ITEM 1. DESCRIPTION OF THE BUSINESS
Business
New Jersey Mining Company (“the Company” or “NJMC”) is a gold producer with an established base in three historic mining districts in the Western United States. The Company’s primary source of revenue comes from its operating gold mine, the Golden Chest Mine located in the Murray Gold Belt of northern Idaho.
New Jersey Mining Company (“the Company” or “NJMC”) was incorporated under the laws of the State of Idaho on July 18, 1996. The Company’s head office and registered records office is located at 201 N. 3rd St. Coeur d’Alene, ID 83814.
Any Bankruptcy, Receivership or Similar Proceedings
There have been no bankruptcy, receivership, or similar proceedings.
Any Material Reclassification, Merger, Consolidation, or Purchase or Sale of a Significant Amount of Assets Not in the Ordinary Course of Business.
There have been no material reclassifications, mergers, consolidations, purchases, or sales not in the ordinary course of business for the past three years.
BUSINESS OF THE COMPANY
General Description of the Business
New Jersey Mining Company (NJMC) was incorporated in the State of Idaho on July 18, 1996. The Company is an established gold producer, with surface and underground mining operations at its 100-percent owned Golden Chest Mine and milling operations at its majority-owned New Jersey Mill and an expanded focus on identifying and exploring Critical Minerals (Rare Earth Minerals). Its business strategy is to grow its asset base and mineral production over time, relying primarily on its in-house skill sets to eventually become a mid-tier gold producer. The Company holds mineral properties in three historic mining districts of Idaho and Montana. Its portfolio of mineral properties includes:
·The Golden Chest Mine, a producing gold mine located in the Murray Gold Belt (MGB) of North Idaho;
·Advanced stage, pre-development surface and underground property, adjacent to the Golden Chest Mine;
·A significant portfolio of early-stage exploration properties within the MGB, many of which include historic gold mines and known gold mineralization;
·USGS recognized Rare Earth Element Resource
oDiamond Creek - third largest REE resource in the US
oRoberts Rare Earth - one the highest grade REE properties in the US
·A significant portfolio of early-stage exploration properties in Central Idaho, primarily in the Elk City area, and;
·The Butte Highlands Mine (50-percent interest), an advanced-stage project which has seen considerable development work, located south of the city of Butte, in Western Montana;
In addition to its portfolio of exploration, pre-development, and producing properties, the Company is also the manager and majority-owner of the New Jersey Mill, which currently processes ore from the Golden Chest Mine. The New Jersey Mill can process gold and silver ore through a 360-tonne per day flotation plant.
During the last two years, the Company has focused its efforts on expanding underground development and production at the Golden Chest Mine with an aggressive focus on consolidating and increasing its land holding within the Murray Gold Belt. With all debt associated with the start-up of operations paid in full, the Company significantly increased its exploration and expansion activities in the Murray Gold Belt. This progress combined with the existing infrastructure and development over the last two years has created a solid foundation for continued growth and a base of value regardless of market cycles.
Competitive Business Conditions
While there has been a market for gold and precious metals historically, the Company competes on several different fronts within the minerals exploration industry. The Company competes with other junior mining companies for the capital necessary to sustain its exploration and development programs. NJMC also competes with other mining companies for exploration properties and mining assets, mostly properties in the western United States. In recent years, the Company has been successful in resuming operations at the New Jersey Mill, consolidating 100% ownership of the Golden Chest Mine and acquiring a 50% interest in the Butte Highlands Joint Venture. In October 2016 production at the Golden Chest resumed with the Company as the sole owner and operator. While not its core business, the New Jersey Mill has little competition for contract milling within an approximate 175-mile radius; however, it is conceivable that fuel prices and other factors could expand the market to include mines outside of the area.
Generally, the Company is subject to the risks inherent to the mineral industry. A primary risk of mineral exploration is the low probability of finding a major ore deposit. The Company attempts to mitigate this risk by focusing its efforts in areas known to host significant mineral deposits, and also by relying on its experienced management team to drive analysis, evaluation, and acquisition of properties that it feels have a higher-than-average probability of success. In addition to deal essentials, such as cost, terms, timing, and market considerations, the Company’s process of property acquisition involves screening target properties based on geological, economic, engineering, environmental, and metallurgical factors. In all of its operations the Company competes for skilled labor within the mining industry.
The risks associated with the Company’s mining and milling operations include other risks typical of the mining industry, such as: operational effectiveness in the processing plant that could result in lower recovery of the economic metals, mechanical failure of equipment that could increase costs or decrease efficacy, ability to hire and retain qualified operators, and risks that the mining operations are unable to economically extract material due to ground or slope failures that increase cost. The Company manages these risks with engineering and geologic analysis, detailed mine planning, a preventive maintenance program, and installing experienced and technically proficient management.
Another significant risk in the mining industry is the price of metals such as gold and silver. If the prices of these metals were to fall substantially it could lead to a loss of investor interest in the mineral exploration sector, which would make it more difficult to raise the capital necessary for the Company to move exploration and development plans forward.
Effect of Existing or Probable Governmental Regulations on the Business
The mining business is subject to extensive federal, state and local laws and regulations governing development, production, labor standards, occupational health, waste disposal, the use of toxic substances, environmental regulations, mine safety and other matters. The Company is subject to potential risks and liabilities occurring as a result of mineral exploration and production. Insurance against environmental risk (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is not generally available to the Company (or to other companies in the minerals industry) at a reasonable price. To the extent that the Company becomes subject to environmental liabilities, the satisfaction of any such liabilities would reduce funds otherwise available to the Company and could have a material adverse effect on the Company. Laws and regulations intended to ensure the protection of the environment are constantly changing and are generally becoming more restrictive.
All operating and exploration plans have been made in consideration of existing governmental regulations. Regulations that most affect operations are related to surface water quality and access to public lands. An approved plan of operations (POO) and a financial bond are usually required before exploration or mining activities can be conducted on public land that is administered by the United States Bureau of Land Management (BLM) or United States Forest Service (USFS).
The New Jersey Mine, Golden Chest Mine, and other nearby properties are part of the expanded Bunker Hill Superfund Site. Current plans for expanded cleanup do not include any NJMC projects. There is no known evidence that previous operations at the New Jersey Mine (prior to 1910) caused any groundwater or surface water pollution or discharged any tailings into the South Fork of the Coeur d'Alene River; however, it is possible that such evidence could surface. Should such a liability emerge for the Company, its exposure would likely be to clean up or cover old mine tailings that may have washed downstream from upstream mining operations. There are no mineral processing tailings deposits at the Golden Chest Mine. However, at least two old adits have small water discharges. The Company could conceivably be required to conduct cleanup operations at its own expense, however, the Environmental Protection Agency’s (EPA) Record of Decision for the Bunker Hill Mining and Metallurgical Complex Operating Unit 3 does not include any cleanup activities at the Company’s projects. Recently, the EPA has proposed a new cleanup plan that greatly increases the number of historic mine sites to be reclaimed, however, the plan has not been approved. NJMC has not received any notifications that it could be liable for any environmental cleanup.
Costs and Effects of Compliance with Environmental Laws (Federal, State and Local)
No major Federal permits are required for the Golden Chest and New Jersey Mines because the operations are on private land and there are no process discharges to surface waters. However, any exploration program conducted by the Company on unpatented mining claims, usually administered by the BLM or USFS, requires a POO to be submitted. The Company’s exploration programs on public land can be delayed for significant periods of time (one to two years) because of the slow permitting process applied by the USFS. The Company believes that such permitting delays are caused by insufficient manpower, complicated regulations, competing priorities, and sympathy for environmental groups who oppose all mining projects.
