What changed in this filing

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Item 2. Properties

2021-03-10 compared with 2020-03-30 · 85 added, 64 removed, 135 unchanged (52% of the section changed)

1 unchanged sentence

Location, Access, and Title to the Property

The Company and its subsidiaries own or control property located in Storey and Lyon Counties, Nevada.

The Company and its subsidiaries own, control, or retain a royalty interest in property located in Storey and Lyon Counties, Nevada.

The property is located predominantly in the Comstock District, just south of Virginia City, Nevada.

1 unchanged sentence

The Comstock District has been the focus of our efforts since 2003.

Our mineral estate in the Comstock District and surrounding area consists of patented mining claims, unpatented mining claims administered by the BLM, five mineral leases, one joint venture (providing exclusive rights to exploration, development, mining and production), and fee ownership of real property.

This includes 126 patented and 392 unpatented mineral lode claims, as well as 39 unpatented placer claims.

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The acreage includes approximately 2,396 acres of patented claims (private lands) and surface parcels (private lands), and approximately 6,962 acres of unpatented mining claims that the BLM administers.

Figure 3 - Comstock Mining's Property and Mineral Leases in the Comstock District

Figure 3 - Comstock Mining's Mineral Estate in the Comstock District

The Company holds the following mineral leases, as shown in Figure 3:

Fred Garrett - Lease

On April 1, 2008, we entered into a mineral exploration and mining lease agreement with Fred Garrett et al, covering one patented claim located in Storey County, Nevada.

On April 1, 2008, we entered into a mineral exploration and mining lease agreement with Fred Garrett et al., covering one patented claim located in Storey County.

The lease began with a five-year Exploration Term, followed by a 15-year Development Term.

We paid a minimum monthly rental of $250 per month under this lease.

On May 1, 2020, we replaced the 2008 lease with a new mineral exploration and mining lease.

The lease began with a five-year Exploration Term, followed by a 15-year Development Term.

The lease remains in effect as long as exploration, development, mining, or processing operations are being conducted on a continuous basis, without a lapse of activity for more than 365 days.

We pay an advance royalty to the lessor of $1,000 per month or a 3% net smelter returns (“NSR”) royalty, whichever is greater.

We pay a rental of $250 per month.

After obtaining all necessary permits to place the property into production, we will pay an advance royalty of $1,000 per month, or 3% NSR, whichever is greater.

We are responsible for the payment and filing of annual maintenance fees, if any, and taxes for this claim.

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The lease remains in effect as long as exploration, development, mining, or processing operations are conducted on a continuous basis, without a lapse of activity of more than 180 days.

We pay an advance royalty to the lessor of $1,000 per month or a net smelter returns (“NSR”) royalty, whichever is greater.

The royalty percentage is a 2% NSR when the market price of gold is $900 or less per ounce and 3% NSR when gold is greater than $900 per ounce.

We pay an advance royalty to the lessor of $1,000 per month or a NSR royalty, whichever is greater.

The royalty percentage is 2% NSR when the market price of gold is $900 or less per ounce and 3% NSR when gold is greater than $900 per ounce.

We are also responsible for payment and filing of annual maintenance fees, if any, and taxes for these claims.

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The Company makes annual advance minimum royalty payments, which started with $30,000 on the first anniversary, and increasing by $5,000 each year.

We are also required to pay a 4% NSR, which will be reduced by the sum of previously paid advance minimum royalties.

We are also required to pay a 4% NSR royalty, which will be reduced by the sum of previously paid advance minimum royalties.

We are also responsible for payment and filing of annual maintenance fees, if any, and taxes for these claims.

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These claims are located in Lyon County and are contiguous with the Company’s Spring Valley mineral holdings.

The lease began with a 5-year Exploration Term, followed by a 5-year Primary Term.

All production from the property is subject to a 3% NSR.

Once permits have been obtained to put the property into production, lease payments will be treated as advance royalties, which will be credited against the NSR.

The Company makes advance minimum royalty payments of $200 per month.

The lease is for an initial term of five years.

We have the option, if we believe the property warrants further development, to extend an additional five years and then continuously thereafter as long as exploration, development, mining, or processing operations are conducted on a continuous basis.

