Business Context and Reporting Period
This Form 10-K identifies the issuer as New Jersey Mining Company, not Idaho Strategic Resources, Inc. It covers the fiscal year ended December 31, 2014 and was filed March 31, 2015. The filing is an annual report; it does not provide a separate fourth-quarter income statement.
The company explores and develops gold, silver, and base-metal properties in the western United States and operates the New Jersey Mill in Idaho. Its principal 2014 development was the start-up of milling operations for ore from the Golden Chest Mine, operated by lessee Gold Hill Reclamation and Mining Inc. The company remains an exploration-stage issuer and reported no SEC-recognized mineral reserves at its principal projects.
Financial Condition and Results
| Metric | 2014 | 2013 |
|---|---|---|
| Total revenue | $92,538 | $113,701 |
| Milling income | $92,165 | $83,762 |
| Operating loss | $1,463,057 | $789,924 |
| Net loss | $1,436,129 | $798,977 |
| Net loss attributable to NJMC | $1,433,634 | $792,173 |
| Net loss per basic and diluted share | $0.02 | $0.02 |
| Net cash used in operating activities | $1,204,681 | $334,525 |
| Capital expenditures and investing cash use | Net investing cash used of $643,970 | Net investing cash provided of $21,916 |
| Cash and cash equivalents | $336,525 | $636,127 |
| Total assets | $6,814,179 | $6,202,069 |
| Total liabilities | $860,329 | $566,201 |
Operating expenses increased to $1,555,595 from $902,995. Major 2014 expenses included $435,601 of exploration, $310,309 of milling costs, $331,517 of management expense, $197,465 of professional services, and $199,465 of general and administrative expense. The filing does not present a meaningful positive operating margin; revenue covered approximately 6% of operating expenses.
Total debt, including current and long-term notes payable and related-party notes, was approximately $508,058 at December 31, 2014. Current liabilities were $547,642 versus current assets of $590,042, excluding the $200,000 milling advance as a financing-like obligation. The company had $180,385 of notes payable due in 2015, including a $175,000 final payment related to the Eastern Star property.
Material Changes Versus the Prior Comparable Period
- Revenue declined 19%, although milling income increased modestly as the mill began processing Golden Chest ore in December 2014. Gold sales fell to zero after remaining gold inventory was liquidated in 2013.
- Net loss increased by approximately $637,000, driven primarily by higher exploration, milling ramp-up, management, professional-services, general and administrative, and stock-based compensation costs.
- Exploration spending rose to $435,601 from $173,948. The principal programs were McKinley and Eastern Star, including approximately $266,064 and $77,822, respectively.
- Cash declined by $299,602 during 2014 despite $1,485,000 of net proceeds from common-stock offerings. Operating cash use was $1,204,681 and investing cash use was $643,970.
- Property, plant and equipment increased to $5,654,199 from $4,908,724, reflecting mill upgrades and the Eastern Star acquisition. The company also acquired a two-thirds interest in GF&H for $100,000 cash.
- Shares outstanding increased from 73,760,148 to 91,760,148. In addition, 21,200,000 warrants and 4,500,000 stock options were outstanding at year-end, creating potential dilution.
- The New Jersey Mill processed 1,923 tonnes in 2014, compared with 5,402 tonnes in 2013. Gold Hill delivered 1,922 tonnes from Golden Chest during the fourth quarter.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expected the Golden Chest mine and New Jersey Mill to ramp toward approximately 6,000 to 8,000 tonnes per month, or roughly 300 tonnes per day at the mine, with steady-state mill throughput targeted during the second quarter of 2015.
- The average milling charge was expected to be approximately $44 per tonne, increasing to about $50 per tonne during the initial ramp-up period. Gold Hill advanced $200,000 interest-free to fund mill start-up costs; the advance was to be deducted from future milling receipts.
- Management stated that the company did not have sufficient cash to fund normal operations and debt obligations for the following 12 months without increased milling revenue, Golden Chest royalty cash flow, liability deferrals, and/or additional financing. The auditors reported substantial doubt regarding the company’s ability to continue as a going concern.
- The company has incurred losses since inception, has minimal recurring revenue, and remains dependent on financing, joint-venture funding, successful milling operations, and future royalty or mining cash flow.
- Major operating risks include dependence on Gold Hill as the mill’s only current ore source, mill recovery and mechanical risks, ramp-up costs, metal-price volatility, exploration uncertainty, permitting delays, environmental and reclamation obligations, equipment and labor availability, and potential difficulty obtaining capital.
- As of year-end, the Golden Chest property had $1,625,000 remaining payable to sellers over the following two years, secured by a first mortgage. The Eastern Star property required a final $175,000 payment plus interest in July 2015.
- Crescent Silver filed a lawsuit on March 19, 2015 seeking damages exceeding $75,000 related to the New Jersey Mill joint venture. Management believes the claims are without merit and is defending the action.
- The company reported an asset retirement obligation of $23,366 and estimated New Jersey Mine and Mill reclamation costs of approximately $95,000. The filing states that no notification of liability for expanded Bunker Hill Superfund cleanup had been received.
- Unusual 2014 items included a $24,741 gain on sale of marketable securities, a $34,878 loss on sale of equipment, $201,927 of stock-based compensation, and a $200,000 milling advance.
Investor Verification Priorities
- Verify the issuer identity and ticker because the supplied metadata names Idaho Strategic Resources, while the filing identifies New Jersey Mining Company and OTCQB symbol NJMC.
- Confirm whether Golden Chest and New Jersey Mill operations achieved the projected 2015 throughput and whether milling revenue became recurring and profitable.
- Review subsequent filings for resolution of the going-concern uncertainty, cash balances, financing activity, and the $2015 debt maturities.
- Assess the economic terms, repayment status, and accounting treatment of the $200,000 milling advance and Golden Chest royalty arrangements.
- Monitor the Crescent Silver litigation and any related effect on mill ownership, governance, or operating rights.
- Evaluate dilution from the 21.2 million outstanding warrants and 4.5 million options, as well as the company’s ability to raise additional capital.
- Confirm exploration results independently; the filing reports encouraging intercepts but no SEC-recognized mineral reserves at the Golden Chest, McKinley, Eastern Star, Toboggan, or New Jersey properties.