Comstock Mining Announces Third Quarter 2012 Results

• Commenced processing and poured dore, including shipping, through October 31, 2012, 1,258 ounces of gold and 14,802 ounces of silver. 
• Completed exploration and development drilling outside of the mine area, on the East-side, resulting in prevalence of higher-grade intercepts.
• Net loss for Q3 2012 was $9.0 million, as compared to $2.0 million for Q3 2011.  The increase of $7.0 million resulting primarily from a $4.2 million increase in operating expenses and an increase in other, non-cash, expenses of $2.6 million for changes in the fair value of derivative instruments.
• Operating expenses for Q3 2012 were $8.0 million, versus $3.8 million in Q3 2011.  The $4.2 million increase resulted primarily from increases in mine development costs, including required soil sampling, permitting and related costs, drilling activities, labor and expense for granting restricted stock to employees.
• Net cash used by operating activities in Q3 2012 was $7.6 million, versus $3.5 million in Q3 2011. The $4.1 million increase resulted primarily from higher exploration and mine development costs.
• Net cash used in investing activities in Q3 2012 was $3.2 million, versus $0.2 net cash provided by investing activities in Q3 2011. The increase resulted from purchases of property, plant and equipment associated with construction of mining infrastructure and equipment.  
• Total debt at September 30, 2012, was $14.1 million as compared to total debt at year-end 2011 of $1.4 million.  Total debt at September 30, 2012, is primarily related to the newly arranged $10.0 million of financings with Caterpillar Financial Services and Auramet Trading LLC and $2.1 million increase in mortgage obligations incurred from the 95-acre purchase of four patented lode claims, known as the Dayton Resource Area.
• Cash, cash equivalents and investments at September 30, 2012 were $3.9 million compared to $9.2 million at December 31, 2011.  In November 2012, the Company raised $8.1 million in gross proceeds (approximately $7.2 million, net of issuance costs) through an underwritten public offering of approximately 3.7 million shares of common stock at a price of $2.19 per share. The Company intends to use the net proceeds of the offering for working capital, expanded permitting and general corporate purposes.

Comstock's Chief Executive Officer, Corrado De Gasperis commented, "In the last three months, we commenced mining on the Comstock, hauled, crushed and leached our material and effectively commenced pouring gold and silver. We also fortified our balance sheet by attracting some of the very best resource-based investors in the industry and remain fully focused on the continued ramp of our production."

March to Production

Some of the more critical objectives completed during the quarter included hiring the remaining, experienced processing staff, installing the crusher, expanding the Merrill Crowe processing facility, commissioning all production equipment and pouring and shipping our first doré bars. Through October 31, 2012, the Company shipped 1,258 ounces of gold and 14,802 ounces of silver. In addition, the Company delivered 28 ounces of gold and 292 ounces of silver to the Northwest Territorial Mint, In Dayton, Nevada, to facilitate the minting of the commemorative bar celebrating the first pour. These bars were recently delivered to the owners with outstanding feedback on their quality.  The combined sale of metal (received payments and payments due on gold and silver sold) was in excess of $2.5 million.

We are hauling, crushing and stacking at a rate of approximately 4,000 tons per day, or approximately one million tons per annum. Through October 31, 2012, the Company has also crushed over 175,000 dry tons of mineralized material. Material placed on the heap leach pad after crushing remains under solution for as long as the pad is utilized. Throughout this period, the recovery of gold and silver continues, but the most effective economic recovery of gold and silver takes between 45 to 60 days to complete. The recovery of gold and silver from the first month represents only a portion of the expected recovery.

The Company has updated its financial analysis for the Lucerne mine and anticipates annual operating expenses, including mining, processing, royalties and mine administration costs of approximately $13.3 million per annum, with a production schedule that commences processing at the rate of one million tons per annum.  The Company anticipates temporary, higher haulage costs of $2.25 million for the first nine months of operations in 2013, associated with hauling on an alternative route until a new Right of Way permit is issued to us by the BLM. These mining, processing and related costs do not include corporate administration or other general and administrative costs, nor do they include exploration and mine development costs.

Exploration and Development

In January 2012, the Company launched its 2012-2013 drilling program.  The Company anticipates about 300,000 feet of reverse circulation and 13,000 feet of core drilling, at a total cost of approximately $12 million.

Following the initial drilling in Spring Valley, the Company began definition drilling in the Lucerne Mine in March 2012. The definition drilling continued concurrently with the commencement of mine production.  To date, 236 RC holes totaling 86,926 feet, and 25 core hoes, totaling 6,126 feet have been completed.  The Lucerne mine definition drilling is scheduled to be completed in November 2012.

