Ladies and gentlemen, welcome to Comstock's 2022 Q2 business results webcast. Here is Comstock's Executive Chairman and Chief Executive Officer, Mr. Corrado De Gasperis.
Good morning, everyone, and welcome to the Comstock Q2 update. I'll provide a business update, including the information in today's press release and from our recently filed Q2 report on Form 10-Q. If you don't have a copy of today's press release, you'll find a copy on our website at www.comstock.inc at the top of the investor page in the newsroom section. Our Form 10-Q is also available on the website on the investor page under SEC Filings and also via EDGAR on www.sec.gov. Please let me remind you that we will make forward-looking statements on this call and that any statements relating to matters that are not historical facts may constitute forward-looking statements. Our statements are based on our most current expectations and are subject to the same risks and uncertainties that could cause actual results to differ materially.
These risks and uncertainties are detailed in the previous reports filed by the company with the SEC and in our recent press release, and all forward-looking statements made during this call are subject to those same and other risks that we can't identify. Once we've completed the prepared remarks, Zach will accept and direct all questions to me. Let me briefly start with our financial position. Our recently reported assets totaled almost $118 million, up $3 million from the Q1. Our operating results reflect both the development of our teams and the larger commitment to the research and development dedicated to commercializing our technologies. This represented $3.7 million in R&D for the full six months ended June 30 and $2.6 million for the three months ended the Q2.
These amounts include the engineering, design, fabrication, and commissioning of both of our pilot facilities for fuels and for LiNiCo. Both our balance sheet and our operating results reflect our push to accelerate these commercializations. This quarter has been an extremely busy one for cellulosic. We had advanced our cellulosic tech, our Bioleum pilot system, and established a meaningful number of new industry collaborations. We also filed, as most of you saw, our new Bioleum patent, representing a significant expansion of our leading technology portfolio, covering new pathways to produce renewable drop-in fuels from woody biomass, all at dramatically improved yield, efficiency, and cost in comparison to all known methods. Our new patent covers both processes and compositions that have been validated at our existing pilot facility, proving that we can simultaneously produce multiple biointermediates that are uniquely isolated and free of contaminants.
This means we can produce both cellulosic sugar and Bioleum from the same ton of wood, enabling the production of the whole array of major biofuels. Renewable fuels provide one of the single largest opportunities for decarbonization. However, most of the existing U.S. renewable fuel refineries draw from the same limited pool of constrained feedstocks, mainly vegetable oils. Comstock can now fully leverage a wholly different and abundant woody biomass feedstock. The Department of Energy's National Renewable Energy Lab has published estimates that the U.S. produces up to 100 million tons per year in just sawmill and forestry residuals alone. That initial biomass source is sufficient to produce 8 billion gallon a year of drop-in fuels by utilizing our technology. This positions us for staggering growth.
Speaking of the Department of Energy, they also recently announced a funding opportunity called a FOA, targeting the further development of biointermediates that can produce high-yielding and efficient renewable diesels, sustainable aviation fuels, and other biofuels. The grant request was a no-brainer for us to test the advancement of our platform. Literally within two weeks, we assembled a world-class coalition of industry leading partners and complementary technologies that would both add to and accelerate our pipeline for producing higher yielding renewable fuels. We filed our preliminary DOE application early. Within a week of our submission, we received a notice of encouragement from the DOE, and we are now proceeding to prepare and file our application by early September.
The grant itself is for $2 million, but the benefits to us have already exceeded those potential dollars, both from the recognition that it's given our technology and the resulting collaborations with new industry partners. Just to be clear, we have the technology today to produce cellulosic ethanol and byproducts profitably. The breakthrough with our Bioleum and the additional pathways proposed in this grant would convert both Bioleum and our cellulosic sugars into drop-in fuels, resulting in even higher yielding, higher value fuels from just one feedstock source. Based on current performance data, we're projecting best-in-class renewable fuel yields exceeding 80 gal per dry ton on a gasoline gallon equivalent basis. We believe our performance is already far better than the best-known processes can deliver today and with fuels that leverage the existing infrastructure.
