have done, it could be insatiable for capital and if you’re not planned I think you’re dead, if you’re not planned you’re dead because every mistake has hugely time and a huge capital cost associated with it, so this is an industry where you just do not have time not to plan. And so the planning of it is the most difficult part and then the execution in our case in the last four, five months was difficult because our survival depended on it right.

If we were reporting, hey something is wrong we can only get 250 ounces a week we’re not sure why its not yielding god the hauling on the State Route is too expensive, we’d be done, we would be dead, right. Instead, we focused and dealt with those very, very difficult things not me, my team, right, I’m just here for support and my external time rather than meeting with investors was meeting with regulators and the community I mean in the last permit at Storey County I sat in the queue and I watched Dave and Rachel present and I got unanimous approval and I’m like I had to pinch myself like where am I, this is fantastic.

So I’m not, I hope this isn’t coming across as any kind of bragging or arrogance I’m relived that’s where I’m, I’m just relieved that we made it to this point. And frankly guys still a high risk industry and this only positions us to deliver what we just talked about. We still have that same amount of wood to chop from here until December as we did from January to July but we feel pretty good about it right now. We’ve got the team, we’ve got people, we’ve got the focus and we’ve got the support. So.

Lawson Stuart - ACI-Standards

I appreciate it. Thank you.

Corrado De Gasperis

Thank you sir.

Operator

And we’ll take our next question from Jeb Handwerger with Mining Development Corp.

Jeb Handwerger - Mining Development Corp

Hey Corrado, congratulations on the second quarter.

Corrado De Gasperis

Thanks Jeb. It was great productivity wise and development wise, it wasn’t wonderfully financially, but we’re good, we’re good where we are to move forward.

Jeb Handwerger - Mining Development Corp

Listening to the last question if you look at Comstock in 2013 versus the GDX, the GDX is down near, down 50% pretty much in 2013 while Comstock is only down 16%. So that’s I think a pretty big sign that you guys are doing the right thing here and you’re following the right business model. I don’t know if you know that if you pull up the two performance charts of the GDX versus Comstock you could see the (inaudible) performance of Comstock versus sector?

Corrado De Gasperis

Yeah I didn’t really have in that contact, it kind of feels crappy when the stock price is getting down I guess relatively it is a good testament. And I think that its not just such a generic analogical thing, its actually logical to me because even though we’re not widely held per the last discussion the two handful of institutions that make up the foundation, so its certainly not the entirety but the foundation of our capital base are knowledgeable about what we’re doing, are paying attention to very intimate details about the mine plan and the progression and know the industry. So I think we have a great I think actually, I think we have a phenomenal base to build on. And I think that’s why I am sure that’s why we’ve been stable relatively speaking its interesting to hear what you just said but you’re right its not like either that there is a base there obviously Winfield Group is the genesis of that basin and the biggest part of that base and so in that regard I think we do have something very positive.

Jeb Handwerger - Mining Development Corp

Going on to the next point we’re seeing the production going up, we’re seeing the cash cost going down, we’re seeing your net loss decreasing significantly from last year from the second quarter was $5.5 million versus $9 million. At this rate do you have any estimates of when we could possibly see a net gain per quarter?

Corrado De Gasperis

I would love it to be in the fourth quarter but my head tells me that with the leach expansions and the work that we have to do its probably going to be Q1, it will be Q1 we’re looking very much forward to what full year 2014 will mean in every respect not just cost performance, not just cash positive performance but relative quarter-on-quarter, relative year-on-year. I mean we’re really setting ourselves up.

Jeb Handwerger - Mining Development Corp

So that’s really the next big milestone I guess 2014, I guess that would be major milestone for the company yeah. Could we talk a little bit about your drilling program right now or do you have a drilling program that’s currently underway and our investors going to, shareholders going to hear more because you spoke about the high grade potential in the district and I am wondering if the company has any sort of high grade program to high grade exploration program?

Corrado De Gasperis

We have a full drill program designed for the Dayton resource area we’re going to look to get some changes made at the county level before we start doing that drilling but that designed and for most all intensive purposes (Technical Difficulty) program designed for the east side which would expand out the entirety of the rest of the eastern part of that resource area which is our flagship right now. That though is being assessed against a development address that would go down into the Chute Zone in through some of the area where we want to do the most exploration development. It’s almost of a combination of an exploration shaft the development shaft and a mining shaft right.

So we want to assess all of those against each other before we decide well if we want to know which one would be the most economically beneficial to us give us the most expansion of resource in the most positive economic way. So I think we’re looking towards 2014 for initiating those I would suspect that we would announce them or announce our decision in terms of which step to take by the end of this year. But we know what we want to do we’ve just prioritized this ramp up of production, reduction of cost and stabilization of cash profit first and then we would have the resources to move forward there. But I appreciate the question in two fronts, one because I didn’t address it but two to this day the biggest upside potential is exciting as production growth business is absolutely critical of prerequisite it is to stabilize this company’s future.