The lease began with a five-year Exploration Term, followed by a five-year Primary Term.

All production from the property is subject to a 3% NSR royalty.

Once permits have been obtained to put the property into production, lease payments will be treated as advance royalties, which will be credited against the NSR royalty.

The Company made advance minimum royalty payments of $200 per month.

The lease was for an initial term of five years.

We had the option to extend an additional five years and then continuously thereafter as long as exploration, development, mining, or processing operations were conducted on a continuous basis.

The lease was amended December 18, 2015, to extend the lease through 2020, and to include an option to purchase the claims, including the NSR, for $100,000.

The Company has committed to drill at least 3,600 feet of reverse circulation holes.

On May 21, 2020, the Company exercised the option and purchased the seven unpatented claims for a total of $100,000, eliminating the 3% NSR royalty.

Renegade Mineral Holdings - Lease

On October 1, 2010, we entered into a Mineral Exploration and Mining Lease agreement with Renegade Mineral Holdings, LLC for twenty-six unpatented lode-mining claims along the southern extension of the Occidental Lode structure in Storey County, Nevada.

The historic Occidental Lode, also referred to as the Brunswick Lode, is located 1.5 miles due east of and sub-parallel to the veins of the main Comstock Lode.

These claims adjoined and extended the Company’s previous holdings of six patented and six unpatented claims, significantly expanding the Company’s position on the Occidental Lode.

The Lease had an initial 3-year Exploration Term and could be extended for two additional six-year terms and then

continuously thereafter as long as the Company is producing on property adjacent to or in the vicinity of these claims.

The Lease had an initial three-year Exploration Term and could be extended for two additional six-year terms and then continuously thereafter as long as the Company is producing on property adjacent to or in the vicinity of these claims.

The agreement includes a 3% NSR royalty with the gold price capped at $2,000 per ounce.

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The lease was amended in September 18, 2019, to formally extend the lease for the second additional six-year term, which increased the lease payments to $2,250 per quarter.

The Company has an exploration drilling commitment on these properties totaling at least $200,000 before October 2021.

The lease was amended on July 9, 2020, to extend the Additional Term to a total of ten years, and to add a Second Additional Term of 10 years, expiring September 30, 2039.

The lease will be extended indefinitely so long as operations are conducted on a continuous basis until a period of 180 consecutive days with no exploration, development, mining, or processing activities.

The lease payments continue to be $2,250 per quarter during the Additional Term, and increase to $3,000 per quarter in the Second Additional Term.

The Company has an exploration drilling commitment on these properties totaling at least $250,000 before September 30, 2021, and to a total of $500,000 by September 30, 2023.

Sutro Tunnel Company - Lease

On October 20, 2010, the Company gained the rights to a Mineral Exploration and Mining Lease with the Sutro Tunnel Company through its membership in Northern Comstock LLC.

The lease provides mineral rights to numerous patents in the Gold Hill area, south of Virginia City, as well as exploration access to numerous town lots in the same area.

The lease began with a 5-year Exploration Term, followed by a 5-year Primary Term.

During the Exploration Term, the Company had exploration commitments of expend $50,000 in the first year, $75,000 in the second year, and $100,000 in the third through fifth years.

On October 20, 2010, the Company gained the rights to a Mineral Exploration and Mining Lease with the Sutro Tunnel Company ("Sutro") through its membership in Northern Comstock LLC.

The lease provides mineral rights to numerous patents in the Gold Hill area, south of Virginia City, Nevada as well as exploration access to numerous town lots in the same area.

The lease began with a five-year Exploration Term, followed by a five-year Primary Term.

During the Exploration Term, the Company had exploration commitments to expend $50,000 in the first year, $75,000 in the second year, and $100,000 in the third through fifth years.

The lease payments started at $500 per month and increased to $1,000 per month when the lease was adjusted on November 17, 2011.

The agreement includes a 5% NSR royalty.

We are also responsible for payment of annual property taxes for the patents and 50% of the annual property taxes for the town lots.

The Primary Term ended December 31, 2018.