We're also expanding our current 2-ton per day cellulosic fuel pilot to extend its current capabilities of producing carbon neutral pulps and cellulosic sugars into the production of Bioleum. This will demonstrate in one place our ability to produce both of these biointermediates from just one feedstock and just one process. We've actually just recently returned from a trip to India, where we were inspecting both the enhancements to and the constructions in progress of our enhanced biomass pilot. In summary, our plans are to enable a fleet of these advanced carbon neutral extraction and biorefining facilities. Our major near term objectives for renewable fuels include finalizing various strategic collaborations with a number of industry leading partners for the development of these advanced drop-in fuels from our biointermediates.
Also, to complete and announce our first commercial agreement with one or two or three or four of these industry leading partners. We're also gonna upgrade and operationalize our Bioleum enhanced demonstration system by mid-2023, and we're gonna lead in the filing of this DOE grant application that's due in early September for these additional breakthrough pathways. Our first commercial agreement will clearly demonstrate our capability and potential and prove the long-term value. The industry response to us so far has been nothing short of spectacular. Let me turn now to LiNiCo and provide you an update there. At LiNiCo, we've already commissioned and operated our proprietary lithium-ion battery crushing and separating system, and we've successfully crushed charged batteries, which is a huge milestone. We've produced what we believe is a uniquely pure black mass, another huge milestone.
We've also enhanced the design and commenced upgrades on the crushing system with the plan to commission it in Nevada once all of our permits are received. We also completed the construction of our bench scale lithium extraction system, and now we have designed and commenced a broad series of lithium extraction test work. We've also received public comments on our Nevada operating permit for our battery metal recycling facility, which we fully responded to, and we are now waiting for the permit to be issued. Our ability to produce a uniquely pure black mass is enabling the development of what we believe will be a very efficient lithium extraction process. I'm gonna pause on that because we already talked about certain processes for extracting lithium.
When our black mass came out in the form and the substance that it did, it created additional efficiencies that we are now testing in our process. By even the most conservative estimates for increasing EV demand, which seems daily to keep growing, the industry will likely require about 5 x more lithium carbonate than the entire lithium mining industry produces today. The conventional recycling processes that we're seeing deployed suffer from extremely high, if not total losses of lithium. We solve this problem by extracting lithium immediately after crushing and separating in a manner that maximizes the recovery for reuse in batteries. It's also extremely efficient.
When we commissioned our first commercial prototype, the 5-ton-per-day system, we identified a number of meaningful opportunities for improvement that we're now making and that we're also modifying our existing air quality permit to reflect.
We expect to file the air quality permit this month, a few months later than originally planned, to accommodate the changes we are making in the crushing system. Our major near term objectives for LiNiCo include completing the designs and upgrades of the now enhanced crushing and separating system, receiving our written determination for the Nevada recycling facility, most likely during the Q4, revising and submitting our modified air quality permit for the enhanced system again this quarter, with expectations for approval in Q2 of 2023, and completing the validation of our lithium extraction test work and process definition by the Q4 of this year. We really look forward to commissioning the system in Nevada, followed by lithium extraction as soon as all these permits are received.
LiNiCo is uniquely positioned with differentiated and valuable technology that is highly efficient and scalable in an industry that continues to grow faster and faster as the whole world electrifies. Our internal ability to design, engineer, manufacture, and commission these systems is different than our competitors'. We felt the benefit of having that internal capability over the last two or three months. Being able to learn from the first pilot, respond quickly to opportunities for improvement, redesign, and move forward. This establishes an incredibly long-term value proposition for us, and it's just enormous. Let me wrap up my prepared comments with a few corporate items. Very happy to report, looks like we're finally closing on the Daney Ranch.
The gross sales price was $2.7 million, with $20,000 in cash already received and another $1.5 million expected this month, with another $1 million to follow. It's a great deal at a great value for us. We're also seeing a tremendous amount of activity in and around Silver Springs, including Redwood's recent announcement that it's investing $3.5 billion in a cathode and anode production facility. Right next door to the expanding Google complex, all only about eight minutes from the Opportunity Zone Fund properties in Silver Springs. Switch has also started construction on its second mega data complex on a campus that's planning for 17 of these data centers, only 12 minutes from Silver Springs, literally just past the Google and Redwood developments.
