Business Context and Reporting Period
This Form 10-Q was filed by New Jersey Mining Company for the quarter and six months ended June 30, 2014. The request metadata identifies Idaho Strategic Resources, Inc.; the filing text itself does not identify that name. The company describes itself as an exploration-stage mining company focused on gold exploration in Idaho, operation of the New Jersey Mill, contract milling, and joint ventures.
The company consolidated its 66%-owned New Jersey Mill Joint Venture and accounted for its 48%-owned Golden Chest LLC investment using the cost method. Management planned to process Golden Chest ore at approximately 9,000 metric tonnes per month for 18 to 24 months, with milling operations expected to begin in October 2014.
Key Financial Metrics
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 | Comparable 2013 period |
|---|---|---|---|
| Total revenue | $63 | $139 | $28,288 / $42,332 |
| Operating loss | $301,909 | $570,655 | $19,421 / $4,341 |
| Net loss | $294,645 | $562,998 | $48,885 / $124,098 |
| Net loss attributable to company | $294,645 | $562,998 | $45,691 / $118,591 |
| Net cash used in operating activities | $512,815 | $73,061 | |
| Net cash used in investing activities | $270,769 | Net cash provided of $8,000 | |
| Net cash provided by financing activities | $362,371 | $57,540 |
The filing reports basic and diluted net loss per share of $0.004 for the quarter and $0.01 for the six-month period, based on weighted-average shares of 79.8 million and 77.8 million, respectively. The filing presents no meaningful operating margin because revenue was negligible and the company remained in the exploration stage.
At June 30, 2014, cash and cash equivalents were $214,914, down from $636,127 at December 31, 2013. Total current assets were $374,969, including $103,217 of joint venture receivables. Total assets were $6.06 million, including $5.15 million of net property, plant and equipment and $540,433 of mineral properties.
Total liabilities were $507,068, comprising $165,707 of current liabilities and $341,361 of non-current liabilities. Reported debt-related balances included current and non-current notes payable of $221,968, related-party notes payable of $202,063, and current capital lease obligations of $9,027. Stockholders’ equity was $5.56 million, including $3.19 million of non-controlling interest in the Mill Joint Venture.
Material Changes Versus Prior Comparable Period
- Quarterly revenue declined to $63 from $28,288, and six-month revenue declined to $139 from $42,332. No contract milling occurred during 2014 through June 30, and prior-year gold inventory had been liquidated.
- Quarterly net loss increased to $294,645 from $48,885; six-month net loss increased to $562,998 from $124,098. Management attributed the deterioration primarily to resumed exploration and higher general and administrative activity.
- Quarterly exploration expense increased to $75,967 from $134, and six-month exploration expense increased to $160,535 from $231.
- Quarterly general and administrative expense increased to $172,163 from $21,564; six-month expense increased to $328,688 from $78,718. The 2014 six-month amount included $57,750 of stock-based compensation.
- Property, plant and equipment increased by approximately $240,735 from year-end 2013, primarily due to construction and installation of a gravity concentrator at the New Jersey Mill.
- Operating cash use increased to $512,815 from $73,061 for the first six months. Capital expenditures were $270,769, while financing activities generated $362,371, including $405,000 from common stock and warrant sales, net of issuance costs.
- Cash declined by $421,213 during the first six months, ending at $214,914.
Guidance, Outlook, Risks, and Unusual Items
Management expected Golden Chest ore processing to commence in October 2014 following installation of the gravity concentrator, estimated to cost $165,000. The company stated that future exploration spending would depend primarily on joint-venture contributions, fundraising, and cash flow from the mill.
Juniper Resources had exercised a mining lease covering part of the Golden Chest property. The arrangement included property payments made on behalf of Golden Chest LLC, a 2% net smelter return royalty, and the potential for processing revenue at the New Jersey Mill. Development of a portal began in June 2014.
The company cautioned that its forward-looking plans are subject to metal-price volatility, uncertain cash flows, exploration and mining risks, operating risks, environmental and regulatory matters, litigation, competition, and other factors beyond its control. No material legal proceedings were reported, and no material mine-safety events requiring disclosure were identified.
At June 30, 2014, the company had 14 million outstanding warrants exercisable at $0.15 and 2.25 million options exercisable at $0.10, with only 750,000 options immediately exercisable. In July and August 2014, the company completed a private placement of 6 million units for net proceeds of $1.08 million. Each unit consisted of two common shares and one warrant exercisable at $0.20 through August 2017.
Management concluded that disclosure controls were effective as of June 30, 2014 and reported no material change in internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Confirm the registrant’s identity, because the supplied metadata names Idaho Strategic Resources, Inc., while the filing identifies New Jersey Mining Company.
- Verify whether Golden Chest ore processing actually commenced in October 2014 and whether the expected throughput and related cash flows were achieved.
- Assess liquidity after the June 30 cash balance of $214,914, including the impact of the subsequent $1.08 million private placement and ongoing operating cash burn.
- Review the collectability and timing of the $103,217 of joint venture receivables, including amounts owed by Crescent for mill activities.
- Evaluate the company’s ability to fund exploration, mill expansion, debt service, and other obligations without additional equity financing.
- Consider dilution from 14 million warrants and 2.25 million options, as well as the shares issued in the subsequent private placement.
- Confirm the economic terms, permitting, development status, and production assumptions underlying the Juniper Golden Chest lease and the planned Mill operations.