The Company is also subject to the rules of the U.S. Department of Labor, Mine Safety and Health Administration (MSHA) for the New Jersey and Golden Chest operations. When an underground mine or mill is operating, MSHA performs a series of regular quarterly inspections to verify compliance with mine safety laws, and can assess financial penalties for violations of MSHA regulations. A typical mine citation order for a violation that is not significant or substantial is about $200.
The New Jersey Mine and Mill have two important State of Idaho permits. The first is an Idaho Cyanidation Permit and the second is a reclamation plan for surface mining operations. No permit is required for the current flotation process as
there is no discharge of water to surface waters and the tailings impoundment is less than 30 feet high from toe to crest in height. An Idaho cyanidation permit was granted October 10, 1995 [No. CN-000027]. Construction of the Concentrate Leach Plant (CLP) at the New Jersey Mill was completed in November of 2007. The Idaho Cyanidation permit requires quarterly surface water and groundwater monitoring during the operation of the CLP. NJMC estimates the cost of water-monitoring associated with the CLP to be approximately $6,000 per year.
The Idaho Department of Lands (IDL) approved a surface mining reclamation plan for the New Jersey Mine in 1993. The plan calls for grading of steep fill slopes and planting of vegetation on the area disturbed by the open pit mine. NJMC pays an annual reclamation fee of $133 to the Idaho Department of Lands for surface disturbance associated with the New Jersey Mine open pit. The Company has estimated its costs to reclaim the New Jersey Mine and Mill site to be $96,600. The Company submitted a reclamation plan to the IDL for its current open pit mining operation at the Golden Chest Mine. The plan was approved and the Company was required to post a reclamation bond of $103,320. This plan also calls for the grading of steep fill slopes and re-vegetation of disturbed land as well as erosion control measures utilizing best practices.
When the Company plans an exploration drilling program on public lands, it must submit a POO to either the BLM or USFS. Compilation of the plan can take several days of professional time and a reclamation bond is usually required to start drilling once the plan is approved. Bond costs vary directly with surface disturbance area, but a small, single set-up drilling program usually requires a bond amount of approximately $5,000. If a plan requires road building, the bond amount can increase significantly. Upon completion of site reclamation and approval by the managing agency, the bond is returned to the Company.
The Company complies with local building codes and ordinances as required by law.
Number of Total Employees and Number of Full Time Employees
The Company's total number of full time employees is 31.
REPORTS TO SECURITY HOLDERS
The Company is not required to deliver an annual report to shareholders, however, it plans to deliver an annual report to shareholders in 2021. The annual report will contain audited financial statements. The Company may also rely on the Internet to deliver annual reports to shareholders.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission and SEC.
The Company maintains a website where recent press releases and other information can be found. A link to the Company’s filings with the SEC is provided on the Company’s website www.newjerseymining.com.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTIES
Figure 1 - Project Location Map
GOLDEN CHEST MINE
Figure 1 - Photo of Golden Chest Mine in February 2020
Property Location
The Golden Chest Mine is comprised of an underground mine, an open pit mine, and an exploration project located about 1.5 miles east of Murray, Idaho, comprised of 25 patented mining claims (280 acres) and 90 unpatented claims (1,390 acres). The site is along Forest Highway 9 and is accessible by several improved dirt roads from the paved highway. A three-phase power line was installed at the property in 2014 with power supplied by Avista Utilities.
Property Ownership
NJMC owns 100% of the Golden Chest LLC (owner of the Golden Chest Mine). The Company consolidated its ownership in December 2015, purchasing Marathon Gold Corporation’s (“Marathon”) 52.22% stake in Golden Chest LLC for $180,000 along with a 2% NSR on production from the Golden Chest property, as well as an adjacent Area of Interest. Golden Chest LLC purchased the mine from Metaline Contact Mines and J.W. Beasley Interests for $3.75 million.
Property History
The Golden Chest Mine was developed in the late 1800’s through the early 1900’s as part of the first gold production from the Coeur d’Alene Mining District. Historical accounts vary, but the district is believed to have produced approximately 300,000 ounces of gold from placer sources. It is estimated that the historic hard rock mining operations on the Golden Chest property produced approximately 65,000 ounces of gold, primarily from shallow, underground, high-grade veins. The Golden Chest Mine is considered to be the largest historic lode producer of gold in northern Idaho.
Modern exploration of the Golden Chest area began in the late 1970’s with several companies, including Cominco-American and Golden Chest Inc. (“GCI”), targeting gold and massive sulfides. Drill tests by GCI included a 200-foot hole from surface that intersected a 60-foot zone containing multiple low-grade gold-bearing quartz veins.
Newmont Exploration Ltd. followed GCI’s discovery by evaluating the veins for bulk mineable potential in the late-1980s. A geochemical survey yielded soil samples from the mine area that were anomalous in both gold and arsenic, indicating a well-developed vein system. Newmont then drilled 35 shallow reverse-circulation and five core holes, establishing an historic resource, most of which is related to the Idaho Vein system on the southern end of the property.
Present Condition, Work Completed, and Exploration Plans
Exploration & Development by NJMC & Golden Chest LLC
NJMC first leased the property in 2003, then explored, drilled, and developed it over subsequent years, producing 8,400 tonnes of ore averaging 6.9 gpt gold, all of which was processed at its New Jersey Mill for total production of nearly 2,000 ounces of gold. From 2004 through 2008, the Company completed an exploration core drilling program at the Golden Chest totaling 3,415 meters of core during that period, successfully extending the Idaho Vein below the No. 3 Level.
NJMC connected the historic No. 3 Level to the surface by driving a 440-meter ramp (the “North Ramp”), which was completed in 2008.
In 2010, NJMC terminated its operating leases to form Golden Chest LLC with Marathon. NJMC contributed certain mining claims, all geological data, and mining equipment to the venture, while Marathon contributed $4-million cash. As Marathon is a Canadian issuer, the joint venture operated and issued technical disclosures in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).
In 2011, Golden Chest LLC completed the most aggressive exploration project in the history of the property, totaling 11,300 meters of surface drilling. Other work completed included the construction of a new core shed, construction of new roads, surface geological work, surface and underground surveying, underground exploration drifting, and mine rehabilitation. In 2012, Golden Chest LLC completed an additional 7,000 meters of drilling and exploration drifting on the Popcorn Vein. Based on the results of those work programs, Golden Chest LLC delineated an updated gold resource and filed a technical report in compliance with NI 43-101.
The Juniper Lease & Mine Modernization
In September 2013, the Skookum Shoot portion of the Golden Chest property was leased to Juniper Mining Company, which later reassigned the lease to Gold Hill, an affiliate company. Gold Hill began construction in Q3 2014, spending an estimated $7 to $9-million on mine development and infrastructure, building a modern gold mine that reached production in May 2015. Mining activities continued until September 2015 when Gold Hill ceased operations and terminated its lease, forfeiting the mine and infrastructure back to Golden Chest LLC.
During the lease, NJMC processed Golden Chest ore at its New Jersey Mill, earning cash from milling fees and its share of a 2% net smelter return (“NSR”) royalty on gold production. In total, Gold Hill mined 40,840 dry metric tonnes of ore at an average grade of 6.70 gpt gold, resulting in production of approximately 8,000 ounces of gold.
Current Underground Operations
During 2020, NJMC mined a total of 12,190 tonnes of ore at an average grade of 5.98 gpt gold. This production came from the 888, 842, and 836 stopes. Underhand drift and fill is the mining method and cemented rock fill (CRF) utilizing waste rock mixed with cement slurry is used for backfill. A total of 1,828 cubic meters of backfill were placed during the year and 75 meters of development were completed as well. The company added a second 2-cubic meter LHD and a second drill jumbo in the third quarter. A second mining crew was added in the third quarter to complement the added equipment and increase the mining rate in the stopes and begin the downward development of the Main Access Ramp (MAR) to lower ore reserves. A wireless communication system was also installed at the mine which will resulted in increased operational efficiency and safety.