Much more importantly, the Opportunity Zone Fund is completing diligence and agreements now with major companies and investors keen on capitalizing on these development and opportunities, and this will most likely result now in about $18 million of additional proceeds to Comstock that when coupled with the Daney sale, will put in excess of $20 million in sales proceeds to us over the next three or four months. It's very gratifying to see Silver Springs coming together and so positively benefiting the Comstock. We are also evaluating specific strategic opportunities for our mining assets that we believe will unlock tremendous value. Preparations for this are ongoing through the remainder of this quarter, with some announcements expected in the Q4.
Our S-K 1300 report is now actually drafted with a new resource estimate for Dayton finally being completed and also planned for publication in the Q4. Just in summary, our priorities are on accelerating the commercialization of renewable fuels and renewable battery metals. We have a clear pathway. We have clear pathways on these solutions, and they are maturing nicely right in front of us. We do understand that these developments are major, and they take time. The industry, however, has taken notice, and we are now engaged on a daily basis, expanding and solidifying these strategic relationships.
The DOE recognition is wonderful, but please understand that we're on a commercialization pathway regardless of the DOE and look forward to showcasing our pilot facilities and our ability to make carbon neutral pulps, sugars, Bioleum, and biofuels, as well as highly pure black mass lithium and recycled battery metals. We're building a company with enormous long-term value for our shareholders. We are doing it foundationally, methodically, sustainably. That's the end of my prepared remarks. Zach, let's just stop there, and we can turn to questions.
Corrado, you answered a lot of the questions that have been asked so far in your presentation. Here is a question that wasn't addressed in your presentation. Are you pursuing new lithium deposits?
Thank you for the question. We are not pursuing new lithium deposits in the terms of mining claims. It's probably not worth mentioning. I'll do it anyway. We're a company that's now founded on extraction technology. The technologies that we use to extract sugars and Bioleum from woody biomass feedstock, similar in many respects to the technology we're using to extract lithium from black mass. We also have complementary technology that we believe ultimately would be very efficient in extracting lithium from certain materials and clays. That technology is in our IP portfolio, but we don't currently have any plans to advance it. With what's happening in the lithium industry, certainly that could surface up to a priority.
Corrado, can you please give us some more details about the governmental grant and loan opportunities?
Yeah. The Department of Energy has got plethora of grant opportunities. I mean, almost overwhelming in the number of them. They're coming out for both battery metal recycling as well as for cellulosic fuels and biofuels. When we saw the grant that I was referring to earlier in the call, it was very complementary to what we're already doing. We have foundational ability to produce biofuels today from woody biomass, and the DOE was looking for opportunities to produce drop-in fuels, which we were already advancing from a single feedstock source, particularly lignocellulosic woody biomass sources. It was very hard for us to pass up putting in an application for something that is our core competency.
It wasn't really a no-brainer though, because we're so close to commercializing our tech, we had to stop and think about how would this be additive, you know, to our portfolio. As we assess the opportunities and assembled a coalition of partners and technologies, we saw an opportunity to not only add in a way that enhances what we have, accelerate in a way that speeds up our commercialization, this grant. Now, having said that, just the dialogues that we've had with the industry partners, just the agreements that we're outlining and forming are remarkable. If we didn't apply for the grant, we're already light years ahead on just the facilitation, so we're grateful about that.
I think to answer the question differently, there's more and more of these grant opportunities coming up. There is an even more enormous number of loan guarantee opportunities coming up in this biofuel space. It might be battery metals and biofuels might be the hottest space you know, in the government right now. I can't think of anything that's coming close from what we're seeing coming out of the government.
Corrado, we have a follow-up to Bioleum. Could you expand on how Bioleum compares to existing fuel solutions using other feedstocks?
Basically, there's a number of comparable points. I mean, the first one is that there is a very high cost to using the vegetable oils that most of the biorefinery projects are being constructed for. I mean, there are dozens of biorefinery projects under construction, all of which are targeting vegetable oils as their feedstock. These costs are very high. David Winsness reviewed some of those costs at the annual meeting. To say $5, $6 a gallon is not an exaggeration. That's number one. Number two, they're not plentiful. If you just look at the allocation for these biofuels, there isn't enough of these vegetable oils to sufficiently supply a fraction of the biorefineries that are being constructed. It's a little bit of a head-scratcher. Everybody's super motivated for biofuels. We understand that, right?
