UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 26, 2015
COMSTOCK MINING INC.
(Exact Name of Registrant as Specified in its Charter)
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Nevada
(State or Other
Jurisdiction of Incorporation)
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001-35200
(Commission File Number)
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65-0955118
(I.R.S. Employer
Identification Number)
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1200 American Flat Road, Virginia City, Nevada 89440
(Address of Principal Executive Offices, including Zip Code)
Registrant’s Telephone Number, including Area Code: (
775) 847-5272
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01. Entry into a Material Definitive Agreement.
Item 3.03 Material Modification to Rights of Security Holders.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Item 5.07 Submission of Matters to a Vote of Security Holders.
Item 8.01.
Other Items.
On August 27, 2015, Comstock Mining Inc. (the “Company”) announced that it has entered into the previously announced first amendment of its operating agreement (the "Amendment") with the other members of its Northern Comstock LLC joint venture. The Amendment will result in reduced capital contribution obligations of the Company from $31.05 million down to $9.75 million and permit such capital contributions to be made in the form of cash, or in certain circumstances, the Company’s common stock, par value $0.000666 per share ("Common Stock"). The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by the full text of the Amendment, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
The Company also announced the results of its consent solicitation (the “Consent Solicitation”), among all of the holders of the Company’s outstanding shares of convertible preferred stock, pursuant to which the Company sought written authorization from a majority of the holders of the Company’s outstanding 7 1/2% Series A-1 Convertible Preferred Stock (“Series A-1”), 7 1/2% Series A-2 Convertible Preferred Stock (“Series A-2”) and 7 1/2% Series B Convertible Preferred Stock (“Series B,” and together with the Series A-1 and Series A-2, the “Preferred Stock”) to amend the certificates of designation of rights, preferences, rights and limitations of the Preferred (the “Charters”).
As of the record date for the Consent Solicitation, July 28, 2015, there were 48,598.5 shares of the Preferred Stock outstanding and entitled to vote. Each share of Preferred Stock outstanding on the record date entitled the holder thereof to one vote for per share of Preferred Stock. Of the shares of Preferred Stock outstanding on the record date, the holders of Preferred Stock entitled to vote, 43,603.78 shares of Preferred Stock were voted. The results of the preferred shareholder voting on the Consent Solicitation were as follows:
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Number of Preferred Shares
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"Yes" votes
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"No" Votes
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Abstentions
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Series A-1
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24,361.99
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24,361.99
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—
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—
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Series A-2
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1,610.31
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1,610.31
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—
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—
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Series B
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22,626.20
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17,381.48
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250.00
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—
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Total
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48,598.50
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43,353.78
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250.00
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Approval of the amendments to the Charters required the approval of a majority of the holders of the Preferred Stock. Accordingly, the amendments to the Charters were approved, thereby resulting in the automatic conversion of the Preferred Stock into shares of Common Stock. Further, as a result of the approval of the amendments to the Charters, the Company declared and will pay a one-time dividend of 127 shares of common stock per share of Preferred Stock to each holder of the Preferred Stock. The Certificates of Amendment to the Charters were filed with the Secretary of State of the State of Nevada on August 27, 2015. The foregoing description of the amendments to the Charters does not purport to be complete and is qualified in its entirety by the full text of the amendments to the Charters, which are filed as Exhibits 4.1, 4.2 and 4.3 hereto, each of which is incorporated herein by reference.
Item 9.01.
Financial Statements and Exhibits.
d)
Exhibits
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Exhibit
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Description
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99.1
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Press release dated August 27, 2015
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4.1
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Certificate of Amendment for the Series A-1 Charter
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4.2
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Certificate of Amendment for the Series A-2 Charter
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4.3
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Certificate of Amendment for the Series B Charter
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10.1
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First Amendment to the Limited Liability Operating Agreement of Northern Comstock LLC
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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COMSTOCK MINING INC.