Since then, the lease has been maintained on a month to month basis.

Negotiations are underway between the Sutro Tunnel Company and Comstock for a new lease.

The agreement included a 5% NSR royalty.

On September 1, 2020, the Company entered into a new Mineral Exploration and Mining Lease with Sutro.

The lease has an initial five-year Exploration Term, followed by a five-year Development Term, followed by a five-year Planning Term.

The lease then continues so long as operations continue on the properties that are generating production royalties, until such royalties cease for a period of six months.

The lease payments start at $5,000 per month in the Exploration Term, then increase to $10,000 per month during the Development Term, then $15,000 per month during the Planning Term.

The new lease does not include exploration commitments.

The lease includes a 4% NSR royalty.

We are also responsible for payment of annual property taxes for the patents and the town lots overlying the patents.

Virginia City Ventures Inc.

2 unchanged sentences

The lease provides mineral rights to three patents in Virginia City.

The lease began with a 5-year Exploration Term, followed by a 15-year Development Term.

The lease began with a five-year Exploration Term, followed by a 15-year Development Term.

The lease payments started at $500 per month and increased to advance royalties of $1,000 per month during the Development Term.

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Pursuant to the terms of the Operating Agreement for Northern Comstock, DWC contributed the DWC Property to Northern Comstock and John Winfield contributed his rights under the Sutro and the VCV leases to Northern Comstock.

The Company contributed 862.5 shares of Series A-1 Preferred Stock in each annual period from 2010 to 2013, and contributes its services in the area of mine exploration, development and production to Northern Comstock.

The Company contributed 862.5 shares of Series A-1 Preferred Stock in each annual period from 2010 to 2013, and contributes its

services in the area of mine exploration, development and production to Northern Comstock.

The terms of the Operating Agreement provided that on each anniversary of the Operating Agreement, up to and including the thirty-ninth (39 th ) anniversary, the Company would make additional capital contributions in the amount of $862,500, in the form of Series A-1 Preferred Stock or cash (upon request of Northern Comstock, which request for cash can be denied by the Company in certain circumstances).

As a result of the Company’s 2015 charter amendments, all of the Company’s outstanding shares of preferred were automatically converted into shares of Common Stock.

On August 27, 2015, the Company signed an Amendment to the Operating Agreement with Northern Comstock LLC.

On August 27, 2015, the Company signed an Amendment to the Operating Agreement with Northern Comstock.

The Amendment resulted in reduced capital contribution obligations of the Company from $31.1 million down to $9.8 million.

The Operating Agreement requires that the Company make monthly cash capital contributions of $30,000 to Northern Comstock LLC and annual capital contributions in the amount of $482,500 payable in stock or cash, at the Company's option, unless the Company has cash and cash equivalents in excess of $10,500,000 on the date of such payments, wherein the Company would then be required to pay in cash.

The Operating Agreement requires that the Company make monthly cash capital contributions of $30,000 to Northern Comstock and annual capital contributions in the amount of $482,500 payable in shares of the Company's common stock or cash, at the Company's option, unless the Company has cash and cash equivalents in excess of $10,500,000 on the date of such payments, whereupon the Company would then be required to pay in cash or, in certain circumstances, shares of the Company's common stock.

The number of shares to be delivered is calculated by dividing the amount of the capital contribution by the volume-weighted average closing price of the Company’s common stock on its primary trading market for the previous 20 consecutive trading days prior to such capital contribution.

The Operating Agreement also provides for a one-time acceleration of $812,500 of the capital contributions payable when the Company receives net cash proceeds

from sources other than operations that exceed $6,250,000.

The agreement includes an ongoing acceleration of the Company’s capital contribution obligations equal to 3% of the net smelter returns generated by the properties subject to the Northern Comstock joint venture.

The Operating Agreement also provides for a one-time acceleration of $812,500 of the capital contributions payable when the Company receives net cash proceeds from sources other than operations that exceed $6,250,000.

The agreement includes an ongoing acceleration of the Company’s capital contribution obligations equal to 3% of NSR generated by the properties subject to the Northern Comstock joint venture.

