Episode Transcript
Tim Gerdeman
Welcome to the WTR Small Cap Spotlight Podcast. I’m your host Tim Gerdeman, Vice Chair and co-founder and chief marketing officer of Water Tower Research. In today’s podcast episode, I am joined by Corrado DeGasperis, CEO of Comstock Inc., NYSE, ticker symbol LODE, as well as my WTR equity research colleague, Peter Gastreich. Comstock is a Nevada-based renewable and sustainable metals company with additional investments in renewable fuels, mineral properties, and real estate. Its high-volume solar panel recycling technology diverts end-of-life solar panels from landfills and recycles on 100% of the commodities that go into them to include, importantly, silver, aluminum, and other valuable and sometimes scarce resources. For more on Comstock’s comprehensive business strategy and outlook, investors can look at Peter’s recent initiation of coverage report. For today’s discussion, we’ll go straight into Corrado’s strategy for Comstock to capture value from the precious metals market. So, gentlemen, without further ado, good morning, and thanks for joining the podcast.
Corrado De Gasperis
Morning, Tim. Thanks for having us. Pleasure to be here.
Tim Gerdeman
Good morning. Corrado, I’ll kick off the first question before passing it over to Peter for further Q&A. Let’s start with the macro backdrop. Sans some very noteworthy volatility in recent trading sessions. Silver has broken out in a way we’ve not seen in years. From your vantage point, what is driving the surge, and do you see it as a structural shift and given where prices are today, how are you positioning the company to capture that value through your metals recycling platform?
Corrado De Gasperis
Yeah, I do think it’s structural, Tim. So, I mean, historically, silver has followed the, you know, the gold thesis of investment in jewelry, you know, and to that extent is always considered the poor cousin, you know, with the gold and silver ratio being often debated, you know, the historical, historical, historical 16 to 1 ratio that during COVID hit, I think, 125 to 1, you know, and people were squawking at, why is silver so undervalued? Why is silver so undervalued? But something meaningful changed about four years ago as well. You know, and that was when the demand for the industrial applications, you know, especially in electronics, you know, be it electronics, photovoltaics, you know, and evolving now into you know robotics data that are tied to electrification today are more than double the historical demand for investment and or jewelry which is also increasing so this structural change we saw four years ago 2021 2022 where the world is using two to 300 million more ounces of silver per year than the mines are producing and on average generally speaking rounded those numbers are produce about 900 million ounces of year globally from the mines or less and now using 1.1 to 1 .2 billion ounces per year and so what seems to have happened that is structural that is foundational macroeconomics supply and demand, but it’s also eaten its way through all the derivatives and all the trading and all the, you know, to get to the foundation of we don’t have the silver we need to make our products, you know. And so I think from our view, and volatility has increased, to your point, some people say in a breathtaking way, but it’s still remarkable where you have, let’s say, a huge drop in silver and you’re still looking at $75, $80 an ounce. So I think we’re going to see much bigger numbers. It’s always difficult to predict, you know, how it evolves, but it’s foundational. And it is, it is critical. It is absolutely critical to the effective use of these products. And when people start talking about putting, you know, solar arrays in space, you know, you can’t begin to fathom, you know, the magnitude of silver that’s required for that.
Tim Gerdeman
Yeah, that all makes sense. And I will say, despite the brutal sell-off in recent days, a couple very high-profile Wall Street market strategists in the last day or two have suggested that silver is in the very, very, very early innings of rallying. So with that, I’ll turn it over to Peter. Thank you.
Corrado De Gasperis
Thank you, Tim.
Peter Gastreich
Okay, thanks, Tim. So, yeah, just moving on a bit further, continuing with Tim’s question. Could you talk a little bit about just kind of, you know, broadly speaking, how Comstock is positioning to capture the value that you’ve just talked about in terms of precious metals through your metals recycling platform?
