Form 10-Q Summary — Quarter Ended March 31, 2012
Registrant: New Jersey Mining Company, now identified in the request metadata as Idaho Strategic Resources, Inc. The filing itself uses the New Jersey Mining Company name. The company reported as a development-stage gold exploration and mineral-processing company and a smaller reporting company. The report was filed May 11, 2012, with 45,305,862 common shares outstanding as of May 1, 2012.
Business Context and Reporting Period
The company conducts gold exploration in northern Idaho, operates the New Jersey mineral processing plant near Kellogg, and provides drilling, engineering, and management services to joint ventures. Exploration during the quarter focused on the 50%-owned Golden Chest LLC project, where 3,495 meters of drilling were completed and an independent 43-101 resource estimate was prepared. The New Jersey Mill expansion was nearly complete, with commissioning expected to begin in May 2012.
Financial Performance and Position
| Metric | Three Months Ended March 31, 2012 | Prior Comparable Period |
|---|---|---|
| Development-stage revenue | $476,186 | $230,571 |
| Operating expenses | $398,485 | $240,639 |
| Net loss | $323,022 | $2,620 |
| Net loss attributable to the company | $322,320 | $2,620 |
| Comprehensive loss | $322,513 | $12,292 |
| Basic loss per share | $0.01 | Nil |
| Net cash provided by operating activities | $269,092 | $(3,426) |
| Net cash used in investing activities | $(1,002,755) | $(896,858) |
| Net cash provided by financing activities | $288,117 | $968,069 |
| Cash and cash equivalents at period end | $167,443 | $425,102 |
Revenue more than doubled year over year, primarily from increased drilling and exploration contracting. The implied net loss margin was approximately 67.7% of revenue, compared with approximately 1.1% in the prior-year quarter. The principal unusual charge was $403,940 representing the company’s equity in the loss of Golden Chest LLC after changing to the equity method effective January 1, 2012.
Total assets were $6.22 million at March 31, 2012, including $4.49 million of property, plant, and equipment. Current assets were $429,551 and current liabilities were $459,557, implying a current ratio below 1.0. Total liabilities were $802,010. Reported capital leases and notes payable totaled approximately $465,161, excluding the asset retirement obligation.
Material Changes Versus the Prior Comparable Period
- Revenue increased by $245,615, or approximately 106%, to $476,186.
- The net loss increased by $320,402, primarily because Golden Chest became jointly funded and the company recognized its share of the venture’s loss.
- Operating cash flow improved to $269,092 from negative $3,426, but this was more than offset by $1.00 million of investing outflows.
- Cash declined by $445,546 during the quarter, from $612,989 at December 31, 2011, to $167,443.
- Property, plant, and equipment increased by approximately $522,000, largely due to investment in the New Jersey Mill Joint Venture expansion.
- Joint venture receivables increased to $202,997 from $131,718, while current liabilities increased to $459,557 from $310,231.
- The company contributed $450,000 to Golden Chest LLC, of which $46,060 was capitalized and the remainder was recognized through equity in the venture’s loss.
- No common stock was issued during the first quarter of 2012. Outstanding warrants for 6,099,550 shares were anti-dilutive for earnings-per-share purposes.
Outlook, Risks, Contingencies, and Unusual Items
Management stated that no gold production was planned at Golden Chest during 2012; activities were limited to exploration intended to expand resources and reserves before a production decision. The company expected to commission the expanded New Jersey Mill during 2012 and process development ore from the Crescent mine.
Additional financing might be required if Marathon Gold did not exercise its option to increase its Golden Chest ownership to 60% by paying $3.5 million. Golden Chest cash-call commitments could continue throughout 2012, and exploration spending depends substantially on joint-venture funding.
The company identified risks including metal-price volatility, uncertain cash flows, exploration and operating risks, environmental and regulatory matters, litigation, competition, and the need for additional capital. A pending federal quiet-title action concerns the public status of the East Fork Eagle Creek Road in Idaho.
During the quarter, three mine-safety citations were received at the New Jersey Mill. Each carried a $100 penalty and was cured through corrective action. No related legal actions, fatalities, or other reportable events were disclosed. Management concluded that disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm the registrant’s corporate name and whether the filing’s New Jersey Mining Company identity corresponds to Idaho Strategic Resources, Inc.
- Verify the funding status and ownership-option terms for Golden Chest LLC, including the potential $3.5 million payment by Marathon Gold.
- Assess whether $167,443 of cash and a current ratio below 1.0 were sufficient to fund planned exploration, joint-venture cash calls, debt service, and mill commissioning.
- Review the Golden Chest resource estimate and the economic basis for any future production decision; the filing did not provide a production forecast or quantified reserves.
- Verify the completion, commissioning cost, capacity, and operating economics of the New Jersey Mill expansion.
- Consider the effect of the $403,940 Golden Chest equity loss and the change from cost-method to equity-method accounting on future reported earnings.
- Review related-party receivables of $185,068 from MUSA and Golden Chest LLC and related-party payables, including $137,662 to Mine Fabrication and Machine.
- Monitor the pending quiet-title litigation, environmental and mine-safety matters, and the company’s need for potential additional financing.