Mining operation Comstock Mining Inc. (NYSE: LODE), which has sustained losses since inception, may be able to turn around now that it has started producing gold.
Comstock, headquartered in Virginia City, Nev., has recurring net losses from operations and is carrying a $173.4 million deficit as of Sept. 30, according to filings with the U.S. Securities and Exchange Commission. The company listed about $11.2 million in assets.
Because of Comstock’s loss history, the company has been financing its business through the sale of securities and from debt financing. Comstock says [in SEC filings] that if it is unable to obtain sufficient near-term financing, or if production rates or the price of gold dip below management’s expectations, then the company could face substantial doubt about continuing as a going concern.
The company also operates cottages, hotel rooms and a restaurant, but expects those operations to become less material it its overall operations as it continues to develop the mine.
Comstock plans to increase production, reduce costs and working capital needs to maximize funds available for working capital[, according to the SEC filing].
The company’s exploration expenses also declined about 57 percent (about $8.4 million) for the nine months ended Sept. 30, compared with the same period in 2012, because of the switch from exploration to mining.
Comstock has recently transitioned into production in the Lucerne Mine and has been able to grow the gold output of the mine. Through September, the company brought in $17.1 million in revenue from shipping gold, and $2.7 million in revenue from silver. The company did not generate any mining revenue for the same period of time ended Sept. 30, 2012[, SEC filings show].
In March, the company raised $10 million in proceeds through offering 5 million shares of common stock at $2 per share. In August, the company raised another $8.75 million through another public offering.
In September, Comstock was able to pay off a $5 million loan from Resource Income Find and Auramet Trading LLC that it agreed to in July 2012. In July 2012, the company entered into a loan agreement with Caterpillar Financial Services Corp. to borrow $5 million, with a 5.85 percent interest rate, payable in 30 months.
The company plans to continue ramping up its production[, it says in the SEC filing,] and plans to produce about 40,000 ounces of gold in 2014.
Mining company Chile Mining Technologies Inc. landed on Mergers & Acquisitions Distressed Company Watch List because of its working capital deficit and lack of revenue as it worked to develop mineral properties.
For last week’s edition of Turnaround Tuesday, see “Struggling Flux Power Restructures Loans.”