Everyone here including Dave Thomas is here because of the resource potential of the entire district. And so that’s we’re all excited and anxious about getting more back into that. I would say what’s been impressive to me is to watch a senior team of exploration geologist with may be one real mine geologist in the bunch Steve Russell shift from an exploration team led by Larry Martin to a mine geology team led by Steve yet watching Larry and the rest of the geologists subordinate to that in some companies there is heavy conflict between exploration and production in our company everyone is subordinating to what’s most important today. I think not only is that obviously positive for us but it gives us tremendous flexibility when we’re ready to go back and start drilling again. So we’re positioned for it, we’re excited about what it means for the company in the future, we just have to stage it in the right sequence.

Jeb Handwerger - Mining Development Corp

Thanks, Corrado.

Operator

And we’ll take our next question from Jerry William (Private Investor).

Jerry William - Private Investor

Hi, Corrado. Again many congratulations on the past quarter. As you spoke you got to hit the build the foundation to build on share price and that’s why I want to touch the base a little bit more in share price. First the one negative I see is that the we are victims of the fact that the price of gold has gone down this past quarter and it seems to kind of leveled out right now but I think you spoke the last time about gold price. So, I was wondering what you’re seeing in terms of the forecasting for gold prices improving in the future based on other company may be withdrawing from production and just the demand for gold overall.

Corrado De Gasperis

Yeah. Okay, so I think just first quickly repeat that I think the best hedge and best protection against gold price volatility of course from us is being lower cost right and we’re heading in the right direction there. In terms of the actual gold price for obviously in the longer term my views of the U.S. government and most all the western governments monitory policy is pretty negative its almost demoralizing the way the government burn deficits and devalue the currency I don’t think they have much of a choice in doing it because their obligations are so far beyond any imaginable practicality that ultimately the U.S. currency has to devalue and has to devalue meaningfully.

Having said what I just said the short-term view of U.S. economy although schizophrenic is biased towards net positive I think anybody who plays out what that ultimately means still remains bullish on gold because I don’t see any growth scenario that’s even being contemplated that could retard the growth of the deficit. I don’t, I just don’t see it I mean obviously pull it down a little bit, that’s about it.

Having said all of that two very interesting things have evolved in this last three or four months. One, is the absolute of raw strength of physical demand, physical demand for gold is extremely strong and coming from deep pockets. So I see that continuing and even growing and it’s been very reassuring to see it be there. The, in all aspects be it for jewelry, be it for monetary, be it for investments or otherwise. On the flip side is the equation I think it was stunning to see how many companies initially that we’re writing down projects when Goldman blow 1500 and then the absolute pervasiveness of it when Goldman blow 1300 I mean Citi put out a note that said they don’t think any mine can make money sustainable at $1300 or less gold. So I guess my feeling is this long-term bullish up intermediate term I believe there is a floor between 12 and 1300 mainly because of the industry’s inability to supply outside of that range immediate or capacity term technically there is no question it could test below those levels even below 1000 will be protective from that, that’s okay, but I don’t think you could do that for any extended period of time, that’s obviously my opinion. But and there is evidence that shows that it could go lower but I just and that’s I just don’t think its in anyway sustainable especially with the sort of catastrophic impact it has on the mining sector in terms of their inability to produce that lower cost overall. And I think that and what we’ve seen in demand I mean the demand growth just at $1300 gold, let alone $1200 gold was remarkable I mean I’m talking physical demand. So, I do think you’re seeing a meaningful adjustment in the market especially with paper investment but the notion of physical supply and demand being out of balance is not correct I mean its out of balance to the supply short side for sure.

Jerry William - Private Investor

Okay, great. And then just one final question. How this seems you’ve ramped up production, you kind of met all your capital needs, is there any thought of perhaps doing a reverse stock split say 10 to 1 that so you might attract some more institutional investors?

Corrado De Gasperis

There hasn’t been any thought about that. I think that our notion is that we have the fundamental asset and the fundamental production in cash flow growth profile to achieve target prices that open us up to all institutions obviously $5 is a meaningful level in that regard. And I think that our capital base is very sound in all other respects. So we haven’t thought about that specific type of activity.

Jerry William - Private Investor

Well again thanks so much and keep up the good work and I think you’ve focused your priorities in appropriate manner. So encouraged to hear all the good news.

Corrado De Gasperis

Thank you, sir. Thank you.

Operator

And there are no further questions at this time.

Corrado De Gasperis - President and Chief Executive Officer

Well I just like to thank everybody for their interest that you had spent in the breadth of the call. And obviously if there are any follow-up questions we’re available to do that and to the point of that one earlier gentlemen I look to be more proactive in terms of the external and investor communications going forward. Thank you and look forward talking again in the fall.

Operator

And this concludes today’s conference. Thank you for your participation.

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