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Comstock Mining advances Lucerne sale towards near-term closing

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Global Mining Review,

Comstock Mining Inc. has announced that Tonogold Resources, Inc. has elected to extend the closing date on the sale of the Lucerne properties until 30 August 2019, by remitting a non-refundable cash deposit of US$875 000. Under the January 2019 agreement, Comstock is selling the membership interest in Comstock Mining LLC to Tonogold for US$15 million, plus the assumption of certain liabilities and a retained 1.5% NSR royalty on Lucerne. The extension brings total cash deposits through August to US$4.225 million, all toward the agreed purchase price. The company has also received US$3.5 million in convertible preferred stock (CPS), for total pre-close payments of US$7.725 million, all applicable to the purchase price, plus fees totaling an additional US$1 million in stock.

The company and Tonogold have also amended the purchase agreement, effective 15 August 2019, allowing Tonogold to close by 30 August 2019, with a majority membership interest of at least 50.3% in Comstock Mining LLC, and an additional cash payment at closing of at least US$3.315 million, bringing the total cash payments for closing to US$7.54 million. The remaining US$4 million will be held as a secured obligation with scheduled monthly payments of not less than US$500 000 each, between November 2019 and May 2020. Once the final payment is made, Tonogold will then own 100% of the membership interests Comstock Mining LLC, owner of Lucerne. The prior ‘earn-in’ option agreement between Comstock and Tonogold, signed in October 2017, is terminated as a result of this amendment and the prior payments of US$2.2 million becomes income in August 2019.

The amendment also results in a fee of US$580 000 in Tonogold CPS, due by 30 August 2019, in addition to the US$420 000 fee in CPS previously paid on 31 May 2019, neither applying to the purchase price. All US$4.5 million of the CPS is convertible on 22 May 2020, at a conversion price representing the lowest of: the 20 day volume weighted closing price of Tonogold shares prior to conversion; Tonogold’s most recent private placement; or Tonogold’s public offering price. The amendment gives Tonogold an option to extend the closing to 30 September 2019, by paying an additional US$250 000 in CPS.

The company previously agreed that, upon the closing of the sale of the Tonogold transaction, it will enter into an option to lease the permitted American Flat property, plant and equipment to Tonogold for crushing, leaching and processing. Upon closing, the company will also enter into a 10 year mineral lease for all additional mineral properties in Storey County, granting Tonogold the right to explore, develop and mine these properties.

Corrado De Gasperis, Executive Chairman and CEO, stated: “The total cash payments at closing of US$7.525 million transfers the majority interest in the entity that owns Lucerne to Tonogold with a clear and expedited path for acquiring the full 100%. The closing will immediately reduce our debt to approximately US$2.5 million. This deal is getting done in the very near-term and the remaining Tonogold payments (approximately US$4 million) eliminates our debt and brings significant free cash to accelerate new revenue growth.”

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