Comstock Mining Inc. (NYSEMKT: LODE) is seeing its cost-reduction efforts paying off. In its business update for the first six months of 2016, the company has revealed that it is on track to surpass $8 million in annualized cost-saving. The company has also disclosed a deal with Caterpillar Inc. (NYSE: CAT) that is aimed to cutting some of its financial obligations and bring flexibility to its balance sheet.
Originally, Comstock Mining Inc. (NYSEMKT: LODE) gave itself a target to lower costs in 2016 by $3 million compared to 2015. That cost-reduction target particularly focused on non-mining costs. But the company has accelerated its cost-saving efforts and now expects to lower 2016 costs by $5.5 million relative to 2015.
The particular areas that Comstock has accelerated cost-saving are land costs, real estate costs, administrative costs and environmental costs among others. Comstock managed to bring costs in these areas faster and significantly. As such, the management of Comstock believes that there is room for annualized cost-saving to surpass $8 million.
Comstock Mining Inc. (NYSEMKT: LODE) is also trying to keep expenses related to the cost-saving measures low. For instance, it said that it incurred nearly $0.3 million in severance cost in 1H2016.
The Comstock Mining Inc. (NYSEMKT: LODE) agreement with CAT
Comstock Mining Inc. (NYSEMKT: LODE) also disclosed in its latest business update that it was able to successfully complete restructuring of certain obligations that related to equipment leases. In particular, the company highlighted the agreement with CAT’s financial services division.
The agreement with CAT allows Comstock to sell certain leased equipment and use the proceeds to pay down its lease obligations. The balance of lease obligations not settled by the proceeds from equipment sale will be paid off in a monthly payment schedule. That schedule calls for a monthly payment of $25,000 until the entire outstanding lease obligation amount is completely settled. Comstock anticipates that it will sell the leased equipment in 2H2016.
The outstanding lease obligation was $3.67 million, but Comstock Mining Inc (NYSEMKT:LODE) has already sold equipment for $0.725 million, which means that the remaining lease obligation is now below $3 million.