The Operating Agreement also provides that if the Company defaults in its obligation to make the scheduled capital contributions, then the remaining capital contribution obligations may be converted into the principal amount of a 6% per annum promissory note payable by the Company on the same schedule as the capital contributions, secured by a mortgage on the properties subject to the Northern Comstock joint venture.

The Operating Agreement requires that these capital contributions commence in October 2015, and end in September 2027, unless prepaid by the Company.

As of December 31, 2020, the capital contribution obligations of the Company total $5.6 million.

These capital contribution obligations are guaranteed by Tonogold.

The Operating Agreement provides the Company with the exclusive rights of development, production, mining and exploration on the respective properties and requires the Company to make certain expenditures toward that end.

Under the terms of the Operating Agreement, all cash flows from the bullion or other minerals recovered from the ore mined out of the ground but untreated and minerals produced from the milling or reduction of ore to a higher grade produced from the DWC Property, Sutro Property or VCV Property, as applicable, or finished products produced from any such property, will be distributed to the Company after the payment of royalties associated with such properties.

Under the terms of the Operating Agreement, all cash flows from bullion or other minerals recovered from the ore mined out of the ground but untreated and minerals produced from the milling or reduction of ore to a higher grade, produced from the DWC Property, Sutro Property or VCV Property, as applicable, or finished products produced from any such property, will be distributed to the Company after the payment of accelerated capital contributions and royalties associated with such properties.

Mineral production from the DWC Property is subject to a 1% NSR royalty payable to Mr.

Mineral production on the Sutro Property is subject to a royalty of 5% NSR.

Mineral production from the VCV Property is subject to a 5% NSR royalty.

Mineral production on the Sutro Property is subject to a 5% NSR royalty.

Mineral production from the VCV Property also is subject to a 5% NSR royalty.

The Company makes advance minimum royalty payments of $1,000 per month on the Sutro Property and $12,000 per year on the VCV Property leases.

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American Flat Processing Facility

The processing facility is in the American Flat area of Gold Hill, NV, less than a mile west of the Lucerne mine, and operated 24 hours per day, seven days per week, for substantially all of 2013 through 2016.

During 2019, Comstock formed Comstock Processing LLC ("CPL"), a newly realigned, wholly-owned subsidiary that owns all of the property, plant, equipment and permits for the crushing, agglomerating, leaching, Merrill Crowe processing, mercury retort, refining, and metallurgical operations located at 1200 American Flat, Virginia City, NV.

The facilities represent a fully permitted platform, best positioned for implementing our Strategic Focus on high-value, cash-generating, precious metal-based activities, including, but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of environmentally friendly, and economically enhancing mining technologies.

To date, Comstock Processing has entered into two agreements that leverage its platform for nearer-term cash generation;

first, with Tonogold the Lease-Option Agreement to lease and operate the facilities and second, with Mercury Clean Up LLC (“MCU”) for the commercial pilot of the MCU mercury remediation system, that is expected to close during the second quarter of 2020.

The processing facility is in the American Flat area of Gold Hill, Nevada, less than a mile west of the Lucerne Mine, and operated 24 hours per day, seven days per week, for substantially all of 2013 through 2016.

The facilities represent a fully permitted platform, best positioned for implementing our Strategic Focus on high-value, cash-generating, precious and strategic metal-based activities, including but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of environmentally friendly, and economically enhancing mining technologies.

To date, CPL has entered into two agreements that leverage its platform for nearer-term cash generation:

first, the Lease Option Agreement with Tonogold to lease and operate the facilities;

and, second, with Mercury Clean Up LLC (“MCU”) for the commercial pilot of the MCU mercury remediation system.

The Company holds 15% of the membership interests of MCU.

Lucerne Resource Area

1 unchanged sentence

Lucerne includes the previously mined Billie the Kid, Hartford and Lucerne mining patents, and extends east and northeasterly to the area of the historic Woodville (southern-most of the historic Comstock bonanzas), Succor and Lager Beer patents and north to the historic Justice and Keystone mines.

The Lucerne resource area is approximately one mile along strike, with explored widths from 600 to 1,800 feet, representing approximately 845 acres of the land holdings controlled by the Company.