They don't have sufficiency of feedstock. Thirdly, it inherently competes with food supply. We don't think it's anywhere near an optimal solution to be using, you know, farmed vegetables for a source of energy. On the contrary, there is an abundance of woody biomass that can be procured at a fraction of the cost. In our opinion, the constraint that's blocking the prevalence of these biofuels is a technology that can efficiently convert these woody biomasses into biofuels. We think it's not only a breakthrough, it unblocks literally a global problem.
Corrado, following up on that, can you please describe the development plans from pilot to commercialization within cellulosic fuels?
Yes. We already have an existing 2-ton-per-day pilot in Wisconsin. It enables the production of carbon neutral pulps and cellulosic sugars, which are easily converted into cellulosic ethanol. We can produce Bioleum as a simple byproduct, the other half of the woody biomass that's not cellulose for energy usage. We already have a commercial-ready model that's profitable making cellulosic ethanol and using the byproducts, even if it's just for subsidized carbon low power. What we're planning to do is build a pilot that will go all the way to cellulosic sugars and all the way to Bioleum, showing and demonstrating the higher yields that we can achieve, and then testing and piloting the ability to take those materials to drop-in fuels.
If we're looking at bringing that up and running by mid-2023, we can start working and operating by the end of 2023, then, you know, you're looking at 2024 and 2025 before you're scaling, you know, and commercializing. The fact that we can already do it profitably allows us to start a large number of activities like assessing sites, like securing feedstocks, like engineering and design and capital estimates, like third-party validations of all of the aforementioned, which positions us to move very quickly from pilot to scale to commercialization. If we didn't know it was economically viable, all of those things would be on hold until the pilots prove that. What our pilots are trying to do is expand that, extend that, right?
that we have the highest yields and the highest values from you know the fuels that are in most demand. Even then we'd be able to produce diesel, aviation fuel, marine fuels, biogasolines, a plethora of biofuels with a very nice product mix, and/or enable our customers and our strategic partners to use those fuels using our biointermediates. Both scenarios are incredibly high returns on our investments and our profitability.
Corrado, we have a few finance questions. When will the company become cash flow positive? When will funds need to be raised, and what form will it take? Equity sales or more project financing?
Thank you. Yeah. Look, each one of our platforms result in profitable operations. Our first facility for battery metal recycling would be profitable. Our first bio intermediate production would be profitable. If we went all the way to biorefining of fuels would be profitable. The view is that we will use our equity judiciously between now and getting these pilots fully up and running and demonstrable. Once they're demonstrable, meaning we can demonstrate it, people can kick it, people can see it, and more importantly, third-party engineers can revalidate it, then the bonding of those facilities and the project financing of those facilities will not only be straightforward from, let's say, the financial community, there's also a very strong demand from strategic partners.
If you think that there's all these biorefineries that are being scheduled and built, and they're not gonna have the feedstock to run full or even to run at all, there's motivated partners out there. We're hearing that already.
Corrado, given the company's recent stock performance, what are the one or two catalysts that will significantly impact the stock price?
We're very disappointed with the stock performance. We think that, you know, our ability to validate the things that I just mentioned both, right, for cellulosic fuels and for LiNiCo, they're worth repeating, right? Our ability to validate and show the production of pure black mass, which we've already done with serial number one, and we're enhancing for serial number two. Our ability to announce the purities and of our ability to extract lithium, will have a meaningful impact on the market. Now, obviously getting the permits that pave the way for us to get those things up and running here in Nevada, strong catalyst, strong, you know, milestones.
On the bio side, not only demonstrating the ability to produce these biointermediates, both the cellulosic sugars, which we can do today, and the Bioleum, and then proof and validation of the yields that these biofuels will come out of is very powerful and maybe most importantly, the agreements that we're looking to sign here with offtake partners. That will demonstrate the confidence and technology that will demonstrate, you know, our commitment to deliver, and that will demonstrate a very specific revenue stream, which will also add to and facilitate, you know, the financing that we talked about earlier. You know, the market has been brutal. The timing for us was not great. You know, our share price could not be more disappointing to us, but the foundation is solid.
The progress on these pilots is remarkable. Being able to see the yields, being able to see the efficiencies that each one of our systems are capable of doing relative to anything that's known or out there in the market, our confidence is supreme on this front. The DOE facilitating engagement with these third parties, the reaction thereto, was overwhelming. We didn't only identify seven major partners in our application, right? We had to choose between the ones that we thought would be most effective, you know, in this process. That was delightful.
