As Bonanza episodes go, this is one storyline we need to frame around Big Hoss, not Little Joe. So, get ready for it

Comstock Fuels has landed $425M in capital and announced that it is underway on three biorefinery projects with 300 million gallons of fuel. In all, more than one million tonnes of feedstock — looks like savannah grasses and woodchips. Yep, the world’s largest cellulosic fuel projects, all three tied at the top, not even a close second. With cellulosic fuel values at the $5.74 mark according to DigestData, think of something like $1.7 billion in revenue, per year. Hence, bonanza. Hence, Big Hoss. Hence, a new day for cellulosic fuels. Not a bad day either for Comstock’s shareholders, when all comes to pass. In all, good news, right there in Virginia City, right there by the Ponderosa.

So, let’s dive into the details as we have them at press time. We’ll be back next week with more in, “Inside the Comstock deal”.

The Investment

Comstock has announced the execution of an indicative term sheet for $325 million via SBC Commerce,  a U.S. based, globally positioned, private equity group.

The transaction package includes $275 million of direct investments into Comstock’s three main operating subsidiaries, including a $3 million direct equity investment into common shares of Comstock itself, and an agreement to sell the membership interests in Comstock’s directly owned Nevada real estate and water rights for gross proceeds of $50 million. The overall valuation on the Comstock businesses comes in at $500 million — fuels, metals, and mining. 

The Three Projects

Comstock has also announced  a binding agreement with SACL, a Singapore-based renewable fuel project developer with several projects in development in Australia. 

SACL and its associated stakeholders have identified three initial sites for the construction of three refineries based on Comstock’s industry leading yields and decarbonizing impacts, including a 250,000 metric ton per year refinery located in southeastern Australia, a 250,000 MTPY refinery located in northwest Australia, and a 750,000 MTPY refinery located on the east coast in northern Australia. 

As backstory, SACL previously announced projects in Mackay, Queensland; Portland, Victoria; and Moree, New South Wales. It’s not clear at press time if these will be the locations.

The SACL facilities will have an estimated total construction cost of about $2.4 billion and produce over 160 million gallons per year of gasoline, SAF, and other renewable fuels from lignocellulosic biomass and about 140 million GGE from vegetable oils, with over $1.5 billion per year in sales at current market prices.

The deal

Comstock Fuels will contribute site specific technology rights in exchange for a 20% equity stake in each refinery, plus a royalty fee equal to 6% of each refinery’s sales of licensed products, and engineering fees equal to 6% of total capital and construction costs. At least one of the refineries will initially start with a capacity of 50,000 MTPY prior to scaling-up to 250,000 MTPY or more, with early adopter royalty fees of 3% of sales and engineering fees equal to 3% of construction costs until scaling-up to 250,000 MTPY, including initial upfront payments of $2,500,000 payable upon execution of each site-specific applicable license.

The Comstock technology backstory

The Comstock Fuels process generally involves: digestion and fractionation of lignocellulosic biomass, bioconversion of cellulose into Cellulosic Ethanol, esterification of lignin and other derivatives into Bioleum Oil,  hydrodeoxygenation of Bioleum Oil into Hydrodeoxygenated Bioleum Oil; refining into ASTM compliant renewable fuels, and gas-to-liquids emissions capture and fuel conversion. 

Comstockers add that “The first five of these processes are proven to produce up to 125 GGEs per dry metric ton of feedstock on a gasoline gallon equivalent basis, depending on feedstock, lignin content, site conditions, and other process parameters, with extremely low carbon intensity scores of 15.”

How is that possible, when other cellulosic ventures aim in the 70-90 gallons per ton range. Think two things. First, metric tons, so add 10 percent yield there. Second, they’re using lignin to make fuel, not heat and power. Add 50 percent to the effective feedstock availability.

The Comstock Multi-Slide Guide

You can view the background on the technology, here.

Use of proceeds

Here’s how the capital will be used.

Comstock Fuels Corporation will receive a direct $200 million investment that will fund the development and deployment of a commercial-scale demonstration facility to produce advanced lignocellulosic fuels from waste woody biomass feedstocks. SBCC will receive 40% of CFC and Comstock will retain the remaining 60%. This investment will also support ongoing research and development for the continuous improvements of the already industry-leading yields, lower costs, lower capital, and lower carbon-intensity scores of Comstock’s proprietary low-carbon fuel solutions.