Current Open-Pit Operations
In 2020, NJMC continued its open pit mining operation which commenced in August of 2016. Mining advanced from the 1059 bench to the 1032 bench. A total of 27,690 tonnes of ore at average grade of 1.73 gpt gold and 248,013 tonnes of waste were mined during the year resulting in stripping ratio of 9.1. Ore tonnes and grade in the Klondike Pit were lower than expected because of historic stopes in the Klondike where high grade material had been mined out by the old-timers. These stopes were unmapped so therefore unexpected.
Exploration Plans
Modern exploration, including nearly 30,000 meters of drilling, reveals six NW-trending ore shoots at Golden Chest that demonstrate strong periodicity, consistent width and spacing, along the Idaho Fault. Most historic production came from the northernmost of these shoots, the Katie-Dora and the Klondike. Excellent mineralization potential remains in unmined portions of the northern shoots as well as in the unmined Paymaster and Joe Dandy shoots to the south. The Company’s core drilling rig was restarted in the fourth quarter of 2020 with drilling on the north end of the property in the Katie-Dora area. This hole intercepted three narrow quartz veins with an average true thickness of 20 centimeters with gold grades ranging from 10 to 75 gpt gold.
Core drilling totaling 6,000 meters is planned for 2021 using both a contractor drill rig and the company’s drill rig. Drilling is planned to explore the mineralized envelope around the Idaho fault at depth below existing drill intercepts in the Joe Dandy, Paymaster, and Skookum areas.
Present Condition of Plant & Equipment
During the lease, Gold Hill made many improvements to the Golden Chest property including approximately 1,000 meters of underground development at a nominal cross section of 4 meters by 4 meters, installation of a 3-phase electrical service, and a new haul road to keep mine traffic separate from employee and visitor traffic. NJMC constructed a 2,100 square-foot steel-frame shop building in 2020 near the main portal. A 2,500 square-foot steel-clad pole building was constructed in 2011 and is used primarily for office space and core logging. A 600 square-foot steel-clad pole building, constructed by NJMC in 2005, is also present near the northern ramp portal.
Geology & Mineralization
Gold mineralization occurs in veins associated with multiple faulting and folding events in the Coeur d’Alene Mining District. The mineralization occurs as gold- quartz veins associated with an orogenic deposit type. The orogenic system at the Golden Chest appears to have an association with igneous rock activity. Hence, the vein deposits may be described as intrusion-related orogenic gold. The principal vein being exploited at the Golden Chest Mine is associated with the Idaho Fault, which juxtaposes the quartzites of the upper Prichard Formation against finer-grained argillites, also of the upper Prichard Formation.
Veins occur adjacent to the Idaho Fault both in its footwall, and in its hangingwall. The mineralization occurs in two types of quartz veins, banded and massive. These veins are generally conformable to bedding in the Proterozoic age Prichard Formation. The banded veins, which occur primarily in argillite, contain, pyrite, arsenopyrite, galena, sphalerite and visible gold. Thicker, massive veins occur in quartzite and contain pyrite, galena, chalcopyrite, sphalerite, scheelite and visible gold.
The Company completed a mine reserve estimate for the year ending December 31, 2020. A block model was completed using Vulcan software and an inverse-distance squared methodology for the underground mine. The underground reserves calculated are entirely in the Skookum shoot where sample density and mining experience gave enough confidence that grades could be reasonably predicted. The composite database consisted of 1,028 muck sample composites on 2.7 meter centers (each round is sampled by a miner), 691 jackleg longhole samples on 1.22 meter centers, and 6,670 core hole composites composited on 3 meter centers using a run length method. Economic parameters such as mining costs, milling costs, metallurgical recovery, mining dilution, and gold payment under smelter contracts were obtained from the Company’s recent operating history and applied to the reserve calculation exercise.
The reserve was calculated by mining engineer Andrew Brackebusch, EIT under the supervision of Grant Brackebusch, P.E. who is the qualified person.
Classification
Tonnes
Gold Grade (gpt)
Proven
42,500
5.17
NEW JERSEY MILL
Property Location
The New Jersey Mill is a fully-permitted, 360-tonne per day, flotation mill and concentrate leach plant (“CLP”) located two miles east of Kellogg, Idaho, in the Coeur d'Alene Mining District. The mill is located on the same property as the New Jersey Mine, adjacent to U.S. Interstate Highway 90 and easily accessed year-round by local roads. Three-phase electrical power is supplied to the New Jersey Mill by Avista Utilities.
Project Ownership
In 2011, NJMC signed a joint venture (“JV”) agreement with United Mine Services (“UMS”), a wholly-owned subsidiary of United Silver Corporation, to increase the capacity of the New Jersey Mill. UMS funded the mill expansion in return for a 35% interest in JV assets plus the right to process 7,000 tonnes of its ore per month. NJMC is the JV manager and retains a 65% interest in JV assets as well as the right to process its own ore at the rate of 3,000 tonnes per month and to allocate unused and excess capacity in its role as manager. The property covered by the JV agreement includes the crushing circuit, grinding circuit, gravity circuit, flotation circuit, CLP, buildings and surface rights only over the patented mill site claim. Unpatented mill site claims are also part of the JV.
Present Condition of Plant & Equipment
Mill Expansion and Crescent Ore Processing
The mill expansion was completed in 2012, rendering the mill capable of processing 360 tonnes of sulfide ore per day to produce a single flotation concentrate. The expansion cost approximately $3.2 million, all of which was funded by UMS under terms of the JV (Ex. 10.1). The expansion project included the installation of a new cone crusher, a new fine ore bin, new conveyors, a new 2.4-meter by 4.0-meter ball mill, additional flotation cells, a new paste thickener, associated pumps, and a new building. Subsequent to the mill expansion, the New Jersey Mill processed 8,470 dry tonnes of silver ore from the Crescent Mine before operations ended.
In April 2014, Hale Capital Partners, through its subsidiary Crescent Silver LLC (“Crescent”), acquired the assets of UMS, including its stake in the New Jersey Mill JV, in a consensual foreclosure process. Therefore, Crescent is now the NJMC’s joint venture partner at the New Jersey Mill.
Golden Chest Ore Processing
In September 2013, the Skookum Shoot portion of the Golden Chest Mine was leased to Juniper Resources LLC which, through its affiliate companies, developed a modern gold mine that reached full production in May 2015. NJMC processed Golden Chest ore at its New Jersey Mill, earning cash from milling fees and its share of a 2-percent net smelter return royalty on gold production.
From December 2014 through September 2015, 40,840 dry tonnes from the Golden Chest Mine were successfully processed at the New Jersey Mill producing approximately 8,000 ounces of gold.
Current Ore Processing Operations
NJMC now has 100-percent ownership of the Golden Chest Mine. In October 2016, the Company resumed operations at the New Jersey Mill, processing ore extracted from open and underground of the Golden Chest. In 2020, the New Jersey Mill processed 39,880 tonnes at an average head grade of 3.03 gpt gold with 88% gold recovery. Since restarting operations at the Golden Chest in October 2016, the Company has milled a total of 162,674 tonnes.
The mill recycles process water and utilizes a paste tailings disposal process patented by NJMC founder Fred Brackebusch to minimize impacts to the environment. By implementing paste tailings processing methods, NJMC is able to recycle process water and prevent the discharge of process water to surface waters. At full capacity, this method saves more than 50 million gallons of water per year. NJMC was recognized as a “Pollution Prevention Champion” by the Idaho Department of Environmental Quality in 2014 for its efforts to reduce pollution at the mill. The Company is planning to permit an expansion of its existing tailings storage facility, TSF #1.