Corrado, could you explain the significance of your recent patent announcement? When will it be awarded?
The patent, we filed a provisional patent. It was enormous. It was enormous in its scope, and it did two things, right? It filed to ensure our protection and our freedom of use of our technology for the composition of certain Bioleum and the process for producing it. So it was both process and composition were included in our patent. We also did an enormous search of all prior technology, all prior patent filings, you know, the things that were out there that we thought could block us, could trip us up, and we didn't find anything at all. I mean, there's nothing material. It was almost a competitive analysis that reaffirmed the novelty of our position. We were calling it for a while internally the umbrella patent, right?
'Cause we wanted to make sure that it not only covered the breakthroughs that we see here now with the Bioleum and the yields that come from that, but also the whole landscape of what we're planning to do in this industry.
Corrado, how would you characterize your ideal strategic partners for each of your businesses, sources of funding, offtake, marketing and distribution, technology, or all of the above?
In the cellulosic fuels, it's almost all of the above. There's already extraordinary suppliers, right, of some of the catalysts and the enzymes that are required in the industry. We have incredibly good relationships with them, and they're the global leaders. There's technology partners that can help us advance. You know, make no mistake, we're the enabler that unleashes the volumes, that unleashes the yields, that enables and unblocks the bottleneck in the industry. That's our technology. There's no reason a complementary technology couldn't enhance the yield of diesel or enhance the yield of aviation fuel. Absolutely, customers not only that are willing to take offtake, but to work with us to validate the materials and let the rest of the markets know that what we have is of high quality and high efficacy.
I think of it that way. In lithium battery recycling, it's really about feedstock more than anything else, you know? What I love about our competency and what I mentioned earlier is the fact that we have the ability to design, handle hazardous materials, engineer, manufacture, right? Manufacture in a way that's scalable. We have this 5-ton per day crushing and separating and conditioning system. It could be 80 tons a day, it could be 100 tons a day, it could be 2 tons a day, it could be 15 tons a day. We have the ability to engineer our solutions, manufacture them, and deploy them. It gives us an incredible capital cost advantage, and it gives us an incredible speed advantage.
Corrado, you may have already covered this, but could you speak a little bit more about the timeframe of the various pilots?
Yes. You know, we got the crushing and separating system run up and running in May, produced black mass. We showed a video of that during the annual meeting. We've revised and upgraded from an engineering perspective all the points that we thought could stand for improvement. What we're in the process now of doing is finalizing those engineerings, finalizing the procurements of some of the upgrade components, planning to get all of that to Nevada. Realistically from a timing perspective, our air quality permit needed to be modified for those changes. As I mentioned, that was, you know, a few months of delay. We're gonna try to file that permit this month, early September at the latest, which probably puts us in the Q2 of 2023.
For the other pilot, for different reasons, right, we're also looking towards the middle, right, of 2023, if not the Q3, maybe early Q3 of 2023. What's outstanding is that there is a tremendous amount of work to do, right, from between now and then on all aspects of the supply chain. While in some cases we have long lead times for equipment, some cases we have a longer lead time for permit, in other cases, we're working on feedstock and supply agreements. I think it's all gonna come together very nicely mid-next year and we'll accelerate and scale from there.
Corrado, can you please provide some more details on the agreement with Tysadco and also, just give a basic overview of how that works?
Absolutely. You know, as the market started to come down, I just thought that it would be prudent to secure additional liquidity if we needed it. You know, there's a lot of funky things out in the market, and we don't like funky things. It was really positive for us that an investor was willing to invest $2 million at market price, no discount, with restricted shares. That tells us that the investor wants to stay and be an investor. We did that deal. You know, the $0.65 share price wasn't exciting to us. It's a low share price.
Considering where the market was, we welcomed another strong investor that came in with restricted shares, and then we just structured the ability to get another $10 million of investment as we would need it. That is in contemplation of the work that we're doing between now and the middle of next year to get these pilots built, to get them commissioned, and to get them up and running.
Corrado, can you please provide some more details about the company's relationship with Aqua Metals?