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Date: August 27, 2015
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By:
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/s/ Corrado De Gasperis
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Name: Corrado De Gasperis
Title: President, Chief Executive Officer and Director
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EXHIBIT INDEX
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Exhibit
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Description
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99.1
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Press release dated August 27, 2015
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4.1
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Certificate of Amendment for the Series A-1 Charter
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4.2
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Certificate of Amendment for the Series A-2 Charter
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4.3
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Certificate of Amendment for the Series B Charter
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10.1
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First Amendment to the Limited Liability Operating Agreement of Northern Comstock LLC
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NORTHERN COMSTOCK LLC
FIRST AMENDMENT TO THE LIMITED LIABILITY COMPANY OPERATING AGREEMENT
FIRST AMENDMENT TO THE LIMITED LIABILITY COMPANY OPERATING AGREEMENT dated as of August 27, 2015 among the undersigned signatories hereto.
W
I
T
N
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S
S
E
T
H
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WHEREAS, a Certificate of Formation was filed with the Secretary of State of the State of Nevada for the purpose of forming the limited liability company governed hereby under Chapter 86 of the Nevada Revised Statutes Act and such Certificate of Formation became effective; and
WHEREAS, the name of such limited liability company is Northern Comstock LLC; and
WHEREAS, the undersigned constitute all of the members of such limited liability company and executed and delivered that certain limited liability company operating agreement dated as of October 19, 2010 to govern the affairs of such limited liability company (the “Original Agreement”), which the undersigned hereby desire to amend certain provisions of the Original Agreement.
NOW, THEREFORE, in consideration of the premises, representations and warranties and the mutual covenants and set forth herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, the undersigned, intending to be legally bound, hereby agree as follows:
Section 1
. Amendments to Section 3.1. Section 3.1 of the Original Agreement is hereby amended and restated in its entirety as follows:
"3.1 Previous Capital Contributions. Prior to the date hereof, each of the Initial Members have contributed the real property rights or capital stock to the capital of the Company as set forth on Schedule A opposite its name in consideration for its Ownership Interest."
Section 2
. Amendments to Section 3.2. Section 3.2 of the Original Agreement is hereby amended and restated in its entirety as follows:
"3.2 Additional Capital Contributions.
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(a)
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Subject to Section 3.2(b), Comstock Mining shall make cash Capital Contributions to the Company in the amount and on the dates indicated on the table set forth below.
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Capital Contribution Amount
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Capital Contribution Date
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$812,500
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August 28, 2016
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$812,500
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August 28, 2017
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$812,500
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August 28, 2018
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$812,500
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August 29, 2019
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$812,500
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August 28, 2020
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$812,500
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August 28, 2021
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$812,500
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August 28, 2022
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$812,500
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August 28, 2023
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$812,500
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August 28, 2024
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$812,500
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August 28, 2025
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$812,500
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August 28, 2026
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$812,500
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August 28, 2027
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(b)
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Notwithstanding Section 3.2(a), at any time that Comstock Mining’s cash and cash equivalents are less than Twelve Million Five Hundred Thousand Dollars ($12,500,000) (such occurrence, a “Liquidity Threshold Event”), then Comstock Mining shall notify the Company that a Liquidity Threshold Event has occurred and at any time that a Liquidity Threshold Event has occurred and is occurring, Comstock Mining shall have the option in its discretion to make Capital Contributions in the form of shares of $0.000666 par value, per share common stock, of Comstock Mining ("Common Stock"), the number of shares to be calculated by dividing $812,500, by the closing price of the Common Stock on its primary trading market on the date prior to such Capital Contribution. Notwithstanding Section 3.2(a), at the initial time that Comstock Mining’s cash and cash equivalents are greater than Twelve Million Five Hundred Thousand Dollars ($12,500,000) (such occurrence, a “Liquidity Surplus Event”), then Comstock Mining shall notify the Company that a Liquidity Surplus Event has occurred and within five (5) business days of delivering such notice, Comstock Mining agrees to make a one-time payment equal to One Million Six Hundred Twenty Five Thousand ($1,625,000), with such Capital Contributions being applied against the scheduled Capital Contributions in reverse order. For the sake of clarity, the right such Capital Contribution is a one-time right. Notwithstanding Section 3.2(a), Comstock Mining shall have the option to prepay such Capital
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Contributions from time to time or at any time without any penalty. Notwithstanding Section 3.2(a), to the extent production has commenced on DWC Property or Leased Property, then Comstock Mining agrees to accelerate Capital Contributions by making accelerated payments (the amount of the accelerated payment is determined as equal to 3% of Net Smelter Returns with respect to the ore producing Property, with such Capital Contributions being applied against the scheduled Capital Contributions in reverse order. For purposes of clarity, this is not an additional payment nor a royalty payment, but a mechanism to accelerate and prepay the existing capital obligation without interest or penalty. Except as provided in this Section 3.2, no Member shall be permitted to make any additional Capital Contributions to the Company without the prior written consent of all Members."
