Business Context and Reporting Period
This unaudited Form 10-Q covers the three months ended March 31, 2016. The filing identifies the registrant as New Jersey Mining Company; the request metadata identifies Idaho Strategic Resources, Inc., so the corporate-name relationship should be verified. The company operates a mineral processing mill in Idaho and holds interests in the Golden Chest and Butte Highlands mining projects.
Management reported that the New Jersey Mill had minimal activity during the quarter. The company planned to resume mining and milling at Golden Chest in the second quarter, subject to raising required startup funds.
Financial Highlights
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Total revenue | $43,965 | $391,120 |
| Gold sales | $29,351 | Not separately reported |
| Milling income | $14,614 | $391,120 |
| Operating loss | $(168,265) | $(269,360) |
| Net loss | $(190,503) | $(279,527) |
| Net loss attributable to the company | $(190,480) | $(268,848) |
| Net cash used in operating activities | $(69,828) | $(256,078) |
| Cash and cash equivalents, period end | $11,582 | $27,347 |
Revenue declined approximately 89% year over year because the prior-year quarter included substantial Golden Chest milling activity. The net loss narrowed because operating activity and related expenses were lower, including lower depreciation, general and administrative expenses, and professional services.
Total assets were $8.26 million at March 31, 2016, compared with $7.82 million at December 31, 2015. Total liabilities increased to $2.40 million from $2.01 million, while total stockholders’ equity increased to $5.86 million from $5.82 million.
Current liabilities were $756,278 versus current assets of $130,051, indicating materially negative working capital. Notes payable, net of discount, totaled $1.16 million, including $549,377 due within one year. Related-party notes and accrued interest totaled $1.09 million, including $400,000 of new related-party borrowings during the quarter.
Cash Flow, Capital and Material Changes
- Cash decreased by $50,693 during the quarter, from $62,275 to $11,582.
- Investing cash outflows were $304,369, including $20,000 for property and equipment, $59,369 for mineral property, and $225,000 for the Butte Highlands investment.
- Financing cash inflows were $323,504, primarily from $400,000 of related-party borrowings, offset by debt repayments.
- The company acquired a 50% interest in Butte Highlands for $225,000 in cash and 3,000,000 restricted common shares valued at $210,000.
- Common shares outstanding increased from 91,760,148 at December 31, 2015 to 94,760,148 at March 31, 2016.
- Mineral properties increased to $1.98 million, primarily due to Golden Chest development expenditures. Property, plant and equipment increased to $5.72 million.
- The company became the 100% owner of the Golden Chest Joint Venture in December 2015, assuming a $1.25 million note payable associated with the patented mining claims and granting a 2% net smelter return royalty to the former partner.
Outlook, Risks and Unusual Items
Management’s near-term plan was to operate both the Golden Chest mine and the New Jersey Mill, using a small-scale, two-year mine plan focused on accessible near-mine ore. The plan depended on obtaining startup financing and successfully resuming production in the second quarter.
The financial statements disclose substantial doubt about the company’s ability to continue as a going concern. Management stated that existing cash was insufficient to fund normal operations and debt obligations for the next 12 months without increased mining and milling revenue, deferral of certain liabilities, and/or additional financing.
Key risks include the company’s limited operating history, recurring losses, minimal cash, negative working capital, dependence on external capital and joint-venture partners, commodity-price volatility, exploration and development uncertainty, permitting and reclamation obligations, operating and equipment risks, and related-party conflicts. The filing states that forward-looking statements are subject to these and other risks.
The company reported no legal proceedings, no senior securities defaults, and no mine-safety events requiring disclosure. Management concluded that disclosure controls were effective as of March 31, 2016, and reported no material change in internal control over financial reporting.
Investor Verification Items
- Verify the registrant’s identity and name-change history because the filing names New Jersey Mining Company while the request identifies Idaho Strategic Resources, Inc.
- Confirm the financing required to restart Golden Chest operations and whether production actually resumed in the second quarter of 2016.
- Assess liquidity, near-term debt maturities, related-party borrowings, and the company’s ability to satisfy obligations with only $11,582 of cash.
- Review the economics, ownership, funding responsibilities, and permitting status of the Golden Chest and Butte Highlands projects.
- Evaluate the effect of the 2% Golden Chest royalty, assumed acquisition debt, and restricted-share issuance on future cash flow and dilution.
- Compare subsequent revenue and operating cash flow with management’s plan to become less dependent on capital-market financing.