Idaho Strategic Resources, Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
The filing covers the three months ended March 31, 2023, and was filed May 15, 2023. Idaho Strategic Resources is a gold producer and critical minerals and rare earth elements exploration company. Its principal operating assets include the Golden Chest Mine, the 65%-owned New Jersey Mill Joint Venture, and rare earth elements properties in Idaho. The company’s common stock trades on NYSE American under the symbol IDR. It had 12,256,523 common shares outstanding at May 1, 2023.
Key Financial Metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $3.342 million | $2.044 million | Up 63% |
| Gross profit | $865,599 | $306,143 | Up $559,456 |
| Gross margin | 26% | 15% | Up 11 percentage points |
| Operating income (loss) | $13,023 | $(426,166) | Improved $439,189 |
| Net income (loss) | $44,186 | $(473,069) | Improved $517,255 |
| Net income attributable to IDR | $60,599 | $(455,602) | Improved $516,201 |
| Basic earnings (loss) per share | $0.01 | $(0.04) | Improved |
| Cash flow from operating activities | $160,762 | $(848,086) | Improved $1.009 million |
| Capital and mineral-property expenditures | $413,521 | $258,930 | Increased |
| Cash and cash equivalents at period end | $2.014 million | $3.409 million | Down $1.395 million |
Gold accounted for $3.484 million of gross metal sales, partially offset by $151,960 of smelter and refining charges. Concentrate sales were $3.203 million and dore sales were $138,105. The company reported 1,725 ounces produced, compared with 1,140 ounces in Q1 2022.
Cash cost was $1,287.32 per ounce and all-in sustaining cost was $1,540.20 per ounce, compared with $978.70 and $1,479.70, respectively, in the prior-year quarter. Management attributed the higher costs primarily to a greater proportion of underground ore.
At March 31, 2023, total assets were $21.791 million, current assets were $4.097 million, and total liabilities were $3.154 million. Notes payable totaled $1.936 million, including $810,291 due within one year and $1.126 million due thereafter. Related-party notes payable totaled $64,565. Stockholders’ equity was $18.637 million.
Material Changes Versus the Prior Comparable Period
- Revenue increased by $1.297 million, driven by higher gold production and a higher average gold price.
- Gross margin improved from 15% to 26%.
- Exploration expense declined to $273,442 from $396,124, primarily because of reduced drilling by the company-owned rig.
- Professional-services expense increased to $240,805 from $79,983 due primarily to legal fees associated with merger and acquisition activity; management characterized the increase as one-time.
- Interest expense decreased to $8,848 from $47,760 as several equipment notes approached the end of their terms.
- Operating cash flow turned positive, but investing activities used $416,121, primarily for mineral-property additions and equipment purchases.
- Financing provided $631,132, including $878,503 of net proceeds from a February 2023 private placement of 158,453 shares. Principal payments totaled $248,972.
- Shares outstanding increased from 12,098,070 at December 31, 2022, to 12,256,523 at March 31, 2023.
Operations, Outlook, Risks, and Unusual Items
During the quarter, approximately 8,500 tonnes were mined from underground stopes and 2,350 tonnes were mined from the Jumbo Pit. The New Jersey Mill processed 11,144 dry metric tonnes at a 5.63 grams-per-tonne flotation feed grade and 91.5% gold recovery. Open-pit mining at the Jumbo Pit was completed at the end of March, and management expects production to come from underground operations at Golden Chest for the foreseeable future.
Management plans to grow Golden Chest production, reinvest operating cash flow in Golden Chest and the New Jersey Mill, and continue exploration of gold and rare earth elements properties. The company reported encouraging Diamond Creek and Lemhi Pass rare earth elements results and expanded its central Idaho rare earth elements land position to approximately 18,030 acres.
Management believes existing cash and operating cash flows, together with planned equity sales and potential debt borrowings or restructurings, are sufficient to fund planned operations and contractual obligations for the next 12 months. The filing provides no formal production, revenue, or earnings guidance.
- Gold concentrate sales are subject to final settlement adjustments based on metal prices and assays. At March 31, 2023, 5,844 ounces had been sold but not finally settled; 1,344 ounces remained exposed to future price changes.
- Gold sales receivable was $1.342 million and was owed by a single broker, H&H Metal, with no allowance for doubtful accounts.
- Cash costs may remain elevated because future production is expected to be predominantly underground.
- The company is exposed to gold and silver prices, recovery rates, operating costs, exploration results, permitting, environmental obligations, and financing availability.
- The asset retirement obligation was $266,116. Estimated undiscounted reclamation costs were $103,320 for Golden Chest and $203,600 for the New Jersey Mine and Mill.
- All notes payable are collateralized by the related property or equipment. Scheduled principal payments include $810,291 over the following 12 months and $530,713 in the subsequent year.
- The company reported no legal proceedings, no defaults upon senior securities, and no material change in internal control over financial reporting.
Important Facts for Investors to Verify
- Whether underground production can sustain the reported 1,725-ounce quarterly production level after completion of the Jumbo Pit.
- Whether higher underground mining costs cause cash cost and AISC per ounce to remain above prior-year levels.
- The final settlement values and collectability of the $1.342 million gold sales receivable, including exposure to metal-price changes.
- The company’s ability to meet $810,291 of near-term note principal payments while funding sustaining capital, exploration, and development.
- The assumptions supporting management’s conclusion that cash and anticipated financing are sufficient for the next 12 months.
- The economic potential, permitting status, and financing requirements of the rare earth elements projects, which remain exploration-stage assets.
- The effect of potential dilution from 535,953 outstanding stock options and 289,294 warrants, including warrants expiring in October and November 2023.