Section 3
. Amendments to Section 5.1(a). Section 5.1(a) is hereby amended and restated in its entirety as follows:
"5.1
Allocations of Net Income and Net Losses
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"(a) Subject to Section 5.1(b), the Net Income and Net Losses of the Company for each Fiscal Year will be allocated to Comstock Mining."
Section 4
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Amendments to Section 5.2. Section 5.2 of the Original Agreement is hereby amended and restated in its entirety as follows:
"5.2
Distributions; Record Dates
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(a) To the extent the Company holds Common Stock, and subject to Section 5.3, the Company shall make:
(i) to DWC on October 20, 2016 and on each anniversary of such date thereafter (each such date a “Yearly Distribution Date”), a distribution of fifty-eight percent (58%) of shares of Common Stock then held by the Company; provided, that prior to October 20, 2025, the Company shall not make such distribution unless DWC shall deliver written notice to the Company at least sixty (60) days prior to such Yearly Distribution Date requesting that such shares be distributed; and
(ii) to Winfield on each Yearly Distribution Date, a distribution of forty-two percent (42%) of shares of Common Stock then held by the Company; provided, that prior to October 20, 2025, the Company shall not make such distribution unless Winfield shall deliver written notice to the Company at least sixty (60) days prior to such Yearly Distribution Date requesting that such shares be distributed.
(b) For as long as the Company shall exist, the Company shall make to Comstock Mining (or its permitted Assigns), a distribution of the cash flows on the Minerals Produced from the DWC Property and the Sutro Property and all cash flows on the Minerals Produced from the VCV Property.
Distributions made pursuant to Section 5.2(b) shall be made no later than thirty (30) days after receipt of payment from the smelter or other purchaser; provided, that upon request by Comstock Mining (or its respective Assigns), the Company shall give a written instruction to the smelter, refinery or other purchaser that such distributions are to be paid directly to Comstock Mining (or its Assigns) from the sums payable to the Company. If Comstock Mining shall Assign less than all of its Ownership Interests to another Person in accordance with this Agreement, distributions made pursuant to Section 5.2(b) shall be prorated between or among Comstock Mining and its Assign(s) in proportion to the respective Capital Accounts of Comstock Mining and its Assign(s) (or as otherwise agreed to by Comstock Mining and its Assigns). All payments shall be accompanied by a statement explaining the manner in which the payment was calculated, including a determination of weights and values of the Minerals Produced.
(c) Except as provided in Section 5.2(b) or Article 10, without the prior written consent of each Member, the Company shall not be permitted, and none of the Manager(s), any Managing Director or any other Person shall cause the Company, to make any distributions of cash or any other property of the Company to the Members except for distributions in the form of Common Stock or cash. To the extent deemed to be necessary or appropriate by the Manager, the Manager may fix a record date for the determination of Members entitled to receive any such distribution."
