Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended September 30, 2019. Although the request metadata identifies Idaho Strategic Resources, Inc., the filing itself identifies the registrant as New Jersey Mining Company (OTCQB: NJMC). The company is a gold producer operating the Golden Chest Mine and New Jersey Mill, with additional mineral properties and a 50% carried interest in the Butte Highlands joint venture.
The company reported approximately 13,620 dry metric tonnes processed during the third quarter at a 3.46 gpt head grade and 87.3% gold recovery. Third-quarter gold sales were 1,414 ounces.
Financial Highlights
| Metric | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 |
|---|---|---|
| Revenue | $1.853 million | $4.545 million |
| Gross profit | $447,185 | $584,649 |
| Gross margin | 24.1% | 12.9% |
| Net income (loss) | $165,242 | $(357,240) |
| Net income (loss) attributable to the company | $187,328 | $(277,844) |
| Operating cash flow | Not separately provided for the quarter | $140,755 |
| Cash and cash equivalents | $280,666 at September 30, 2019 |
- Cash cost per ounce was $927.37 for the quarter and $983.97 for the nine-month period.
- All-in sustaining cost was $1,071.05 per ounce for the quarter and $1,146.66 per ounce for the nine-month period.
- Total assets were $11.164 million, compared with $10.639 million at December 31, 2018.
- Notes payable totaled $1.274 million, including $299,751 due within one year. Related-party notes payable totaled $249,335, including $36,095 current.
- Total liabilities were $2.157 million, compared with $1.493 million at year-end 2018.
- Current assets were $786,995 versus current liabilities of $808,924, indicating a current ratio below 1.0.
Material Changes Versus the Prior Comparable Period
- Third-quarter revenue increased 79.4% from $1.033 million to $1.853 million. Nine-month revenue increased 73.3% from $2.624 million to $4.545 million.
- Gross profit improved from a $194,821 loss to $447,185 of profit in the third quarter, and from an $801,616 loss to $584,649 of profit for the nine months.
- Third-quarter net income improved from a $588,275 loss to $165,242 of income. The nine-month period shifted from $1.135 million of net income to a $357,240 net loss.
- The nine-month 2018 results included a $2.948 million gain on the sale of mineral properties; no comparable gain was recorded in 2019.
- Operating cash flow improved from an outflow of $968,972 in the first nine months of 2018 to an inflow of $140,755 in 2019.
- Cash increased modestly from $248,766 at December 31, 2018 to $280,666 at September 30, 2019, while total notes payable increased substantially, primarily due to equipment financing.
- Cash cost per ounce declined from $1,460.47 to $927.37 for the quarter and from $1,478.96 to $983.97 for the nine-month period. AISC declined from $1,787.76 to $1,071.05 for the quarter and from $1,979.71 to $1,146.66 for the nine-month period.
Guidance, Outlook, Risks and Unusual Items
- Management stated that increased production from the open pit and underground operations, including a 40% production increase beginning in March 2019, contributed to positive operating cash flow in the last two quarters.
- Management believes planned production, existing cash, potential equity sales and the ability to restructure debt will provide sufficient liquidity for planned operations and contractual obligations for the next 12 months. This is management’s assessment rather than formal quantitative guidance.
- Mining risks include fluctuations in gold and silver prices, production grades and recoveries, operating costs, availability of financing, mine development execution and reclamation obligations.
- At September 30, 2019, 1,643 ounces of gold contained in concentrates remained exposed to future price changes before final settlement.
- The company received a $50,000 non-refundable down payment toward the sale of the McKinley property. A lease payment for the Crown Point property was not made when due, and the company was negotiating revised terms with the prior owner.
- The company recognized $190,019 of stock-based compensation during the first nine months of 2019, compared with $34,580 in the prior-year period.
- There was one reportable significant-and-substantial mine safety citation during the quarter. No related legal action or mining fatality was reported.
- No legal proceedings were reported, and management stated that disclosure controls were effective with no material change in internal control over financial reporting.
Investor Verification Items
- Confirm the registrant’s identity and ticker, because the filing names New Jersey Mining Company while the request metadata names Idaho Strategic Resources, Inc.
- Verify whether the company can sustain positive operating cash flow and meet the stated next-12-month obligations given cash of $280,666, current liabilities of $808,924 and scheduled debt principal payments of $299,751 within one year.
- Review equipment-financing terms and debt maturities, including total notes payable of $1.274 million and related-party notes of $249,335.
- Assess sensitivity to gold prices, concentrate settlement adjustments and the 1,643 ounces of unsettled concentrate inventory.
- Follow the Crown Point lease negotiations and the proposed McKinley property sale.
- Reconcile non-GAAP cash cost and AISC measures to GAAP results and assess whether lower unit costs are repeatable as mining conditions change.