Business Context and Reporting Period
The filing is New Jersey Mining Company’s Form 10-K for the fiscal year ended December 31, 2020, filed March 31, 2021. The request metadata identifies Idaho Strategic Resources, Inc.; however, the filing itself identifies the registrant as New Jersey Mining Company (NJMC), ticker NJMC, traded on OTCQB.
NJMC is a gold producer focused primarily on the 100%-owned Golden Chest Mine in northern Idaho and the majority-owned New Jersey Mill. It also holds exploration and development properties in Idaho and Montana, including a 50% carried interest in the Butte Highlands project and two rare earth element projects.
Financial and Operating Highlights
| Metric | 2020 | 2019 |
|---|---|---|
| Gold sales revenue | $5.675 million | $6.120 million |
| Gross profit | $67,546 | $738,548 |
| Net loss | $739,939 | $726,507 |
| Net loss attributable to NJMC | $642,876 | $609,605 |
| Cash flow from operating activities | $(482,418) | $206,407 |
| Cash and cash equivalents at year-end | $2.540 million | $217,796 |
| Working capital | $2.226 million | Not clearly provided |
| Total liabilities | $3.405 million | $2.195 million |
| Total assets | $14.669 million | $10.852 million |
- The Company processed 39,880 tonnes at the New Jersey Mill at an average head grade of 3.03 grams per tonne gold and reported 88% gold recovery.
- Gold production was 3,755 ounces contained in concentrates, compared with 5,060 ounces in 2019.
- Open-pit production was 27,690 tonnes at an average grade of 1.73 grams per tonne gold. Underground production was 12,190 tonnes at an average grade of 5.98 grams per tonne gold.
- Cash cost was $1,292.77 per ounce and all-in sustaining cost was $1,614.13 per ounce, compared with $940.49 and $1,075.36, respectively, in 2019.
- Capital expenditures and mineral-property additions contributed to $(1.594) million of investing cash flow.
- Financing activities generated $4.398 million, including $2.907 million from equity offerings, $1.085 million from convertible debt, $518,246 from Small Business Administration loans, and proceeds from warrant and option exercises.
- Year-end common shares outstanding were 137.6 million, compared with 123.8 million at December 31, 2019.
Material Changes Versus the Prior Comparable Period
- Revenue declined 7.3%, while gross profit declined 90.9%, primarily because fewer tonnes and lower-grade material were mined and processed from the open pit.
- Operating cash flow changed from positive $206,407 to negative $482,418.
- Production fell from 5,060 ounces to 3,755 ounces, while cash cost per ounce increased approximately 37.4% and AISC per ounce increased approximately 50.1%.
- The Company added a second underground mining crew, a second loader, a second drill jumbo, and a wireless communications system. It also completed 75 meters of Main Access Ramp development and placed 1,828 cubic meters of cemented rockfill.
- Mineral-property balances increased to $3.455 million from $2.363 million, including the acquisition and exploration of Alder Gulch and additions at Golden Chest.
- Debt increased materially, including $1.010 million of convertible debt, $25,000 of related-party convertible debt, and $518,246 of SBA loans at year-end.
- The Company recognized a $358,346 gain from forgiveness of its Paycheck Protection Program loan, partially offsetting operating losses.
- Exploration expenses increased to $303,291 from $214,924, while pre-development expenses declined to zero from $117,440.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expected planned production over the next 18 months to restore positive operating cash flow as underground mining becomes the primary source of mineralized material. No specific production, revenue, or earnings guidance was provided.
- The Company planned approximately 6,000 meters of Golden Chest drilling in 2021 and additional exploration at Alder Gulch, Buckskin, Giant Ledge, Eastern Star, Diamond Creek, and Roberts.
- Management stated that existing cash, operating cash flows, and potential financings were expected to fund contractual obligations and planned operations for the next 12 months. The Company has a history of losses and dependence on equity and debt financing.
- Open-pit tonnes and grades were below expectations because previously unmapped historic stopes had removed portions of the mineralized veins.
- Mining and milling operations are exposed to gold and silver price volatility, equipment failures, labor availability, recovery rates, ground conditions, cost inflation, permitting delays, and environmental and reclamation obligations.
- The New Jersey Mine and Golden Chest properties are within the expanded Bunker Hill Superfund Site. NJMC had received no notice of liability, and the EPA’s proposed expanded cleanup plan had not been approved, but potential future cleanup exposure was identified.
- Exploration and mining on unpatented public-land claims may require plans of operations and reclamation bonds; permitting delays may last one to two years.
- At December 31, 2020, the Company reported one significant and substantial mine-safety citation, with no mining-related fatalities or disclosed legal actions.
- COVID-19’s impact in 2020 was described as minimal, but future restrictions could adversely affect production, costs, and financial results.
- The audit report expressed an unqualified opinion. The critical audit matter concerned the effect of ore-reserve estimates on mineral-property valuation, depreciation, and recoverability.
Most Important Facts for Investors to Verify
- Confirm the identity of the registrant: the supplied filing is for New Jersey Mining Company, not an entity named Idaho Strategic Resources, Inc.
- Verify whether underground production can achieve management’s expected improvement in operating cash flow and offset lower open-pit production.
- Review the Company’s ability to refinance or repay convertible debt, equipment notes, related-party debt, and SBA obligations.
- Assess the effect of rising cash costs and AISC on profitability at prevailing gold prices.
- Validate Golden Chest reserve estimates, including the reported 42,500 tonnes of proven reserves at 5.17 grams per tonne gold, and the assumptions for costs, recovery, dilution, and gold prices.
- Monitor dilution from 5.975 million warrants, 2.1 million options, and convertible debt potentially convertible into approximately 5.14 million shares as of early 2021.
- Evaluate concentration risk: approximately 95% of 2020 product sales were concentrate sales to H&H Metal, identified in the filing as a former related party.
- Determine whether permitting, reclamation, Superfund-related developments, or future environmental obligations could require material cash expenditures.