Section 5
. Insertion of New Section 5.5. The following new Section 5.5 is hereby inserted in its entirety as follows:
"5.5
Special Redemption Right
. Commencing on August 28, 2027 (or the date of Comstock Mining’s last Capital Contribution pursuant to Section 3.2(a), if earlier), and thereafter, in exchange for a one-time payment of one-thousand dollars ($1,000), the Company shall have the right, but not the obligation, to redeem all of the then owned Ownership Interests of each of Winfield and DWC at any time.
IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of the day and year first above written.
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COMSTOCK MINING INC.
By:__
/s/ Corrado De Gasperis
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Name: Corrado De Gasperis
Title: Chief Executive Officer
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DWC RESOURCES, INC.
By:__
/s/ John V. Winfield
__________________
Name: John V. Winfield
Title: Chairman
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____
/s/ John V. Winfield
__________________
JOHN V. WINFIELD
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SCHEDULE A
Capital Contribution Table
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Member
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Contribution
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DWC Resources, Inc.
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The property described in Exhibit A contributed on October 19, 2010. (Fair Market Value = $6,864,000)
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John V. Winfield
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The rights of the “Lessee” under the Leases attached hereto as Exhibit B and Exhibit C contributed on October 19, 2010. (Fair Market Value = $6,336,000)
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Comstock Mining Inc.
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3,450 shares of 7 ½% Series A-1 Convertible Preferred Stock contributed in four increments on October 20, 2010, October 20, 2011, October 20, 2012 and October 20, 2013. (Fair Market Value = $3,450,000)
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Comstock Mining Obtains Stockholder Approval for Conversion of Preferred Stock
And Signs Favorable Restructuring of Joint Venture
VIRGINIA CITY, NV (August 27, 2015) - Comstock Mining Inc. (the “Company”) (NYSE MKT: LODE) today announced that it has signed the amendment relating to the previously announced restructuring of its Joint Venture agreement with Northern Comstock LLC. The Company also announced that it has received all necessary approvals from the holders of the Company's convertible preferred stock for the conversion of all such convertible preferred stock to common stock, substantially simplifying the capital structure, eliminating super-voting rights, eliminating future preferred stock dividends and additionally eliminating significant royalty obligations on the future production from some of our richest properties.
Corrado De Gasperis, President & CEO commented, “Substantially all of our preferred shareholders voted overwhelmingly to approve this transaction that has now been completed. This is a watershed event for the Company and reaffirms investor confidence and support of our plans. I want to thank John Winfield and our Board for taking the steps necessary to maximize value for all of our shareholders. The completed transaction has strengthened our balance sheet by significantly reducing liabilities and dramatically lowering our future capital and mining costs.”
Pursuant to the definitive agreement with John V. Winfield to amend the terms of the operating agreement for its Northern Comstock LLC joint venture, the Company reduced its remaining capital contributions from $31.05 million to $9.75 million. The amendment permits such capital contributions to be made in the form of cash, or in certain circumstances, the Company’s common stock, par value $0.000666 per share ("Common Stock"). In addition, any prior or future royalty commitments from the Northern Comstock properties to Mr. Winfield were eliminated. There are no provisions for any issuances of preferred stock, in any form.
In connection with the approval of the amendments to the Company's convertible preferred stock that resulted in the conversion of all such convertible preferred stock into Common Stock, the Company declared and will pay a one-time dividend of 127 shares of Common Stock per share of preferred stock.
Adoption of the amendments required approval of affirmative vote of the holders of a majority of the outstanding shares of the convertible preferred stock and submission of the amendments to the Charters with the Secretary of State of the State of Nevada.
Over 99% of all voted convertible preferred shares were voted in favor of the transaction with less than 1% disapproving. A total of over 89% of all preferred shareholders voted. Mr. De Gasperis concluded: “These transactions reflect the strong confidence and direct support of our largest investors and a significant improvement in our capital structure. This positions us extremely well for growing and maximizing the intrinsic value for all of our shareholders.”
About Comstock Mining Inc.