Corrado De Gasperis
Yeah, absolutely. I didn’t, I didn’t get into that part, so I appreciate to follow up. So with us, you know, the biggest dilemma that we see in our markets is that the solar panels came to end of life fully a decade earlier than expected each solar panel on average could have a half an ounce of silver in it okay and when you look at some of the other people trying to recycle or reuse these materials it’s very ineffective it’s very slow it doesn’t scale right so one production line for us can produce three point reproduce process, if you will, recycle 3.3 million panels per year. And you’re talking about a high -speed, high-scale system where you’re feeding in a panel every seven seconds. It’s fully automated. You know, and so in that context, one facility, even if you’re thinking about maybe 90% recovery of the silver, you know, using conservative numbers, you’re probably going to be producing over 1.3 million ounces of silver per year. Two facilities in Nevada would be 2.6 million ounces of silver per year. And then it becomes very, very critical because it’s, you know, you can do the math very quickly, 1.3 million times $75 or $80. There’s a very, very big value there. Then going downstream ultimately to refine those metals, you know, and actually capture the substantial majority, you know, of that metal rather than paying someone else to refine it is our two bastions, right? So, A, capture the market, process as many of these panels as possible, reusing 100% of the materials, including and especially the silver, and then going downstream and further refining those metals, so that you’re not only getting all the silver, then you’re getting the copper. You’re getting the silicon. You’re getting the gallium. You’re getting the tellurium. You’re getting all of these precious and critical minerals that would otherwise be landfilled and lost forever.
Peter Gastreich
Okay. Thanks very much. That’s a great introduction. Let’s move in a little bit about the into the economics of the solar panel recycling. You know, Comstock in your IR presentation, you really very clearly lay out these economics. You know, the model blends, tipping fees, very low variable costs and commodity sales. For our listeners who may not be as familiar, could you please walk us through how the economics look at full scale, especially now that, you know, high silver prices have increased the value of those silver-rich tailings?
Corrado De Gasperis
Yeah, absolutely. So with one facility, and really, to be more pedantic, you know, one production line within one facility, we deploy about $12 million of capital for that production line, and we can produce, you know, we can process, as I mentioned, 3.3 million panels. Now that’s 100,000 tons, Peter. So let’s use 100 ,000 tons as the simple, rounded basis for everything that we’re going to say. These upfront fees, tipping fees, as most people will refer them to, we’re providing a remarkable environmental service. We are immediately and completely eliminating a liability. And we’re not eliminating it for our customers. We’re eliminating it off the face of the earth. Yes, for our customers, but it’s gone. We eliminate the liability and we get paid for that environmental service. You know, I think there’s a better word than tipping fee because it has certain connotations to it. We’re providing a very valuable service quickly, expediently, completely. So that’s $500 a ton. So that’s $50 million of revenue right there. Previously, when we were capturing aluminum at $1,300 a scrap ton, and we were capturing silver at $35 an ounce and only recovering about half of it because the refiner’s charge us to process that stuff out and discount it accordingly, we were getting another $250 a ton. So $125 for aluminum, $125 for silver. So that’s another $25 million of revenue. Put all of that, $75 million, against the all-in cost of $15 million. That’s $4 million of totally variable cost. These extremely low variable costs result because the process of eliminating these contaminants, the process of processing these materials cleanly is super-efficient. And so we use natural gas and we use electricity, which is about, I mean, it’s substantially all of those totally variable costs. There’s a couple other minorities in there, but I would easily say 92, 93, 94% of our variable costs is electricity and natural gas. So, then about 11 million of fixed operating expenses, if you’re doing the 100,000 tons, that’s $150. So $750 minus $150 is $600, which is equivalent to about $60 million of cash flow per year from one production line and one facility. Now, if you want it to be conservative, say, well, let’s operate it at 90% rather than 100%, $55 million. It’s a big number. Now, that assumed $35 silver where we’re barely getting 50% of the value. At $60 silver, we’re getting more than 50% of the value plus the higher price. So more yield, more price, and that adds another $25 million a year in revenue, literally another equivalent of $250 a ton. Now most people say, whoa, you’re talking about $80 to $85 million cash flow from a $12 million investment. Is that real? That is absolutely real. That is exactly what we’re talking about. But in the same exact context, as much of the, every time you think of, well, a $20 million increase or a $25 million increase because of silver prices, you should immediately be thinking we’re leaving at least that much on the table by not refining the metals ourselves. So from a macro so from a macro perspective, if you had a potential of creating, let’s just say, $75, $80 million of cash flow per facility, and we have a business plan to roll out seven facilities, that’s remarkable. Now, then we want to refine from there.