As of December 31, 2020, the Company had a net capital cost of $4,040,327 associated with the New Jersey Mill.
BUTTE HIGHLANDS PROJECT
Property Location
In January 2016, NJMC purchased a 50% interest in Butte Highlands Joint Venture LLC (“BHJV”) from Timberline Resources Corporation (“Timberline”). BHJV owns the Butte Highlands Gold Project, located 15 miles south of Butte, Montana, within a gold-producing region that includes several large gold deposits. The property can be accessed via State Highway 2 and county and USFS roads. Electricity and water are available on the property.
Property Ownership
The Butte Highlands property covers approximately 135 acres and includes 11 patented claims. All of the private lands within the Butte Highlands property are patented lode and placer claims. BHJV is responsible for paying Montana state property taxes on all patented lands and for paying annual BLM maintenance fees on any unpatented mining claims.
Butte Highlands Joint Venture
In 2009, Timberline formed a 50/50 joint venture, the BHJV, with Highland Mining LLC (“Highland”) for the purpose of developing and mining the Butte Highlands property, with Highland to fund all mine development costs through to commercial production. In 2012, Montana State Gold Company LLC (“MSGC”) purchased Highland, assuming its project loan and its funding commitment.
NJMC purchased Timberline’s 50% “carried to production” interest in BHJV in 2016 for total consideration of $435,000 with Highland funding all development costs and NJMC’s 50% share of costs to be paid from proceeds of future mine production. Proceeds are to be split on an 80/20 basis (to Highland and NJMC, respectively) until payback is reached, after which proceeds will be split evenly.
Property History
The Butte Highlands gold mine was an historic lode mine that produced an estimated 60,000 ounces of gold from 1937 until the War Production Board forced its closure at the onset of WWII. The property was later explored by Battle Mountain, Placer Dome, ASARCO, and Orvana in the 1980’s and 1990’s which, in total, drilled more than 30,000 meters at Butte Highlands, prior to its acquisition by Timberline in 2007.
In 2009, Timberline formed a 50/50 joint venture with Highland to create BHJV for the purpose of developing and mining the property. In 2009 and 2010, Timberline conducted surface exploration, drilling, and permitting work as Highland began building surface and underground infrastructure.
In 2011, BHJV completed an underground exploration ramp and a 16,000-meter underground core drilling program to support mine modeling, focusing on the upper portion of the “Old Mill Block” which has dimensions of approximately 85 meters along strike, 335 meters down dip, and a mineralized thickness of 2.5 to 4.5 meters. The program returned many significant mineralized intercepts, including a highlight of 4.4 meters grading 232 gpt gold.
A NI 43-101 compliant technical report for Butte Highlands was completed in May 2013 by Mine Development Associates of Reno, Nevada.
The project has experienced significant timeline delays due, in part, to miscalculations of the permitting process and other technical issues. Permitting advanced more effectively from 2013 to 2015 with the following critical milestones successfully achieved:
•In July 2013, the Montana Department of Environmental Quality (“DEQ”) issued the final Montana Pollutant Discharge Elimination System (“MPDES”) water discharge permit;
•In January 2015, the Montana DEQ authorized BHJV to construct and operate an underground gold mine by publishing positive Record of Decision (“ROD”) on Final Environmental Impact Statement (“EIS”);
•In October 2015, the U.S. Forest Service (“USFS”) released its Final Decision Notice on haul road with a Finding of No Significant Impacts.
These milestones represent the final major hurdles to the receipt of necessary permits allowing the project to proceed. Final construction designs and completion of work will be required, along with bond payments, before final authority is granted to proceed with the proposed operation. Once final designs and road construction are complete, the USFS will grant authority to use local USFS roads for material haulage. Upon payment of the reclamation bond, the Hard Rock Operating Permit will be granted by the Montana DEQ.
Present Condition, Work Completed, and Exploration Plans
Prior to NJMC’s purchase of its stake in BHJV, the BHJV partners envisioned a 4 to 5-year mine life with estimated annual production of 30,000 to 35,000 ounces of gold. Mining was proposed to be conducted by cut and fill methods at a rate of 400 tons per day with a cut-off grade estimated at 4.8 gpt gold. Waste rock will be mixed with portland cement and placed underground as cemented rock backfill (CRF) in the mined ore zones to promote geotechnical stability. Preliminary metallurgical testwork indicates recoveries of approximately 85% of the contained gold in a flotation concentrate and 20% of the mass reporting to a rougher concentrate.
NJMC anticipates progress in regard to BHJV (not the mine or operations) this year and is cooperating with its partner to advance and or consolidate ownership in 2021. The partner maintains management control and all plans are subject to their approval and direction.
Present Condition of Plant & Equipment
Since 2009 Highland has invested nearly $40-million at Butte Highlands building a modern gold mine, including nearly 1.6 kilometers of underground mine development and construction of surface facilities, all of which are located on private lands owned by BHJV.
Geology & Mineralization
Gold mineralization at Butte Highlands is hosted primarily in lower Paleozoic Wolsey Shale with higher-grade mineralization occurring within sediments proximal to diorite sills and dikes. The project is within a favorable geologic domain that has hosted several multi-million-ounce gold deposits. There are currently no mineral reserves as defined by the SEC at Butte Highlands Project.
NEW JERSEY MINE PROJECT
Property Location
The New Jersey Mine is an underground gold mine located two miles east of Kellogg, Idaho, in the Coeur d'Alene Mining District. The mine is adjacent to U.S. Interstate Highway 90 and is easily accessed year-round by local roads. The New Jersey Mill is located on the same property. Three-phase electrical power is supplied to the New Jersey Mill by Avista Utilities.
Property Ownership
At the New Jersey Mine and Mill complex, the Company owns 102 acres of private land with surface and mineral rights, 108 acres of private land with mineral rights only, 40 acres of private land with surface rights only, and approximately 130 acres of unpatented mining claims. The unpatented claims are on federal land administered by the BLM. The gold-bearing Coleman vein system, including the underground workings and the Coleman pit, are located on the patented mining claims that are wholly-owned by the Company and not part of the New Mill Joint Venture.
Property History
In the late 1800’s and early 1900’s, New Jersey Mining and Milling (an unrelated company) drove more than 760 meters of development workings on the Coleman Vein and its northwest branch, including drifts, crosscuts, shafts, and raises. The historic development also included a 10-stamp gravity mill that was operated for a short period.
Present Condition, Work Completed, and Exploration Plans
Since 2001, NJMC has drilled 14 holes totaling 1,765 meters to explore the Coleman Vein and associated zones. Drilling confirmed vein system continuity and resulted in the discovery of the broad, low grade (averaging about 0.70 gpt gold) Grenfel zone. The Company’s best intercept of the Coleman vein assayed 2.76 gpt gold over 12.5 meters, which included 6.80 gpt gold over 2.5 meters.
In 2008, the Company performed underground exploration on the Coleman Vein at the 740 level, including 84 meters of drifting, with 20 meters along the vein before it was displaced by a fault. The Company also drill-tested the Scotch Thistle prospect, but a 400-meter program encountered silicification and associated alterations with no significant gold mineralization. There are at least 14 gold prospects within or near the New Jersey Mine.
In 2010, a raise was driven upward on the 740 level to explore a narrow high-grade vein that crosscut the main Coleman Vein. This raise was driven 12 meters vertically, leading to the extraction of 367 tonnes that assayed 2.68 gpt gold in processing at the New Jersey Mill.
NJMC has not conducted material work at the New Jersey Mine since 2010, and has no plans for exploration in 2021, With the New Jersey Mill actively processing ores from the Golden Chest Mine and the increase in the gold price, the potential economics of nearby gold prospects has improved significantly.
While the Company has conducted significant drilling, underground development, and even limited gold production from the New Jersey Mine, the project has no mineral reserves as recognized by the SEC.
