Business Context and Reporting Period
Unaudited Form 10-Q for the three months ended March 31, 2019, filed May 15, 2019, by New Jersey Mining Company. The request identifies Idaho Strategic Resources, Inc.; the filing text identifies the registrant as New Jersey Mining Company, which investors should verify.
The company is a gold producer focused on the Golden Chest Mine in Idaho, the New Jersey Mill, and exploration and development properties in Idaho and Montana. It owns 65% of the New Jersey Mill Joint Venture and holds a 50% carried-to-production interest in Butte Highlands.
Financial Highlights
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Gold sales revenue | $1.145 million | $1.101 million |
| Gross profit | $59,931 | $6,611 |
| Gross margin | 5.2% | 0.6% |
| Operating loss | $221,636 | $232,082 |
| Net loss | $223,122 | $265,846 |
| Net loss attributable to the company | $205,404 | $253,239 |
| Net loss attributable to the company per share | Nil | Nil |
| Cash flow from operating activities | $(99,121) | $70,265 |
| Capital expenditures and mineral property purchases | $36,208 | $189,813 |
| Cash flow from financing activities | $(90,712) | $374,133 |
| Ending cash and cash equivalents | $22,725 | $379,202 |
Revenue increased 3.9% year over year. Cost of sales declined to $1.085 million from $1.095 million, although depreciation and amortization increased to $128,951 from $69,061. Other operating expenses increased to $281,567 from $238,693, including $65,567 of pre-development expense. The operating loss margin was approximately 19.4% in 2019 versus 21.1% in 2018.
At March 31, 2019, total assets were $10.475 million, including $690,976 of current assets and $6.489 million of property, plant and equipment. Current liabilities were $817,489, producing a current ratio of approximately 0.85. Notes payable totaled $571,530, and related-party notes payable totaled $214,091. Total liabilities were $1.550 million. Accounts payable increased to $534,916 from $401,501, while cash declined sharply from $248,766 at year-end 2018.
Material Changes Versus the Prior Comparable Period
- Gold sales increased by $43,284, or 3.9%.
- Concentrate sales increased to $1.134 million from $824,029, while dore sales decreased to $10,777 from $277,362.
- Gross profit improved by $53,320, primarily due to lower direct production costs relative to revenue.
- Net loss attributable to the company improved by $47,835, or approximately 18.9%.
- Operating cash flow changed from $70,265 provided to $99,121 used, driven partly by a $90,728 increase in gold sales receivables and higher other current assets.
- Cash decreased by $226,041 during the quarter, reflecting operating, investing and financing cash uses and no new equity financing.
- Depreciation and amortization increased by $59,890, while the prior-year charges for stock-based compensation and forward gold contract fair-value changes did not recur.
- Management reported that a five-day mill schedule began in March and increased monthly mill production by approximately 40%.
Guidance, Outlook, Risks and Unusual Items
The company processed approximately 11,550 dry metric tonnes at a head grade of 3.20 grams per tonne and 87.1% gold recovery during the quarter, producing approximately 960 ounces of gold sales. Open-pit and underground operations continued at the Golden Chest Mine, and management reported drilling results intended to support mine expansion and resource growth.
Management stated that increased production, planned equity sales and the ability to restructure debt are expected to provide sufficient cash flows and liquidity to fund planned operations and contractual obligations for the next 12 months. This is a forward-looking assessment rather than a formal quantitative production or financial guidance forecast.
Liquidity remains a significant risk: cash was only $22,725 at quarter-end, operating cash flow was negative, current liabilities exceeded current assets, and scheduled principal payments include $176,171 due within the following 12 months. The filing also notes reliance on future production, equity financing, debt restructuring and other capital sources.
Concentrate sales and receivables are exposed to changes in metals prices before final settlement. At March 31, 2019, approximately 1,375 ounces of gold contained in concentrates remained exposed to future price changes. The company also had a $150,000 current note receivable and a $156,510 asset retirement obligation.
No legal proceedings, senior securities defaults, material changes in internal controls, or reportable mine-safety events were disclosed. The company adopted new lease and nonemployee stock-compensation accounting standards effective January 1, 2019, with no material impact reported.
Investor Verification Checklist
- Confirm whether the filing relates to New Jersey Mining Company or Idaho Strategic Resources, Inc., including the applicable ticker and corporate history.
- Verify the company’s ability to fund operations given $22,725 of cash, negative operating cash flow and approximately $176,171 of notes payable due within 12 months.
- Assess whether the reported 40% production increase translates into sustained positive operating cash flow.
- Review gold production, recovery, realized prices, concentrate settlement adjustments and exposure to metal-price changes.
- Review debt terms, related-party notes, upcoming maturities and any contemplated refinancing or equity issuance.
- Evaluate the economic significance and permitting, exploration and development risks associated with the Golden Chest and other mineral properties.