The 2012-2013 drilling program is continuing with three significant objectives: 1.) Infill drilling in the Dayton Resource Area 2.) Step-out and infill drilling in the East-side of the Lucerne Resource Area and 3.) Exploration drilling on high priority targets, including Spring Valley.

The infill drilling in the Dayton Resource Area will provide detailed information needed to create a preliminary mine plan for the proposed Dayton mine, to be developed in parallel with the expanded Lucerne Mine.  With that plan, the Company will complete a feasibility study, a prerequisite before commencing the permitting for the second mine.

The step-out drilling phase in the East-side of the Lucerne Resource Area will test the continuity of mineralization to the North and South, and at greater depths to the East.  The infill-drilling phase will then provide the detailed information needed to develop an expanded mine plan for the Lucerne Mine.  That mine plan will position the Company to complete an economic feasibility study, a prerequisite before any permitting for the expanded mine becomes foreseeable.

The Company expects to update its NI 43-101 technical reporting late in the fourth quarter of 2012, for publication in early January, including updates on the Lucerne Mine and the broader Lucerne resource.

Corporate

Cash, cash equivalents and available-for-sale securities on hand at September 30, 2012, totaled $3.9 million.  Inventories totaled $1.2 million, including finished goods inventory at September 30, 2012, of $0.4 million.  In addition, stockpiles and mineralized materials on the leach pads totaled $2.8 million.

For the nine months ended September 30, 2012, we used cash from operating activities of approximately $17.8 million compared to $9.4 million in the same period of 2011. The increased use of operating cash flow of approximately $8.4 million was primarily as a result of increased use of cash for exploration and mine development expenses of $5.8 million, general administrative expenses of $0.9 million, and consulting and professional fees of $1.2 million, and a $0.4 million increase in cash used in operating activities from changes in working capital.

Net cash used in investing activities included $12.7 million for the purchase of mineral rights and properties, plant and equipment, including approximately $1.3 million for mining vehicles and equipment, $9.5 million for processing equipment and $1.9 million for land and buildings.

In July 2012, the Company placed a $4.67 million reclamation surety bond, through the Lexon Surety Group with the State of Nevada's Bureau of Mining Regulation Reclamation.  The bond insures for the estimated costs required to safely reclaim the natural environment to the regulatory standards established by the State of Nevada's Division of Environmental Protection with the purposes of ensuring public safety, protecting the waters of the state, and providing for post mining land use.

In November 2012, the Company raised $8.1 million in gross proceeds (approximately $7.2 million, net of issuance costs) through an underwritten public offering of approximately 3.7 million shares of common stock at a price of $2.19 per share. The Company intends to use the net proceeds of the offering for working capital, permitting and general corporate purposes.

During the nine-month period ended September 30, 2012, preferred shareholders converted 1,401 shares of Series A-2 convertible preferred stock into 2,152,217 shares of common stock and 1,185 shares of Series B convertible preferred stock into 718,176 shares of common stock. Subsequent to September 30, 2012, through November 13, 2012, preferred shareholders converted 241 shares of Series B convertible preferred stock into 146,042 shares of common stock.

On January 1, 2012 and July 1, 2012, the Company declared and issued 1,220,003 and 927,984 shares of common stock, respectively, in payment of dividends on the convertible preferred stock.

Comstock's Chief Executive Officer, Corrado De Gasperis concluded, "We are focused on ramping up production, stabilizing cash flow and positioning our resources for the substantial growth in 2013."

Conference Call

As previously announced, the Company will host a conference call on November 20, 2012 at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time to report Third Quarter 2012 results and provide a business update.

The live call will include a moderated Q&A, after the prepared remarks. The dial-in telephone numbers for the live audio are as follows:

North American Toll Free: 1-866-544-4625

Canada Local / International: 416-849-2726

The audio will be available following the call, and for 30 days thereafter, at http://www.comstockmining.com/investors/investor-library

About Comstock Mining Inc.

Comstock Mining Inc. is a Nevada-based gold and silver mining company with extensive, contiguous property in the Comstock District.  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 and mining.  The goal of its strategic plan is to deliver stockholder value by validating qualified resources (at least measured and indicated) and reserves (probable and proven) of 3,250,000 gold equivalent ounces in 2013, and commencing commercial mining and processing operations with annual production rates of 20,000 gold equivalent ounces.

Forward-Looking Statements

This press release and any related calls or discussions may contain forward-looking statements. 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, timing and accounting for restructuring charges, gains or losses on debt extinguishment,  derivative liabilities and the impact thereof; productivity, business process, rationalization, restructuring, investment, acquisition, consulting, operational, tax, financial and capital projects and initiatives; 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 set forth in our SEC filings and the following: the 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 our recapitalization and balance sheet restructuring activities; 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 list 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.  

SOURCE Comstock Mining Inc.

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