Business Context and Reporting Period
This Form 10-Q covers the three months ended March 31, 2015, and was filed by New Jersey Mining Company, not Idaho Strategic Resources, Inc. The company operates a mineral processing plant near Kellogg, Idaho, conducts gold exploration, and evaluates mining and milling opportunities. The New Jersey Mill began processing Golden Chest Mine ore in December 2014 and remained in a ramp-up phase during the quarter.
The company consolidated its majority-owned New Jersey Mill Joint Venture and its two-thirds-owned GF&H Company. Common shares outstanding were 91,760,148 as of May 1, 2015.
Financial Highlights
| Metric | Q1 2015 | Q1 2014 | Change or other detail |
|---|---|---|---|
| Total revenue | $391,120 | $76 | Primarily milling revenue from Golden Chest ore |
| Operating loss | $269,360 | $268,748 | Loss remained broadly stable during mill ramp-up |
| Net loss | $279,527 | $268,356 | 2015 loss includes $10,679 attributable to non-controlling interests |
| Net loss attributable to company | $268,848 | $268,356 | Basic and diluted loss per share reported as nil |
| Net cash used in operating activities | $256,078 | $261,497 | Operating cash burn remained substantial |
| Net cash used in investing activities | $42,376 | $29,249 | Included equipment purchases and equipment deposits |
| Net cash provided by financing activities | $(10,724) | $387,710 | 2014 included $405,000 from a private placement |
| Cash and cash equivalents, period-end | $27,347 | $733,091 | 2015 balance declined from $336,525 at December 31, 2014 |
Total operating expenses were $660,480, including milling costs of $338,770, exploration expense of $47,057, depreciation and amortization of $48,919, management expense of $56,539, professional services of $60,777, and general and administrative expense of $108,418.
At March 31, 2015, total assets were $6.61 million, total liabilities were $907,475, and total stockholders’ equity was $5.70 million. Current assets were $391,664 versus current liabilities of $605,470, indicating negative working capital of approximately $213,806.
Material Changes Versus Prior Comparable Period
- Revenue increased from $76 to $391,120 as the mill began processing Golden Chest ore.
- Milling expense increased from $13,204 to $338,770, largely offsetting the new milling revenue during the ramp-up period.
- Cash declined by $309,178 during the quarter, compared with a $96,964 increase in Q1 2014.
- Milling receivables increased to $227,500 from $117,615 at December 31, 2014, while accounts payable increased to $135,370 from $77,913.
- Total debt and related obligations were approximately $498,366, consisting of current and long-term notes payable and related-party notes payable. The filing also reported a $200,000 interest-free milling advance, repayable through future milling receipts.
- No common shares were issued during Q1 2015. The company had 21.2 million warrants outstanding with exercise prices ranging from $0.10 to $0.20 and 4.25 million options outstanding with exercise prices ranging from $0.10 to $0.15.
Outlook, Risks, Contingencies, and Unusual Items
Management stated that the mill was in a start-up and ramp-up phase and expected to continue processing Golden Chest ore. The company had no additional candidate milling projects identified, although it continued business development and exploration activities. Longer-term plans depend on growing milling revenue, receiving potential Golden Chest royalty cash, raising equity or debt, obtaining joint-venture funding, and eventually profitably exploiting mineral properties.
The filing states that substantial doubt exists regarding the company’s ability to continue as a going concern. Management reported insufficient cash to fund normal operations and debt obligations for the next 12 months without increased milling revenue, commencement of royalty cash flow, deferral of certain liabilities, and/or additional financing. The financial statements contain no adjustments that might be required if the company cannot continue operations.
Key risks include the company’s limited operating history, recurring losses, dependence on mineral prices and mill throughput, financing and joint-venture risks, regulatory and reclamation obligations, exploration uncertainty, equipment and operating costs, dependence on key personnel, and risks relating to mineral property title and the New Jersey Mill.
On March 19, 2015, Crescent Silver, LLC, the minority owner of the New Jersey Mill Joint Venture, sued the company in federal court in Idaho, alleging breaches of the joint-venture agreement and seeking damages in excess of $75,000. The company believes the claims are without merit and is defending the action.
After quarter-end, President and CEO Patrick Highsmith resigned effective May 4, 2015. The board accepted the resignation and reappointed Delbert Steiner as CEO and John Swallow as president. Related salary, benefits, and other expenses were expected to be recognized in the second quarter.
Management reported that disclosure controls were effective as of March 31, 2015 and that no material change occurred in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Confirm the registrant’s identity: the supplied filing is for New Jersey Mining Company, while the request metadata identifies Idaho Strategic Resources, Inc.
- Assess whether the $27,347 cash balance and negative working capital can support operations and debt maturities without new financing or materially higher milling receipts.
- Track mill throughput, operating costs, collections of milling receivables, and repayment of the $200,000 milling advance as the Golden Chest operation progresses.
- Review the going-concern disclosure and the company’s ability to secure financing, royalty proceeds, or additional joint-venture support.
- Monitor the Crescent Silver litigation and any effects on the New Jersey Mill Joint Venture.
- Evaluate the impact of the post-quarter-end CEO and president changes, including related compensation and execution risk.