The Lucerne resource area extends approximately one mile along a strike, with explored widths from 600 to 1,800 feet, representing approximately 845 acres of the land holdings controlled by the Company.

The Lucerne is the site of our previous mining activities.

On January 24, 2019, the Company entered into a Purchase Agreement to sell its interests in CML, a wholly-owned subsidiary of Comstock whose sole assets are the Lucerne properties and related permits, to Tonogold.

On January 24, 2019, the Company entered into a Purchase Agreement to sell to Tonogold its interests in Comstock LLC, a wholly-owned subsidiary of Comstock with sole net assets of the Lucerne properties and related permits.

The Purchase Agreement requires a total purchase price and fees of $ 17.6 million, comprised of $11.5 million in cash and $6.1 million in Tonogold CPS.

Tonogold will also guarantee the Company’s remaining financial responsibility for its membership interest in Northern Comstock LLC, which owns and leases certain mineral properties in the Lucerne area, and also assume certain reclamation liabilities, both totaling approximately $7.0 million.

Tonogold will also guarantee the Company’s remaining financial responsibility for its membership interest in Northern Comstock, which owns and leases certain mineral properties in the Lucerne area, and also assume certain reclamation liabilities, both totaling approximately $7.0 million.

The Company also retains a 1.5% NSR royalty on the Lucerne properties.

At closing on November 18, 2019, Tonogold was granted 50% of the membership interests of CML, representing the ownership contractually granted based on the cash and CPS consideration paid to date.

The Company will retain all management control and authority over CML until Tonogold has made all payments in full.

Accordingly, Tonogold’s membership interest in CML is accounted for as a noncontrolling interest shown in the consolidated balance sheets.

At the initial closing on November 18, 2019, Tonogold was granted 50% of the membership interests of Comstock LLC, representing the ownership contractually granted based on the cash and CPS consideration paid to date.

The Company retained all management control and authority over Comstock LLC until Tonogold made all payments in full.

On September 8, 2020, the Purchase Agreement was closed, and 100% of the membership interests were acquired by Tonogold.

The fair value of the consideration delivered by Tonogold for the membership interests in Comstock LLC was $18.8 million, including cash, CPS, and a note receivable, net of the contingent forward asset.

Tonogold's activities, aided by the independent mining advisory firm of Mine Development Associates (“MDA”), have included remodeling and updating the Lucerne resource estimate, and planning further exploration, development and feasibility assessments.

Present Condition of Property and Work Performed

The Comstock District

We have completed extensive geological mapping, sampling and drilling on a limited portion of the Comstock District mineral property, particularly the Lucerne and Dayton resource areas, in order to characterize the mineralized material.

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We conducted test mining operations from 2004 through 2006, and from 2012 through 2016.

However, we have not established reserves that meet the requirements of SEC Industry Guide 7.

However, we have not established reserves that meet the requirements of SEC Industry Guide 7 or regulation S-K 1300.

Therefore, any activities that we perform on our lands and claims are considered exploratory in nature, including test mining.

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Mineralization is open-ended to the north and south along strike and down-dip to the east, including the Chute Zone in the eastern portion of the Lucerne resource area.

Our geologists have also identified structurally complex zones developed within the Silver City fault zone that have enhanced precious metals grade of contiguous mineralization averaging 0.10 gold ounces per ton extending approximately 200 feet.

The structural complexity is explained by a series of northeasterly striking structures that represent a separate, later mineralizing event intersecting with the northwesterly striking assembly of Silver City fault zone structures.

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The samples were then assayed at the Company’s in-house metallurgical laboratory for gold and silver.

This underground sampling program has provided a wealth of assay information and provided critical information for furthering the geologic understanding of the Dayton.

In some cases, structures identified on the surface were traced underground and in other cases new structures were identified underground were surface expressions were absent or obscured.

This underground sampling program has provided a wealth of assay information and critical information for furthering the geologic understanding of the Dayton.

In some cases, structures identified on the surface were traced underground and in other cases new structures were identified underground where surface expressions were absent or obscured.