Comstock Metals Corporation will receive a direct $22 million investment to accelerate the deployment of three 100,000-ton-per-year solar panel recycling facilities in Nevada.  The solar panel recycling demonstration facility has already moved to two operating shifts, and we are adding the third shift during the third quarter and the teams are fully engaged on both sides of the supply chain with active collaborations for long-term supply and long-term offtake agreements for all residual materials. SBCC will receive 20% of the entity and Comstock will retain 60% on a fully diluted basis after vesting of Comstock Metals existing equity incentives for its president, Dr. Fortunato Villamagna.

Comstock’s Mining segment will receive a direct $50 million investment to advance the development of the southern part of the Comstock district, including the expansion of Dayton resource, the development of a Dayton mine plans, with full reclamation and sustainable, post productive land uses.  The production plan anticipates gold and silver extraction within three or four years, depending, in part, on the magnitude of potential resource expansion and breadth and complexity of community development plans.  SBCC will receive 40% of the entity and Comstock will retain 60%.

Also, Comstock Inc. will receive a $3 million direct investment in exchange for 7.5 million restricted shares of LODE at $0.40 per share. This investment further invests and aligns SBCC with the broader Comstock mission and shareholders.

Finally, SBCC agreed to acquire 100% of Comstock’s directly owned industrial and commercial real estate and water rights in Nevada. Comstock will receive gross proceeds of $50 million ($47 million, net of transaction expenses) which, upon closing, will be used for the elimination of debt and other obligations, continued development and growth of the Company’s strategic portfolio of advanced technologies for the energy transition and general corporate purposes.

Reaction from the Stakeholders

“Comstock Fuels’ breakthrough yields unlock an abundant, available and efficient feedstock source that enables extraordinary new opportunities for renewable fuels project developers, especially given the ongoing global surge in demand for sustainable aviation fuel,” said Garry Millar, SACL’s founder and director. “The Comstock Fuels process uses proven, off-the-shelf equipment and standard refining processes to convert woody biomass, such as plantation grown eucalyptus in our case, into renewable intermediates and fuels that leverage existing supply chains. We are excited by this collaboration, and we are looking forward to working with the Comstock Fuels’ team and our local stakeholders to develop each of our projects and more.”

“SACL’s team has rapidly advanced their projects, and we look forward to accelerating their objectives as we position our technologies as the leading global solution for sustainable, extremely low carbon renewable fuels,” stated David Winsness, president of Comstock Fuels. “We are concurrently executing on our own plan to build, own, and operate our first four facilities in the U.S., including an initial 50,000 MTPY Commercial Demonstration Scale Facility followed rapidly by three 1,000,000 MTPY Commercial Scale Facilities. Collectively, our planned U.S. facilities will produce upwards of 700 million GGE per year of renewable fuels, including approximately 400 million GGE from woody biomass and another approximately 300 million GGE from vegetable oils. Between SACL and our initial plans alone, we are pushing nearly 1 billion GGE per year of initial renewable fuel production from our solutions before considering all of the other projects and licensees in our pipeline.”

“These transactions recognize the significant opportunity we have positioned and the tremendous value that has already been created for our shareholders, and should provide the critical capital necessary for each of our three core businesses to achieve profitability while simultaneously supporting many of the prerequisites for our long-term growth plans,” said Corrado De Gasperis, Executive Chairman and CEO of Comstock Inc. “We have forged a well-aligned partnership with a capable capital partner keen on enabling systemic decarbonization and rapid, globally impacting growth. We have invested over a year into this construct, and we are thrilled about what this means for Comstock and our shareholders.”

The Bottom Line

The scale is completely “off the chart awesome” as a foray into cellulosic fuels. The why is clear — with cellulosic, you get that uber-low carbon intensity (15, wow) and you get volume. For sure, dairy waste is better on carbon and there’s a lot of sugarcane out there, but a two-fer is hard to find. So, the rationale is clear, especially when you look at the premium that cellulosic brings over, say, waste fats and oils, when you look at something like the Renewable Fuel Standard. 

So, it comes down to an execution play, rather than a “do something way easier and way thinner on the margins.” Comstock long ago landed on the “do harder, make more” side of the equation. So, now come the hard yards — not so much the acquisition of affordable feedstock, but the handling and processing of it. We can’t wait to see more, as the story unfolds.