Comstock Mining Inc. is a producing, Nevada-based, gold and silver mining company with extensive, contiguous property in the Comstock District and is an emerging leader in sustainable, responsible mining, including concurrent and accelerated reclamations, soil sampling, voluntary air monitoring, cultural asset protection and historical restorations. The Company began acquiring properties in the Comstock District in 2003. Since then, the Company has consolidated a significant portion of the Comstock District, amassed the single largest known repository of historical and current geological data on the Comstock region, secured permits, built an infrastructure and commenced production in 2012. The Company continues acquiring additional properties in the district, expanding its footprint and creating opportunities for further exploration, development and mining. The near term goal of our business plan is to maximize intrinsic stockholder value realized, per share, by validating qualified resources and reserves (proven and probable) from our first two resource areas, Lucerne and Dayton, and significantly grow the commercial development of our operations through extended, long-lived mine plans that are economically feasible and socially responsible.
Forward-Looking Statements
This press release and any related calls or discussions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Comstock. Forward-looking statements are statements that are not historical facts. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements include statements about matters such as: future prices and sales of, and demand for, our products; future industry market conditions; future changes in our exploration activities, production capacity and operations; future exploration, production, operating and overhead costs; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); future employment and contributions of personnel; tax and interest rates; capital expenditures and their impact on us; nature and timing and accounting for restructuring charges, gains or losses on debt extinguishment, derivative liabilities and the impact thereof; productivity, business process, rationalization, investment, acquisition, consulting, operational, tax, financial and capital projects and initiatives; recapitalization and other capital structure modifications; capital raising; contingencies; environmental compliance and changes in the regulatory environment; offerings, sales and other actions regarding debt or equity securities; and future working capital, costs, revenues, business opportunities, debt levels, cash flows, margins, earnings and growth.
The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “should,” “intend,” “may,” “will,” “would,” “potential” and similar expressions identify forward-looking statements, but are not the exclusive means of doing so. These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical and current trends, current conditions, possible future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees, representations or warranties and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements. Some of those risks and uncertainties include the risk factors discussed in Item 1A, “Risk Factors” of our annual report on Form 10-K and the following: current global economic and capital market uncertainties; the speculative nature of gold or mineral exploration, including risks of diminishing quantities or grades of qualified resources and reserves; operational or technical difficulties in connection with exploration or mining activities; contests over our title to properties; potential dilution to our stockholders from the conversion of securities that are convertible into or exercisable for shares of our common stock; potential inability to continue to comply with government regulations; adoption of or changes in legislation or regulations adversely affecting our businesses; business opportunities that may be presented to, or pursued by, us; changes in the United States or other monetary or fiscal policies or regulations; interruptions in our production capabilities due to unexpected equipment failures; fluctuation of prices for gold or certain other commodities (such as silver, copper, diesel fuel, and electricity); changes in generally accepted accounting principles; geopolitical events; potential inability to implement our business strategies; potential inability to grow revenues organically; potential inability to attract and retain key personnel; interruptions in delivery of critical supplies and equipment raw materials due to credit or other limitations imposed by vendors; assertion of claims, lawsuits and proceedings against us; potential inability to maintain an effective system of internal controls over financial reporting; potential inability or failure to timely file periodic reports with the SEC; potential inability to maintain the listing of our securities on any securities exchange or market; and work stoppages or other labor difficulties. Occurrence of such events or circumstances could have a material adverse effect on our business, financial condition, results of operations or cash flows or the market price of our securities. All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statement.
Neither this press release nor any related calls or discussions constitutes an offer to sell or the solicitation of an offer to buy any securities.
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Contact information for Comstock Mining Inc.:
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PO Box 1118
Virginia City, NV 89440
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questions@comstockmining.com
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http://www.comstockmining.com
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Corrado De Gasperis
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Kimberly Shipley
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President & CEO
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Manager of Investor Relations
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Tel (775) 847-4755
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Tel (775) 847-0545
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degasperis@comstockmining.com
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shipley@comstockmining.com
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