Spring Valley

2 unchanged sentences

Limited drilling in Spring Valley has intercepted altered volcanic host rocks and identified several mineralized zones.

Economic gold mineralization has been intercepted in several widely spaced drill holes during prior Spring Valley programs and selected drill hole intercepts are highlighted (see Figure 5 in the Exploration section of the Management Discussion and Analysis).

The expanded exploration program for Spring Valley will include phased drilling programs that will continue southerly from SR341 to the historic Daney mine site (see Figure 6 in the Exploration section of the Management Discussion and Analysis).

Economic gold mineralization has been intercepted in several widely spaced drill holes during prior Spring Valley programs and selected drill hole intercepts are highlighted (see Figure 7 in the Exploration section of Management's Discussion and Analysis).

The expanded exploration program for Spring Valley will include phased drilling programs that will continue southerly from State Route 341 to the historic Daney mine site.

The targeted area has a total strike length of approximately 8,000 feet.

On May 21, 2020, the Company exercised its option with New Daney Company Inc.

("New Daney") to purchase seven unpatented lode mining claims located in Spring Valley, Nevada, south of the Company's Dayton resource area.

These claims had been leased from New Daney since 2010.

The claims were purchased for a total of $100,000, inclusive of a 3% NSR royalty.

On September 8, 2020, the Company and Tonogold closed the Purchase Agreement, transferring the membership interest of Comstock Mining LLC to Tonogold.

The Purchase Agreement waived the non-compete restrictions to allow Tonogold to proceed with an option to acquire the Ida Consolidated and other properties (the "Ida Properties") from the Wilson Parties.

If Tonogold exercises the option, Tonogold agrees that the Ida Properties will be subject to the NSR royalty agreement,

and also agreed to transfer two patented and eight unpatented mining claims west of Spring Valley to the Company for no further consideration (see Figure 3).

The Occidental vein is a sub parallel vein system to the Comstock Lode and is considered by the Company to be an underexplored, potentially significant exploration target.

3 unchanged sentences

Detailed geologic assessment combined with new technological advances in 3-D geophysical surveys will be reviewed to best define future drilling and development plans for this exploration target.

The Occidental properties are included in Tonogold's Mineral Exploration and Mining Lease.

The Occidental properties are currently being explored by Tonogold under its Mineral Exploration and Mining Lease.

Under that lease, the Company retains a 1.5% NSR royalty on any mineral production from these properties.

The northern Comstock underground targets of the Gold Hill Group will be prioritized and exploration proposals will follow.

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The Company now controls the contiguous lands of the Gold Hill group and has an opportunity to explore the mineral potential of this area more cost effectively by utilizing knowledge gained from the review of the historical records.

The Gold Hill properties are included in Tonogold's Mineral Exploration and Mining Lease.

The Como Project

The Como Project is located in Lyon County, Nevada, approximately 15 miles east of Carson City.

The Company performed geological reconnaissance on this property, but has not drilled or collected any samples.

We own a 100% interest in one patented and thirteen unpatented lode-mining claims, covering an area of approximately 168 acres in Lyon County,

Nevada, that comprise the Como Project.

On February 27, 2020, the Company sold the patented claim and five of the unpatented claims, for $0.1 million in cash, and a 2% NSR, with the buyer’s option to purchase the full NSR for $0.15 million.

The Gold Hill properties are currently being explored by Tonogold under its Mineral Exploration and Mining Lease.

Under that lease, the Company retains a 1.5% NSR royalty on any mineral production from these properties.

The Como and Wild Horse Properties

On February 25, 2020 and September 17, 2020, the Company sold two patented mining claims and five unpatented mining claims (the "Wild Horse" properties), and eight unpatented mining claims (the "Como Comet" properties), respectively, to Hercules Gold USA LLC ("Hercules") for a total purchase price of $100,000 and 100,000 shares of common stock of Eclipse Gold Mining Corporation (the parent Company of Hercules), with a fair value of $52,000, plus a 2% NSR royalty on future mineral production from these properties.

Hercules has the option to purchase the royalty for $75,000 for each one percent (1%) per each patented or unpatented claim.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties