Business Context and Reporting Period
The filing is a Form 10-Q for the three months ended March 31, 2021, filed May 17, 2021. The filing identifies the registrant as New Jersey Mining Company, while the request metadata identifies Idaho Strategic Resources, Inc.; this name discrepancy should be verified. The company operates the Golden Chest gold mine, the New Jersey Mill, and mineral exploration properties in Idaho and Montana. It also owns a 65% interest in the New Jersey Mill Joint Venture and a 50% carried-to-production interest in Butte Highlands.
Financial Performance and Position
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $1.587 million | $1.401 million | 13.3% increase |
| Gross profit (loss) | $(71,403) | $97,911 | Declined to a loss |
| Operating income (loss) | $(1.627) million | $(149,532) | Loss increased |
| Net loss | $(1.662) million | $(162,189) | Loss increased |
| Net loss attributable to company | $(1.646) million | $(146,268) | Loss increased |
| Cash flow from operations | $(719,167) | $24,183 | Turned negative |
| Cash flow from investing | $(189,874) | $(737,650) | Lower use of cash |
| Cash flow from financing | $1.481 million | $795,599 | Higher financing inflow |
| Ending cash | $3.112 million | $299,928 | Increased from year-end and prior period |
Gross margin was approximately negative 4.5%, compared with approximately 7.0% in Q1 2020. Operating margin was approximately negative 102.5%, and net margin was approximately negative 104.8%. The filing reports cash cost of $1,476 per ounce and all-in sustaining cost of $2,097 per ounce, compared with $1,073 and $1,198, respectively, in the prior-year quarter. Gold production was 1,065 ounces versus 1,094 ounces.
At March 31, 2021, total assets were $15.729 million, including $3.112 million of cash, $7.866 million of property, plant and equipment, and $3.593 million of mineral properties. Total liabilities were $5.508 million and stockholders’ equity was $10.221 million. Debt included $2.610 million of convertible debt, $25,000 of related-party convertible debt, $1.698 million of notes payable, and approximately $165,000 of SBA loans, before considering classification between current and long-term portions.
Material Changes Versus the Prior Comparable Period
- Revenue increased primarily because of a higher realized gold price; concentrate sales were $1.510 million and dore sales were $76,508.
- Production costs increased and exceeded revenue, producing a gross loss. A January windstorm caused approximately one week of mine and mill downtime, while crusher repairs and a ball mill motor failure further constrained mill throughput.
- Exploration expense increased to $717,707 from $41,678, reflecting 3,500 meters of contract core drilling at Golden Chest.
- Operating expenses increased substantially, including $614,431 of stock-based compensation related primarily to options granted to management, directors, employees, and service providers.
- Cash from operations declined to a $719,167 outflow, while financing inflows increased primarily due to $1.600 million of convertible debt issued in February 2021.
- Property, plant and equipment increased by approximately $639,000, including a non-cash equipment note of $761,073. Mineral properties increased by approximately $138,000.
- Common shares outstanding increased from 137.573 million at December 31, 2020 to 137.978 million at March 31, 2021. The company also had 5.625 million outstanding options and 5.975 million warrants.
Outlook, Commentary, Risks, and Unusual Items
Management stated that the company was producing from both open-pit and underground operations at Golden Chest and expected existing cash, operating cash flows, equity sales, and potential debt borrowings or restructurings to fund planned operations and contractual obligations for the next 12 months. No formal production or earnings guidance was provided.
Management highlighted higher underground ore tonnage, progress on the Main Access Ramp, exploration results at the Joe Dandy and Paymaster areas, and continued development of rare earth element properties. The filing does not provide a clear full-year production or cash-flow forecast.
- Operational risks include weather-related outages, equipment failures, repair delays, shipping delays for replacement parts, production variability, and elevated costs.
- COVID-19-related operating procedures remained in place, with management noting that future effects on operations, costs, revenues, and market conditions were uncertain.
- Gold concentrate sales are exposed to subsequent price changes until final settlement; 1,412 ounces of gold had been sold but not finally settled at March 31, 2021.
- The company depends on continued production and access to capital markets or debt financing. Although management concluded that liquidity was adequate for the next 12 months, operating cash flow was negative during the quarter.
- In April 2021, after quarter-end, the company purchased approximately 508 acres adjacent to Alder Gulch for $1.699 million in cash.
- The company reported no legal proceedings, senior-security defaults, material changes in internal controls, or mine-safety events requiring disclosure.
Investor Verification Items
- Verify the registrant’s corporate name and identity, because the filing states New Jersey Mining Company while the request identifies Idaho Strategic Resources, Inc.
- Reconcile the substantial increase in operating loss with exploration spending, stock-based compensation, production downtime, and other cost increases.
- Review the terms, collateral, maturity dates, interest rates, and potential dilution from the convertible debt, options, and warrants.
- Assess whether production and realized gold prices can support positive operating cash flow given reported cash costs and AISC.
- Confirm funding and liquidity for the post-quarter-end $1.699 million Alder Gulch land purchase and other planned capital requirements.
- Review final settlement exposure on provisional gold sales and the effect of gold prices on receivables and revenue.