As of December 31, 2020, the Company had a capitalized development plus investment cost of $248,289 associated with the mine.
Geology & Mineralization
The New Jersey Mine area is underlain by argillites and quartzites of the Proterozoic-age Prichard Formation, which commonly hosts gold mineralization regionally. The property occurs adjacent to and north of the major Osburn Fault, an important geological structure of the Coeur d’Alene Mining District. The Prichard Formation is divided into nine units of alternating argillites, siltites, and quartzites; the units exposed in the New Jersey Mine area appear to belong to the lower members. Gold mineralization is associated with sulfide-bearing quartz veins that cut the bedding in Prichard argillite and quartzite. Associated sulfides are pyrite, arsenopyrite, chalcopyrite, low-silver tennantite, galena, and sphalerite.
ALDER GULCH PROJECT
Property Location
The Alder Gulch Project is located just north of the town of Murray in Shoshone County, Idaho. The property can be accessed via dirt road from paved Forest Highway 9. The property is a gold exploration project without known reserves.
Property Ownership
The Alder Gulch Project is comprised of 368 acres of patented mining claims having both surface and mineral rights. There is no underlying royalty attached to the Alder Gulch property. The acquisition of this project was funded by the issuance of secured convertible promissory notes (the “Notes”) with an aggregate principal amount of US $885,000. The land is the security underlying the Notes. The outstanding principal amount of the Notes will bear interest at an annual rate of 8.0% for a term of three years. The principal amount of the Notes will be convertible at the option of the investors for common shares of the Company at a price of US $0.18 for per common share prior to the maturity date of the Notes. Interest only payments shall be made on the Notes payable and the Company may prepay the Notes in whole or in part without written consent of the investors.
Property History
The Alder Gulch land was originally patented in the 1880’s due to its gold potential and has changed ownership only a couple of times since Idaho statehood in 1890. It was held in the same family for nearly 100 years. Timber harvesting was the main activity occurring on the property in the last century. There is no evidence of modern mineral exploration on the property, but there is evidence of placer mining of gravel deposits left by an ancient river channel along the hillside. There is also evidence of historic prospect pits and exploration adits on the Alder Gulch property.
Present Condition, Work Completed, and Exploration Plans
In 2020, the Company conducted surface sampling, geologic mapping, trenching, and a ground-based magnetic survey. Also in 2020, a LIDAR survey was completed from Alder Gulch to the Golden Chest providing a detailed contour map of the surface on 1-meter intervals. This mapping will be an important tool for future gold exploration. A minor amount of logging also took place on the property in 2020. The Company is planning more exploration in 2021 including geologic mapping, trenching, sampling, geophysics, and core drilling.
Geology and Mineralization
The bedrock geology at the Alder Gulch Project is composed of siltite, argillite and quartzite belonging to the Proterozoic Prichard Formation and intrusive rocks of unknown age. A major structural feature is the Murray Peak Fault, a northerly trending, high-angle reverse fault which bisects the property. The ancient stream channel of auriferous gravels, the original justification for granting of the mining patent, extends across the Alder Gulch land from the northeast to the southwest. Gold mineralization is exposed through the gravel cover in numerous prospects, like on the Evans claim where a hydrothermally altered gold bearing intrusive sill barely outcrops above the gravels. The sill contains disseminated pyrite and galena with numerous quartz vein stringers mineralized with chalcopyrite, galena and gold bearing tellurides. A select sample from this sill assayed 4.75 gpt gold, 15.65 gpt silver, 2.2 % lead and 7.96 ppm tellurium.
BUCKSKIN PROJECT
Property Location
The Buckskin Project is located 1.5 kilometers north of the town of Murray in Shoshone County, Idaho. The property can be accessed via dirt roads from paved Forest Highway 9. The property is a gold exploration project without known reserves.
Property Ownership
The Buckskin Project is comprised of 12 patented mining claims covering 218 acres and 73 unpatented mining claims covering approximately 1,367 acres. The 218 acres of patented mining claims was acquired through an exploration and mining lease. The Buckskin Lease term runs for 7.5 years and includes annual payments of $12,000 and a 2-percent NSR on future production from the property. If the property is placed into production, the lease will continue as long as production is underway and also includes a right of first refusal for NJMC to purchase the property, and the lease payments are treated as an advance payment on the royalty. The unpatented lode claims adjacent to the core group of claims are wholly owned by the Company and not subject to a royalty. These claims require an annual claim fee payment to the BLM.
Property History
The Buckskin property was mined intermittently for both gold and base metals in the early 20th century with most of the mining completed in the 1930’s. The property contains numerous old workings, most of which are inaccessible. A mill was located on the property but historic production is unknown.
Present Condition, Work Completed, and Exploration Plans
In 2019, the Company conducted exploration efforts in the Buckskin area with trenching mapping/sampling, road building, reopening historic underground workings, and underground mapping/sampling. The Company conducted additional field work in 2020 such as mapping, trenching, and ground based magnetic surveys. More geophysics and sampling are planned for 2021 and drilling may follow.
Geology & Mineralization
The bedrock geology at the Buckskin Project are largely quartzites of the Burke Formation and argillite-siltite of the Prichard Formation. A major structural feature is the Murray Peak Fault, a northerly trending, high-angle reverse fault. Historical prospects and adits are developed along northerly trending shear zones that are likely related to the Murray Peak Fault, that contain and silica flooded rock. Gold mineralization is found in quartz veins and is associated with sulfide minerals including pyrite, chalcopyrite and galena. Anomalous tungsten was also detected in assays.
BUTTE GULCH PROJECT
Property Location
The Butte Gulch Project is located 3 kilometers east of the town of Murray in Shoshone County, Idaho. The project lies immediately adjacent to the east side of Golden Chest Mine. It is accessed by paved Forest Highway 9, then on secondary dirt roads. The property is an exploration property without known reserves.
Property Ownership
The Butte Gulch Project is comprised of 60 acres of both patented surface and mineral rights, 117 acres of patented mineral rights, and 602 acres of unpatented claims. The patented surface and mineral rights were purchased from a third party in mid-2018 and any lode production from the patented claims is subject to a 2% NSR. The patented claims where the Company only owns the lode mineral rights can be placer mined by the current owner who was the vendor of the property. NJMC holds a first right of refusal for the purchase of the surface rights not already owned by the Company. The unpatented lode claims are wholly owned by the Company and not subject to a royalty.
Property History
Butte Gulch has been placer mined by several different operations over the last century however; there are no gold production records from these historic placer mining efforts. There is evidence of historic lode prospecting in the form of surface pits and exploration adits on the property, but the Company is not aware of any modern exploration occurring on the property.
Present Condition, Work Completed, and Exploration Plans
The property is an exploration stage property adjacent to the Golden Chest Mine. The property vendor has retained the placer mining rights in the bottom of the drainage on the patented claims and conducted placer mining activity last year. NJMC has no affiliation or connection with the placer mining operation. Two historic adits have been reopened for mapping and sampling. Additionally, areas have been rock sampled where current placer operations have uncovered altered bedrock. More geologic fieldwork is planned for the upcoming 2021 season to explore for gold mineralization.
Geology & Mineralization
Outcrops in the Butte Gulch area are dominantly argillite, siltite and quartzite units that belong to the Prichard Formation. The hinge line of a major regional scale fold called the Trout Creek Anticline traverses the property. Both northwest and northeast trending quartz veins containing pyrite, galena and chalcopyrite have been identified with anomalous silver mineralization.
GIANT LEDGE PROJECT
Property Location
The Giant Ledge Project is located six kilometers east of the town of Murray in Shoshone County, Idaho. The project is situated in Granite Gulch and is accessed by paved Forest Highway 9 and secondary dirt roads. It is an exploration project without known ore reserves.
