Business Context and Reporting Period
This Form 10-Q was filed by New Jersey Mining Company, the registrant identified in the filing, for the quarter and six months ended June 30, 2015. The request metadata identifies Idaho Strategic Resources, Inc.; investors should verify the issuer identity because the filing itself does not use that name.
The company operates a mineral processing mill near Kellogg, Idaho, conducts gold exploration in Idaho, and holds interests in joint ventures, including the New Jersey Mill Joint Venture and Golden Chest LLC. The New Jersey Mill began processing Golden Chest/Skookum ore in December 2014.
Key Financial Metrics
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 |
|---|---|---|
| Total revenue | $872,250 | $1,263,370 |
| Operating income (loss) | $142,432 | $(126,879) |
| Net income (loss) | $141,486 | $(138,042) |
| Net income (loss) attributable to the company | $165,673 | $(103,175) |
| Net cash used in operating activities | Not separately provided | $(113,162) |
Quarterly operating margin was approximately 16.3%; six-month operating margin was approximately negative 10.1%. Quarterly net margin was approximately 16.2% on a consolidated basis. The filing reports no income tax provision or benefit.
- Cash and cash equivalents were $140,296 at June 30, 2015, versus $336,525 at December 31, 2014.
- Total current assets were $574,603 and current liabilities were $709,415, resulting in negative working capital of $134,812.
- Total debt and related obligations included $415,076 of notes payable, $38,497 drawn on a line of credit, and $161,312 owed under a related-party property note. The filing separately presents current and long-term portions.
- Total liabilities were $1,022,987; total stockholders’ equity was $5,862,429.
- Capital expenditures were $96,543 during the first six months, compared with $270,769 in the prior-year period.
- Depreciation and amortization were $102,187 for the first six months, compared with $30,034 in the prior-year period.
- The mill processed 26,403 tonnes of Golden Chest ore during the first six months. Milling receivables increased to $299,488 from $117,615 at year-end.
Material Changes Versus Prior Comparable Period
- Revenue increased from $63 to $872,250 for the quarter and from $139 to $1,263,370 for the six-month period, primarily because of Golden Chest ore processing.
- The company reported quarterly consolidated net income of $141,486 versus a prior-year loss of $294,645. For the six-month period, the loss narrowed to $138,042 from $562,998.
- Milling costs increased to $431,519 for the quarter and $770,290 for the six months, reflecting increased processing activity.
- Cash declined by $196,229 during the first six months, primarily because of ramp-up costs and working-capital requirements.
- Accounts payable increased to $178,953 from $77,913, while the milling advance declined to $150,000 from $200,000 as the advance was repaid through milling receipts.
- The company used $38,497 of available bank credit during the second quarter; $38,497 of $43,000 total availability was outstanding at June 30, 2015.
- No common shares were issued during the first half of 2015. Outstanding common shares were 91,760,148 at August 1, 2015.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management did not provide formal quantitative revenue or earnings guidance. Its stated strategy is to increase milling revenue, obtain future royalty cash flow from Golden Chest, pursue exploration and business development, and reduce reliance on capital-market financing.
The notes state that substantial doubt exists regarding the company’s ability to continue as a going concern. Management said the company does not have sufficient cash to fund normal operations and debt obligations for the next 12 months without increased milling revenue, Golden Chest royalty cash flow, deferral of certain liabilities, and/or additional financing.
- The company has a history of losses, limited recurring revenue, and dependence on the successful ramp-up of milling operations.
- Liquidity is exposed to metal prices, ore volumes and grades, milling performance, joint-venture counterparties, financing availability, debt maturities, and exploration results.
- A property note includes a balloon payment due in June 2016; other notes carry interest rates ranging from 4.91% to 17.5%.
- Crescent Silver, the minority owner of the New Jersey Mill Joint Venture, filed litigation in March 2015 seeking damages in excess of $75,000. The company considers the claims without merit and is defending the case.
- The company disclosed no material change in internal control over financial reporting and concluded that disclosure controls were effective as of June 30, 2015.
- The filing contains an apparent inconsistency: the MD&A refers to quarterly net income of $188,863, while the consolidated statements report $141,486 of net income and $165,673 attributable to the company. The filing text does not explain the difference.
Important Facts for Investors to Verify
- Confirm the registrant’s identity, because the filing names New Jersey Mining Company while the request metadata names Idaho Strategic Resources, Inc.
- Reconcile the inconsistent quarterly net-income figures in the MD&A and financial statements.
- Assess whether milling operations can generate sufficient recurring cash flow to resolve the disclosed going-concern uncertainty.
- Review near-term debt maturities, including the June 2016 property-note balloon payment and variable-rate line of credit.
- Monitor the Crescent Silver litigation and any effect on the New Jersey Mill Joint Venture.
- Validate Golden Chest ore volumes, milling receivable collectability, royalty timing, and the company’s ability to secure additional mill feed or financing.