Peter Gastreich
Okay, that’s very compelling. We’ll come back to the refining in just a moment here. But you recently announced that Comstock secured all final permits for the Silver Springs facility. You have equipment arriving. You know, where does commissioning on this facility, this first facility stand today? And how should investors think about the ramp up of this facility as well as your other planned locations? You know, Nevada, California, Ohio, there’s been a few announcements elsewhere.
Corrado De Gasperis
Yeah, absolutely. So we’re on schedule. We had originally guided that we would have the permits, you know, by the end of 2025, we would be commissioning during the first quarter of 2026, which is right now, which is what’s happening, and we would be up and running in the second quarter. Now, in terms of that ramp up, we have a very, very precise view of getting to about 25,000 ton run rate, which of course is only about 25% of 100 ,000 tons, getting to a 25,000 ton rate as quickly as possible. Third quarter would be great. You know, just get that up to that run rate. Why is that run rate relevant? Because we are profitable at over 20% utilization. So getting the 25%, we can prove, look at the system, look at the way that it operates, and look at the money that it’s generating. That’s unequivocal, absolute validated proof of concept. Then ramping it up from that point forward, we would be happy if we exited the year, you know, 35, 40,000 tons, and then exiting 2027 running full, running full, meaning typically somewhere between 90 and 95% utilization. So it’s very, very exciting for us. What we just did was accelerate facility number two, which will also be in Nevada. And I want to make a very salient point on these permits. These permits were first of a kind. Nevada has a very, very robust environmental regulatory infrastructure, primarily because it’s the number one mining jurisdiction in the world. So, they’re very knowledgeable about the complexities of air quality, water pollution, and all these kinds of things. But this was a first of its kind and its kind. And it’s a state interpreting the federal rules. And so Nevada was very strict and stringent in interpreting the rules, which initially, quite frankly, was annoying. But with hindsight, it was remarkable because they basically held us to a standard that you’re a recycler if you’re not generating hazardous waste. So therein, the bar is set that you cannot generate hazardous waste. And therein, having a zero landfill solution puts us in an extremely rarefied space. Like, we don’t know anyone today that has a zero landfill solution, hence we don’t technically know anyone today that could qualify for the permits that we qualified for. And why is that especially important? Because Nevada, California, and Arizona represent easily 50% of the end-of-life market and easily by far no one comes close the biggest market in the United States. So we’ve established a beachhead right on the California borders, the California and Arizona borders to take all of California, all of Arizona, all of Nevada into the most efficient, most expedient, most scalable infrastructure for solar panel recycling. Now, we did announce the California site, as you mentioned, and that was really in response to the myriad of customers in California and to be able to service them better, you know, more intimately and ultimately give us some efficiency in how we coordinate our logistics back to Nevada because there’s a lot, you know, you don’t want to be sending quarter trucks and have trucks. You want to consolidate, you know, aggregate, you know, and then bring it over when, when that’s appropriate. Bigger customers, that’s not an issue, of course. So then when we look, then we look out to Texas, Florida, Georgia, North Carolina, Ohio, even Minnesota as the hubs of where you see the most concentration of deployed solar panels. Worth, letting the audience know, there’s 1.4 billion solar panels deployed in the United States. Last year, we saw about 3 .5 million come to end of life. This year, 4 .5 million. But in 2030, that number is projected to be 30 to 35 million. It’s a literal tsunami. But then you pause and say, 35 million relative to 1.4 billion is a tiny tip of the iceberg of what’s coming over the next 20 or 30 years. So, it’s hard to exaggerate the magnitude of this market and the speed at which we capture market share, frankly, to us is the number one critical success factor now. Proving the tech was previously, you know, commissioning and getting the first facility deployed, very critical, we’re doing it right now, but ultimately getting that market share and making sure our customers understand this is the fastest, most efficient, and most effective way to terminate their environmental liabilities and keep domestic critical minerals in the United States as a strategic supply chain.
Peter Gastreich
I just want to step back to the, you know, silver content and you brought up the, you know, the refining as well. And there has been, you know, a little bit of investor misunderstanding about, you know, how much silver can actually be extracted from these panels at today’s rates. And of course, you have your newly announced domestic silver refining strategy, which should help to unlock additional value. But maybe you can kind of walk us through exactly sort of, you know, where those recovery rates look today and where we could be going in the future with the defining strategy.