Property Ownership
The Company’s land position consists of 57 unpatented lode claims covering an area of 1,119 acres. The claim group includes 3 separate claim blocks; Giant Ledge, Porphyry and Bear. The unpatented lode claims are wholly owned by the Company and not subject to a royalty. These claims require an annual claim fee payment to the BLM.
Property History
The Giant Ledge Project consists of several historical prospected areas with lead, copper and gold mineralization in and along the contact of the igneous intrusive. The Giant Ledge Mine was active in the 1920’s when a 122 meter deep shaft was sunk and about 450 meters of drift development was completed. A flotation mill was erected and a minor amount of undisclosed production was achieved. Bunker Hill Mining Company also examined and mapped the mine workings in the 1950’s. Sunshine Mining Company conducted exploration at the Giant Ledge in the mid-1980’s and drilled two core holes. In 2008, the Company obtained core from Sunshine’s drilling program, and it was re-logged and assayed. The best of the mineralization showed 4.6 meters of 0.908 gpt gold and 0.24% combined copper and lead. An extensive soil sampling program was completed in conjunction with a VLF and magnetometer survey.
Present Condition, Work Completed, and Exploration Plans
The property is an exploration stage prospect east of the Golden Chest Mine. Although no significant work was performed at Giant Ledge during the 2009-2020 period, the Company is preparing to resume exploration efforts in 2021.
Geology & Mineralization
The primary structural feature on the Giant Ledge property is the French Gulch fault. The fault contact extends through the property, separating monzonitic intrusive rocks on the west, from Prichard Formation’s argillite and quartzites on the east. Structurally controlled mineralization is found in both, the contact between argillite-quartzite sediments and in the monzonite. Seams and disseminations of auriferous pyrite, galena and chalcopyrite are found up to 10 meters into the footwall and hangingwall.
POTOSI PROPERTY
Property Location
The Potosi Project is located 4.4 kilometers southwest of the town of Murray in Shoshone County, Idaho. It is an exploration project without known ore reserves. The project is accessed by the paved Beaver Creek county road and other secondary dirt roads.
Property Ownership
NJMC acquired fee simple title to of 3 patented lode claims as part of the 2018 Butte Gulch land acquisition. The 3 patented claims cover a 71 acre area.
Property History
Potosi has been placer mined in several different operations over the last century however, there is no gold production records from these historic placer mining efforts. There is evidence of historic lode prospecting in the form of surface pits and exploration adits on the property, but the Company is not aware of any modern lode exploration occurring on the property.
Present Condition, Work Completed, and Exploration Plans
Minor reclamation work, road improvements and timber harvesting was conducted in 2019, In 2020, the Company completed the remaining reclamation of surface disturbance caused by a previous operator. There are no exploration plans for 2021.
Geology & Mineralization
Host rocks at the property are siltites and argillites of the Prichard Formation. Geologic mapping suggests fault structures associated with the Crown Point Shear Zone may cross the property.
McKINLEY-MONARCH PROJECT
Property Location
The McKinley-Monarch property encompasses a number of historic prospects in central Idaho and extends, from the town of Riggins northward for nearly five miles. The property is an early-stage, gold exploration project accessed via public and private dirt roads off of US Highway 95. The property is without known ore reserves.
Property Ownership
In 2013, NJMC acquired the McKinley-Monarch property through its acquisition of Idaho Champion Resources (“ICR”). The Company also holds 28 unpatented claims, totaling 560 acres, adjacent the 4 patented claims of the McKinley Mine (not owned by the Company). These claims require an annual claim fee payment to the BLM.
Property History
The McKinley-Monarch property is located in the Simpson Mining District and was first prospected in 1891. The property was subject to intermittent mining activity until it was shut down during WWII. The property remained largely dormant until Hunt Energy executed a sampling program in the late 1970’s and Kennecott Exploration completed a property evaluation in the early-1990s. In 2012, ICR started surface exploration of the property, including a ground magnetic survey, before the acquisition by NJMC in 2013.
ICR previously conducted ground magnetic survey over a large portion of the property, approximately 2.4 by 5.6 kilometers. The survey indicates that potentially major structures passing through the district are associated with some degree of demagnetization. It also appears to indicate the potential mineralization at the McKinley-Monarch property along with several potential target areas, including historic mines and prospects that extend for several miles along the known trend.
Present Condition, Work Completed, and Exploration Plans
Surface mapping and sampling by NJMC identified an area with significant gold mineralization in outcrop: the Monarch Zone, about one kilometer S-SW of the McKinley Mine. At the Monarch Zone, several samples returned high-grade gold with values up to 26 gpt. There are no exploration plans for 2021.
Geology and Mineralization
The McKinley-Monarch project is located within the rocks of the Riggins and Seven Devils Groups, a remnant of a subducted island-arc complex. The metasediments of the accreted Riggins and Seven Devils Groups are considered to be the source of coarse gold found in the nearby historic placer operations. Mapping and geophysics both suggest major northerly trending fault structures cut these metasediments. Rock alteration consists of carbonization and silicification. Gold mineralization is associated with auriferous pyrite and quartz-carbonate veining.
EASTERN STAR PROJECT
Property Location
The Eastern Star property is located about four miles west of Elk City in central Idaho. It consists of 11 patented lode mining claims (220 acres) acquired by NJMC in 2014 and an additional 45 unpatented lode claims (413 acres) located in 2018. Eastern Star is an early-stage exploration project with no mineral reserves as recognized by the SEC. The property is accessible via improved dirt roads off of Idaho State Highway 14.
Property Ownership
NJMC acquired fee simple title to the 11 patented claims (220 acres) from Premium Exploration Inc. (“Premium”) for $250,817 in 2014. The Company also holds the 45 unpatented lode claims (413 acres) surrounding the core group of patented claims. All of the Eastern Star claims are wholly owned by the Company and not subject to a royalty. The unpatented claims require an annual claim fee payment to the BLM.
Property History
The Elk City Mining District is an historic gold mining region dating back to the 1860s that once supported more than 20 underground mines, including the Eastern Star, along with placer dredging operations. Modern exploration in the district by companies including Cypress-Amax, Kinross Gold, and Bema Gold has focused on near-surface bulk tonnage gold potential, while the many smaller-scale high-grade gold occurrences have largely been ignored.
In recent years, prior operator Premium collected grab samples from three separate locations, representing nearly one-half mile of mineralized trend. Of 25 grab samples, nine returned gold values greater than 16.9 gpt. Premium then drilled three core holes at Eastern Star, targeting a bulk mineable gold deposit.
Present Condition, Work Completed, and Exploration Plans
In 2014, The Company completed mapping, sampling and trenching programs. Company geologists identified several quartz veins that had been exploited by historic prospect pits and small shafts. Surface grab samples from these veins confirmed the widespread presence of high-grade gold within mineralized quartz vein material.
The Company performed an 880-meter trenching program. The channel samples intercepted notable gold mineralization including contiguous samples up to 10.4 meters of 2.25 gpt gold and 6.4 meters of 7.97 gpt gold (which included 4.3 meters of 11.34 gpt gold).
Although no significant work was performed at Eastern Star during the 2015-2020 period, the Company is preparing to resume exploration efforts in 2021. The Company’s exploration objective at Eastern Star is to evaluate the potential of these high-grade gold-bearing quartz veins for development and production.
Geology & Mineralization
The Eastern Star property is underlain by extensively weathered, high grade metamorphic rocks such as biotite gneiss and schist, intruded by felsic dikes and sills emanating from the Idaho Batholith. Two types of gold mineralization are present at the Eastern Star property. The first is the large, low-grade, bulk tonnage mineralization associated with the northerly trending Orogrande Shear Zone, and the second is the easterly trending high-grade gold quartz veins.