Yes. Aqua Metals is a minority investor in LiNiCo, and Aqua Metals is a partner in the sense that they have entered the lithium ion battery recycling business. People may or may not know that they were previously doing a very similar thing in lead battery metal recycling, and so are working very diligently. They're a public company, so everything they're doing, everyone should be aware of or can be aware of to develop a solution, a downstream solution that takes black mass and is able to produce pure nickels, pure cobalts, maybe even some lithium products. So that's exciting for us. We have an ongoing collaboration since we're both owners in LiNiCo. I think at the annual meeting we talked about three downstream scenarios for us.
One was our own ability to extract lithium, which I've talked about already at length today. Second is Aqua Metals' downstream ability to extract some of the other battery metals, and Green Li-ion, which we have an investment in and has downstream capabilities to produce cathode active materials, precursor cathode active materials. It's pretty remarkable what's happening here in Northern Nevada, right? We're seeing our ability to take these pure black masses in a number of different directions. We're probably not gonna do all three. We're certainly gonna do one. We may do two of the three. We'll see how it plays out. All three are in development. All three have promise, and so we'll let that process play out.
It'll play out timely for us as we're building our system and the front end, which we believe is the critical part of ensuring the growth of the business.
Corrado, to the extent possible, please provide a preview of coming announcements.
Well, I think I laid it out, right? The near term objectives for Bioleum, we're talking about building a coalition, we're talking about announcing partnerships, we're talking about announcing offtake agreements, and we're talking about deploying an expanded biomass pilot facility, so that's very exciting, you know, on all fronts. From LiNiCo Process, we're talking about receiving major permits, revising and deploying and commissioning the pilot facility and starting to produce not only black mass, but also ultimately lithium. Now, we'll have news on our abilities to produce lithium, you know, sooner than we'll actually be deploying the system, so that's good. We'll be openly talking about those updates as we go. The only other news from a corporate side is the highly probable and very active closing on the Silver Springs properties.
I was trying to convey earlier that we're you know, the fund is engaged with large investors and large companies. There are large companies coming into the area beyond Google, beyond Redwood. Okay, it's really remarkable what's happening. Silver Springs is finally starting to get real traction, direct traction. You know, big news for us is $20 million of cash coming into the treasury, you know, over the course of the next quarter.
Okay. We do have a follow-up question on the coalition.
Thank you.
How soon will that occur?
We're in ongoing active discussions, like, literally every single day for the last three or four weeks. You know, a lot of it has been rallied around this one grant. Ironically, the grant is a very small sliver in how those conversations are expanding. I mean, you know, we have some folks saying, "Why are we bothering with a government grant when we can do this together right now?" In that context, you know, we're scoping the grant to not be silly, right? Like we're scoping the grant for what we believe is large upside with a longer lead time, and we're not scoping in the grant things that we can do with our partners sooner. It's night and day. I mean, the last two months have been exhilarating.
The response has been, I mean, just truly remarkable. I think it validates what we're doing. It validates our tech. I mean, these conversations are not, "Hey, we can make fuel out of wood. What do you think?" I mean, they're highly technical. You know, they're engaged with the top technology officers of all of the companies that we're talking about. These companies are not small, you know? They're big. For us, it's been really a validator. It. We haven't learned anything new about ourselves, but I think a lot of people are learning more about us.
Corrado, what revenue will the company see in 2022, and what revenue will the company see in 2023?
Look, we think that there's opportunities for not only producing and selling black mass in 2023 but also with some of our partners, enabling them and selling some of our solutions on the cellulosic fuel side. Okay. We're not gonna see a first biorefinery in 2023, but we'll see, you know, this year, offtake arrangements. Once those offtake arrangements start locking in, the plans for producing that offtake will accelerate 'cause they're a critical prerequisite for not only finalizing the size and scale of what we're gonna do but also the financing. We're thrilled at the progress. It's in the right sequence, and it's all happening.
Corrado, that does it for our questions. I wanna thank everyone for submitting their questions, and I'll turn it back over to you.
Thanks. I wanna thank everybody for your time and attention. We announced after the market closed purposely to allow our investors to digest our 10-Q, to digest our press release and have the benefit of all of these discussions before the market opens. We're very happy to have follow-ups as always. If you have any questions or concerns, please don't hesitate to ping us or reach out, and we'll be responsive. Thank you very much.