Corrado De Gasperis
Yeah, it is, I apologize for any confusion because there is, there’s really three variables here that we’re talking about, and they’re all relevant, right? The first one is how much silver is in each panel, you know, and you see a lot of scuttle butt about, oh, they’re using less silver per cell. That’s true. They’re putting a lot more cells in each panel, you know these panels used to be 150 watts now they’re up 600 watts you know they’re getting more and less real estate you know so frankly we see on average more than half an ounce of silver per panel and we don’t see any drop off in that as we project forward certainly not any material time frame that we can see forward that’s the first thing. The second thing is what we’re doing now is we’re producing very clean aluminum selling it all, very clean glass pearls selling it all. And then these silver-rich tailings, and these tailings, when we sell them to a refiner, we’re only getting about 45 to50% of the silver value net. So they say, well, we’ll give you 75% of the silver value, but we’re going to deduct transportation costs. We’re going to deduct refining costs, which quite frankly they dictate to us. We don’t know what their refining costs are. So you’re getting about half of the silver value. Now, back to our earlier discussion, it’s very, very profitable for us in the current environment, very profitable for us. So the idea, though, is instead of yielding 45 or 50% of the silver value. And because of the way the math works, the higher the silver price, the higher the yield. But, you know, you’re getting 60% at best. Instead of that, we would then like to deploy, you know, this integrated refining solution. And we wouldn’t want to be refining at every recycling site. So if we had seven recycling sites around the world, You’d only need one centralized industrial scale refinery to handle all of the tailings that are coming out of our plants. Typically, the tailings represent 10 to 15% of the mass balance. So even if you used 12.5% the midpoint, you know, you’re talking about when you had seven facilities up and running, you’re talking about 80 to 100,000 tons of material. That would be a nice, very, very nice, you know, centralized refining operation. Now, you could have two, you could have one, let’s say, in the West Coast and one in the East Coast, and that would be nice too, because the CAPEX that we’re anticipating for the refining is not very high at all. It’s a very well-known series of processes. What we’re doing new is we’re integrating it all, you know, into under one roof. Because we’re not just recovering. tailings. It’s very standard to extract, you know, copper from ore. But when you have a dozen of those elements, then you need to sequence the process and you need to optimize the recoveries in a slightly different way. You know, so that’s what we’re talking about. You know, A, you know, maximize the yield from the recycling center. B, tolerate or suffer a lower recovery by having to sell the stuff to refiners. C, optimize, maximize recovery by self-refining.
Peter Gastreich
Okay, I’d like to pivot from your urban mining, so-called urban mining with the silver and metals recycling, to the, you know, your traditional mining assets. So you have a legacy mining portfolio. That’s obviously become very interesting where gold prices are at today. So with your Dayton and Lucerne assets fully permitted and highly sensitive to gold prices, how are you thinking about the timing, partnerships, and ultimately monetization of those assets?
Corrado De Gasperis
Yeah, there’s an interesting compare and contrast. I mean, from a first perspective, you know, if you compare to the, you know, the metal price lift of, you know, gold hitting or pushing $5,000 and, you know, silver being, you know, in the $75 range, these assets become very, very valuable. I mean, the mine plans, you know, show robust cash flows over the mine lives. And, and even, you know, look, even at $2,250 and $2,500 and $2,650, that’s when it started to get very interesting to us, you know, And it hasn’t been that long, though, right? It’s been 12 months since then, you know, and over the last three to five months, we’ve been getting a lot more serious, a lot more sophisticated inquiries about monetizing these assets. And, you know, people will say, why don’t you just mine them? What are you doing? You know, you could generate $100 million a year just from the Dayton mine alone. You know, what are you doing? And the response is it is very profitable, it is very lucrative, but compared to the solar recycling, the capital allocation is still highly, highly, highly prioritized to solar recycling. You know, I was just saying this recently to someone that, you know, and I just mentioned to you, you know, if we can do 1.3 million ounces of silver per facility and we have two facilities in Nevada that’s 2.6 million ounces of silver produced every single year now this lucrative Dayton mine and I say that very sincerely I mean we couldn’t be more thrilled at the cash flow profile of that mine it only has 2.6 million ounces in situ so you’re talking about a seven -year mine plan to extract 2.6 million ounces of silver. There’s a lot of gold in there, too. Don’t get me wrong, right? 2.6 million ounces of silver. And you’re going to get, if you’re really, really good, and we were, when we were mining, you know, 55 to 60% of that silver off of your leach pad. So it’s very hard to say we want to put a dollar into that development versus a dollar into the recycling development. And there’s no conflict there. We will be allocating the capital to the recycling. However, very sophisticated, very capable, very competent partners would be keen to come in and either acquire outright or partner or, you know, deploy the capacity there needed to access that value and that cash flow. And we’re keen to do that. I think some of our investors, you know, some of our investors love mining, but most of our investors are like, please, God, don’t allocate capital to the mining assets when you have the solar recycling opportunity just sitting there waiting for that capital. And I want to just reaffirm. That’s absolutely our view.