DIAMOND CREEK RARE EARTH PROJECT
Property Location
The Diamond Creek REE Project covers approximately 1,040 acres and is comprised of 52 unpatented mining claims. It is located in the Eureka Mining district, approximately 13 kilometers (8 miles) north-northwest of the town Salmon, Idaho. The property is accessed by a dirt road known as the Diamond Creek road. The Diamond Creek Project is an exploration stage property with no mineral reserves as recognized by the SEC.
Property Ownership
The unpatented lode claims are wholly owned by the Company and there are no underlying royalties. The unpatented claims require an annual claim fee payment to the BLM.
Property History
The area was historically prospected for gold until 1949 when its unique geologic setting was recognized by the United States Geologic Survey (USGS) and the Idaho Geological Survey. In the early 1950’s the U.S. government sponsored country-wide exploration for nuclear power related raw materials. This campaign resulted in the discovery of thorium in areas of Lemhi County, including the REE occurrence in the Diamond Creek area. Several other companies have undertaken minor rare earths exploration programs on the property including one stage of limited core drilling.
Present Condition, Work Completed, and Exploration Plans
The Company staked the claims that make up the property in early 2020. Some surface exploration activities including mapping and sampling were completed in 2020. Additionally, the Company submitted a Plan of Operations (POO) to the USFS for a core drilling program. The POO is currently under review by the USFS.
Geology & Mineralization
The REE mineralization at Diamond Creek is found in quartz veins over a large area approximately 3.2 km long and 0.8 km wide. There are at least eight known veins and they range in width from 0.15 to 7.6 m in thickness. Vein widths appear best developed in the metasediments and can be traced on the surface for distances ranging from 33.5 to 780 m.
Samples taken by NJMC show REE oxide contents ranging from 0.59 to 5.51 percent. Work by the USGS in 1979 reported three samples cut across one of the larger veins were assayed for gold and contained 0.5, 2.4 and 11.9 grams per tonne. Down-dip extensions of these mineralized veins have never been sufficiently tested. Historical reports indicate two short core holes have been completed with some significant REE mineralization noted.
ROBERTS RARE EARTH PROJECT
Property Location
The Roberts Rare Earth Element Project is comprised of 12 unpatented mining claims covering an area of approximately 219 acres. This Project is located within the Mineral Hill Mining District, approximately 48 kilometers (30 miles) northwest of Salmon, Idaho. Access to the property is via National Forest Road 036 (Indian Creek Road).
Property Ownership
The unpatented lode claims covering the Roberts Rare Earth Project are wholly owned by the Company and are not subject to any underlying royalties. Annual claim fees are due to the BLM to maintain the validity of an unpatented mining claim.
Property History
The Mineral Hill district was historically prospected in the early 1900’s for gold and copper. Rare earth element (REE) mineralization was first discovered in the early 1950’s. Studies conducted by A. T. Abbott (1954) and A. L. Anderson (1958) from the Idaho Geological Survey, and E. P. Kaiser (1956) with the USGS, pioneered recognition of these REE occurrences. Abbott reported cutting a 2.5-foot sample across the Roberts Lode which returned 21.5-percent combined rare earth oxides and thoria.
Present Condition, Work Completed, and Exploration Plans
The Company staked the claims that make up the property in early 2020. Some surface exploration activities including mapping and sampling were completed in 2020. Sampling by Company geologists returned assays of combined rare earths elements in excess of 12%. Similarly, as with NJMC’s Diamond Creek project, REE’s are not the only valuable commodities; gold and niobium may also be profitable by-products. Recently collected samples at the Roberts property have gold assays up to 8.8 grams per tonne (0.25 ounce per ton) and niobium as high as 0.50-percent. Exploration plans geologic mapping, sampling and geophysical surveys. An exploration drill program is being planned for submittal to the USFS.
Geology & Mineralization
The REE mineralization at the Roberts Project is associated with a unique group of igneous rocks known as carbonatites. Carbonatites are carbonate rocks sourced from magmatic origins, with primary carbonate compositions exceeding 50%. The Roberts Project contains two of the eight known carbonatite occurrences within the Mineral Hill District. The first carbonatite can be found in a northwest-trending seam which measures approximately 400 meters (1,300 feet) long and 90 meters (300 feet) wide; the second occurrence occurs as a small carbonatite plug, measuring about 200 meters in diameter.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the fiscal year ended December 31, 2020, the Company had one citation for a violation of mandatory health or safety standards that could significantly and substantially (S&S citation) contribute to the cause and affect a mine safety or health hazard under section 104 of the Federal Mine Safety and Health Act of 1977. There were no legal actions, mining-related fatalities, or similar events in relation to the Company’s United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's Common Stock currently trades on the OTCQB tier of the OTC Market under the symbol "NJMC".
As of March 1, 2021, there were approximately 1,200 shareholders of record of the Company's Common Stock.
Dividend Policy
The Company has not declared or paid cash dividends or made distributions in the past and the Company does not anticipate that it will pay cash dividends or make distributions in the foreseeable future. The Company currently intends to retain and reinvest future earnings, if any, to finance its operations.
Transfer Agent
The transfer agent for the Company's Common Stock is Nevada Agency Trust 50 West Liberty, Suite 880 Reno, Nevada 89501.
Securities Authorized for Issuance Under Equity Compensation Plans
In April 2014 the Board of Directors of the Company established a stock option plan to authorize the granting of stock options to officers and employees. Upon exercise of the options shares are issued from the available authorized shares of the Company.
No additional fees are paid for attendance at Board of Directors’ meetings, committee membership or committee chairmanship
Equity Compensation Plan Information
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(a)
(b)
(c)
Equity compensation plans approved by the board
1,600,000
$0.14
Equity compensation plans not approved by the board
Total
1,600,000
$0.14
Recent Sales of Unregistered Securities
Occasionally, we pay for goods and services with restricted common stock. Our policy is to determine the fair value of the goods or services, and then issue the number of corresponding shares using an agreed upon price for our common stock that considers the bid/offer price as quoted by the OTC Market.
The Company closed a private placement in April 2020. Under the private placement, the Company sold 1,481,481 units at $0.135 per unit for net proceeds of $200,000. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.18 for 24 months. The Company closed a private placement in August 2020. Under the private placement, the Company sold 9,718,572 units at $0.28 per unit for net proceeds of $2,706,896. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.40 for 24 months. The transactions were strictly limited to persons who met certain minimum financial (accredited investors) or sophistication requirements. In management’s opinion, the securities were issued pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. No shares of the Company’s common stock were issued for cash in 2019.
In July of 2020, 277,778 shares of the Company’s stock were issued to a holder of convertible debt at a rate of $0.18 per share in exchange for $50,000 in debt. No shares of the Company’s common stock were issued in exchange for convertible debt in 2019.
In the third quarter of 2020, 1,041,667 shares were issued in exchange for outstanding warrants for net proceeds of $208,334. In the fourth quarter of 2020, 666,667 shares were issued in exchange for outstanding warrants for net proceeds of $133,333.
In the fourth quarter of 2020 25,000 shares were issued in exchange for outstanding options at a rate of $0.18 per share for net proceeds of $4,500.
In the fourth quarter of 2020, the Company issued 550,000 shares of its common stock in exchange for 1,125,000 outstanding options in a cashless option exercise. Of these, 500,000 shares with a fair value at the time of exercise of $125,000 were issued to management and the remaining 50,000 shares with a fair value at the time of exercise of $15,000 were issued to other employees.
In the second quarter of 2019, the Company issued 398,575 shares of its common stock in exchange for 1,200,000 outstanding warrants in a cashless warrant exercise. The fair value at the time of exercise was $59,680.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
New Jersey Mining Company is a gold producer focused on diversifying and building its asset base and cash flows through a portfolio of mineral properties located in historic producing gold districts in Idaho and Montana.
