Business Context and Reporting Period
This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2015. The filing identifies the registrant as New Jersey Mining Company; the request metadata identifies Idaho Strategic Resources, Inc., so the issuer identity should be verified. The company operates a permitted mill in Idaho, owns or manages interests in mining properties and joint ventures, and generates revenue primarily from milling services and related activities.
Financial Highlights
- Revenue: $603,129 for the quarter and $1,866,499 for the nine months, versus $6,229 and $6,368, respectively, in the comparable 2014 periods. Nearly all 2015 revenue was milling income from Golden Chest ore.
- Profitability: Net income was $120,087 for the quarter, including $125,000 of gain from forfeiture of a milling advance, versus a $371,632 loss in the 2014 quarter. Nine-month net loss was $17,955 versus $934,632 in 2014. Net income attributable to the company was $129,501 for the quarter and $26,326 for the nine months.
- Operating results: Operating income was $111,793 for the quarter, but the nine-month operating loss was $15,086. Milling costs were $379,201 for the quarter and $1,149,491 for the nine months.
- Cash flow: Operating cash flow was negative $6,116 for the nine months; investing cash flow was negative $133,297, principally from $143,297 of capital expenditures; financing cash flow was negative $82,102. Cash declined from $336,525 at December 31, 2014 to $115,009 at September 30, 2015.
- Liquidity: Current assets were $479,179 and current liabilities were $479,437. The filing states that the company had negative working capital and insufficient cash to fund normal operations and debt obligations for the next 12 months without increased milling revenue, deferred liabilities, additional financing, or other actions.
- Debt: Notes payable totaled $407,047, including $247,434 due within one year. A US Bank line of credit had approximately $35,963 outstanding against $43,000 of availability, with stated variable rates of 7.25% and 21.9%. Related-party notes totaled $151,324.
- Assets and equity: Total assets were $6,780,461 and total liabilities were $774,635. Total stockholders’ equity was $6,005,826, including $3,202,832 of non-controlling interests. Common shares outstanding were 91,760,148 as of November 1, 2015.
Material Changes Versus the Prior Comparable Period
- Milling revenue increased sharply as the New Jersey Mill processed Golden Chest ore beginning in late 2014; 38,920 tonnes were processed during the first nine months of 2015 and approximately 40,840 tonnes from ramp-up through early September.
- The company’s improved quarterly and year-to-date results primarily reflect milling activity, while milling, depreciation, and related operating costs also increased.
- Exploration expense declined to $143,725 for the nine months from $307,052 in 2014 as spending was limited by available cash.
- Property, plant and equipment increased to $5,743,824 from $5,654,199, reflecting mill-related investment and capital expenditures.
- The company did not issue common stock during the first nine months of 2015, compared with $1,485,000 of net proceeds from equity and warrant sales in the 2014 period.
- Juniper terminated the Golden Chest lease in September 2015 and stopped supplying ore. The remaining $125,000 of a $200,000 milling advance was recognized as a gain.
Outlook, Risks, Contingencies, and Unusual Items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern because of limited recurring revenue, negative working capital, historical losses, limited cash, and debt obligations. The financial statements contain no adjustments that might be required if the company cannot continue operations.
- Golden Chest: After quarter-end, the company entered into an option to acquire Marathon Gold’s 52% interest in the Golden Chest joint venture for total payments of $200,000 and a retained 2% net smelter royalty. The filing states that the company intended to exercise the option and was evaluating conservation, a new joint venture partner, or mining remaining ore.
- Revenue concentration: The mill had no identified additional candidate projects for production after the Golden Chest lease termination. Future revenue depends on securing mill feed, restarting or continuing Golden Chest operations, finding partners, or developing other projects.
- Litigation: Crescent Silver filed an action seeking damages in excess of $75,000, alleging breaches of the New Jersey Mill Joint Venture Agreement. The company considers the claims without merit and is defending the action.
- Operating and market risks: Key risks include metal-price volatility, exploration and development uncertainty, permitting and reclamation obligations, financing availability, dependence on joint-venture partners and key personnel, mill operating risks, and potential dilution or difficulty accessing capital markets.
- Unusual items: The nine-month results include a $125,000 gain from forfeiture of the milling advance. Management also disclosed that operating results for the interim period may not be indicative of full-year results.
- Controls: Management concluded that disclosure controls were effective as of September 30, 2015 and reported no material change in internal control over financial reporting during the quarter.
Facts Investors Should Verify
- Confirm whether this filing belongs to Idaho Strategic Resources, Inc. or the registrant named in the document, New Jersey Mining Company.
- Verify the status, exercise, funding, and closing of the Golden Chest acquisition option and the company’s source of funds for the required payments.
- Assess whether the company secured replacement mill feed or a joint venture partner after Juniper’s lease termination.
- Review cash availability, the $247,434 of notes due within one year, line-of-credit terms, and potential refinancing or equity requirements.
- Monitor the Crescent Silver litigation and any related exposure beyond the stated claim exceeding $75,000.
- Distinguish recurring operating profitability from the one-time $125,000 forfeiture gain and determine whether milling operations can generate positive cash flow.