Peter Gastreich
Okay, got it, I’ll just put in one final question here before we get to your closing remarks. So you recently completed the Mackay transactions, including the sale of your remaining NSR royalty. What does that deal signal about the underlying value of the mining district? And how should investors think about the economic leverage and strategic optionality that’s embedded in your mining portfolio? You’ve touched that a little bit already.
Corrado De Gasperis
Yeah, no, I think it should be viewed as a very strong reinforcement. You know, if you think about the entire Comstock district you know the Dayton Spring Valley is the southern part the Lucerne is the central part and the properties that you know Mackay acquired are in the north the north is um is we had never had intentions of developing the north because it’s deeper it’s more complex right it’s actually also where most of the historic Comstock LODE underground mining activities occurred in the late 1800s. So some would say it’s a little treacherous, you know, up there. Is there gold and silver up there? There is absolutely gold and silver up there. But it would require a lot of exploration development dollars. So for a sophisticated company, including their CEO, is a very sophisticated geologists with a long history of good discoveries and successes. They see that value and they’re willing to make the investment to develop that value. For us, you know, we ultimately, since 2023, we monetized almost $8 million, you know, in that claim set. But, you know, it would take tens of millions, if not hundreds, to develop, you know, that complexity of geological structure and they see real value in doing that. I think that’s a strong testament to what people are seeing as possible. The Lucerne is near-surface mineralization and the Dayton is immediately at surface mineralization. So from a production profile and an ability to just jump in and mine those ounces, you know, those opportunities immediate term, you know, near term and immediate term, whereas the north is a much longer term play, but still very prospective.
Peter Gastreich
Okay, great. So, Corrado, thanks for taking the time today. You know, this has been an incredible deep dive into precious metals, and it’s just one aspect, so, you know, multiple aspects that you have at Comstock, which we will, you know, definitely address in future podcasts. It’d be great to have you back. I’ll pass over to Tim in just a moment to wrap up, but just to, you know, see if there’s anything that we missed today or would you like to leave any final thoughts with our listing investors?
Corrado De Gasperis
Yeah, no, I would say that, you know, what’s really exciting for us is that we’ve built, we believe we have at least a two-year lead in the solar recycling markets, you know, especially the fact that we’ve been operating a facility for two years and now we’re scaling it up. and now we’ve got these first-of-a-kind permits that would be very, very difficult for others to achieve, at least in the biggest territory. So this recent capital raise was designed to accelerate the deployment of those recycling facilities, capture the vast majority of the market share of this rapidly growing market. And then lastly, get to it with, you know, fully designing and fully validating a refining solution. If the refining solution didn’t come online for three years, that would be wonderful for us, because in three years, we’ll have at least two, maybe three facilities that are able to feed that central machine to refine these metals for domestic production. So yeah, we’re excited about the lead we have if we don’t move faster of course we feel that lead will shrink right because it’s a very big market it’s very attractive you know once people you know figure out a little bit better on how to do certain things they’ll start coming in and we don’t we don’t want them to catch us
Peter Gastreich
Thank you very much. Tim over to you
Tim Gerdeman
Thanks Peter and Corrado for joining today and I have to say Corrado, I put on my former equity research cap. You got my attention when you started talking about the total addressable market. Those are real numbers for affirm your size. So a very exciting story. And thanks for your time.
Corrado De Gasperis
Thanks, Tim. Appreciate it. Thanks, Peter. Fantastic discussion.
Tim Gerdeman
Thank you for listening. And don’t forget to subscribe as well as visiting www. Watertowerresearch.com to stay up to speed on the company small cap written research reports, podcast, fireside chats, industry -specific symposiums, and conference schedules. We will see you next time for another edition of the WTR Small Cap Spotlight Podcast. Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.