The Company’s plan of operation is to generate positive cash flow, increase its gold production and asset base over time while being mindful of corporate overhead. The Companies management is focused on utilizing its in-house technical and operating skills to build a portfolio of producing mines and milling operations with a primary focus on gold and secondary focus on silver and base metals.
The Company’s properties include: the Golden Chest Mine (currently in production), the New Jersey Mill (majority ownership interest), and a 50% carried to production interest in the past producing Butte Highlands Mine located in Montana. In addition to its producing and near-term production projects, New Jersey Mining Company has additional gold exploration prospects, including the McKinley-Monarch and Eastern Star located in Central Idaho, and additional holdings near the Golden Chest in the Murray Gold Belt. Recently, the Company added two rare earth element properties in Idaho to its portfolio of exploration properties in an effort to diversify its holdings towards the anticipated demand for these elements in the electrification of motorized vehicles.
Highlights for 2020 include:
·For the year ending December 31, 2020 39,880 dry metric tonnes (dmt) were processed at the Company’s New Jersey Mill with an average gold head grade of 3.03 grams per tonne gold (gpt).
·NJMC produced a total of 3,755 ounces of gold contained in concentrates.
·Mined 27,690 tonnes of ore from the open pit at an average grade of 1.73 gpt gold with an average stripping ratio of 9.1 and an average daily mining rate of 1,480 tonnes per day (tpd). Tonnes and grade were lower than expected because of unmapped historic stopes where the old-timers mined portions of the veins.
·Mined 12,190 tonnes of ore from the underground mine at an average grade of 5.98 gpt gold, placed 1,828 cubic meters of cemented rockfill (CRF) and completed 75 meters of Main Access Ramp (MAR) to access new stopes.
·Added additional mining equipment and a second crew of miners in the third quarter of 2020 to increase underground mine production and initiate underground development of the Main Access Ramp. A wireless communication system was also installed underground to improve communication and safety.
·Added two rare earth element properties in central Idaho to its portfolio, the Diamond Creek and Roberts Projects.
·Acquired the Alder Gulch Project which contains 368 acres of patented, prospective land just west of the Golden Chest.
Results of Operations
Our financial performance for the years ended December 31, 2020 and 2019 is summarized below:
·Revenue from gold concentrate sales was $5,674,947 for the year ending December 31, 2020 compared to $6,119,512 for the comparable period in 2019. The decrease in revenue from mining operations is the result of fewer tonnes processed at the mill due to less tonnes and lower grade mineralized material being mined in the open pit in 2020 compared to 2019.
·Gross profit in 2020 was $67,546 compared to a gross profit of $738,548 in 2019 also because of fewer tonnes and lower grade mineralized material being mined in the open pit in 2020 compared to 2019.
·The Company had a net loss of $739,939 in 2020 compared to a net loss of $726,507 for the same period in 2019.
·The consolidated net loss included non-cash charges of $236,493 ($1,112,434 in 2019) as follows: depreciation and amortization of $575,671 ($580,005 in 2019), accretion of asset retirement obligation of $9,632 ($9,077 in 2019), stock based compensation of none ($190,019 in 2019), loss on abandonment of mineral property of none ($333,333 in 2019), loss on write off of equipment $9,536 (none in 2019), gain on forgiveness of CARES Act loan of $358,346 (none in 2019).
·Net loss attributable to New Jersey Mining Company was $642,876 and $609,605 in the years ended December 31, 2020 and 2019, respectively.
·Pre-development expenses decreased in 2020 compared to 2019 as the underground operations were commenced.
·Exploration expenses increased in 2020 compared to 2019 as funds became available. These exploration costs were primarily associated with core drilling and rare earth exploration.
Cash Costs and All In Sustaining Costs Reconciliation to GAAP-Reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost per ounce and all-in sustaining costs (AISC) per ounce (non-GAAP).
The table below presents reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion and amortization to the non-GAAP measures of cash cost per ounce produced and all in sustaining costs per ounce produced for the Company’s gold production for the years ended December 31, 2020
and 2019. The cost per ounce calculations are based on ounces produced. Upon sale, the Company typically receives payment at an average rate of 91% of ounces produced after smelting and refining charges are deducted.
Cash cost per ounce is an important operating measure that we utilize to measure operating performance. AISC per ounce is an important measure that we utilize to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital. Current GAAP measures used in the mining industry, such as cost of goods sold do not capture all of the expenditures incurred to discover, develop, and sustain gold production.
Financial Condition and Liquidity
The Company has accumulated deficit of approximately $12.7 million at December 31, 2020 and incurred a consolidated net loss in 2020 of $739,939. The Company’s working capital at December 31, 2020 is $2,226,162. The Company is currently producing from the open-pit and underground at the Golden Chest. During 2020, production generated negative cash flow from operations of $482,418 compared to positive cash flow used in operations of $206,407 in 2019. Planned production for the next 18 months indicates a positive cash flow from operations will be renewed as underground mining overtakes the open pit as the primary source of mineralized material. In prior years, the Company has been successful in raising required funds for ongoing operations from sale of its common stock or borrowing. Management believes it has the ability to meet its contractual obligations with continuing cash flows from operations, existing cash, and potential financings for the next 12 months.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of New Jersey Mining Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of New Jersey Mining Company (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The Impact of Ore Reserves on Mineral Properties
As discussed in Note 2 to the consolidated financial statements, the Company’s ore reserves are estimated by management’s specialists based on the amount of metals that could be economically and legally extracted or produced at the time of the reserve determination. Management’s calculations of ore reserves are based on financial, engineering and geological estimates, including future metals prices and operating costs.
We identified the assessment of the impact of ore reserves as a critical audit matter. Costs of developing ore reserves are capitalized and amortized using the units-of-production method over estimated recoverable reserves. Reserves also serve as the basis for assessing the recoverability of the carrying value of Company’s mineral properties.
The reserve estimates are based on several significant assumptions that are developed internally by management’s specialists, including the amount of metals to be extracted, future operating costs, and estimated future capital expenditures. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
·Evaluating management’s process for determining estimates of mineralized material, including drilling, sampling and assaying data.
·Analyzing the objectivity, experience, and qualification of the Company’s mine engineers.
·Evaluating the reasonableness of the reserves estimate by reviewing management’s assessment of historical drilling, sampling, and assaying activities, which are used in the estimate of proven and probable reserves.
·Assessing the reasonableness of management’s determination of future operating costs and estimated future capital expenditures through comparison to current and past performance at the mine site, including evaluating against evidence obtained in other areas of the audit.
Assure CPA, LLC (formerly DeCoria, Maichel & Teague, P.S.)
We have served as the Company's independent auditor since 2003.
Spokane, Washington
March 31, 2021
New Jersey Mining Company
Page
Consolidated Balance Sheets, December 31, 2020 and 2019 27
Consolidated Statements of Operations for the years ended
December 31, 2020 and 2019 28
Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2020
and 2019 29
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 30
Notes to Financial Statements31-44
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
Notes to Consolidated Financial Statements
1. Description of Business
New Jersey Mining Company (“the Company”) was incorporated as an Idaho corporation on July 18, 1996. The Company's primary business is exploring for, developing, and extracting gold, silver, and base metal mineral resources in the Greater Coeur d’Alene Mining District of North Idaho and extending into Western Montana. The Company is currently focused on mining and milling ore from the Golden Chest property. It is also evaluating new mineral investment and development opportunities in the western United States.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, the New Jersey Mill Joint Venture (“NJMJV”). Intercompany accounts and transactions are eliminated. The portion of NJMJV partially owned by other investors is presented as non-controlling interest on the consolidated balance sheets and statements of operations.
Accounting for Investments in Joint Ventures
For joint ventures where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the venture’s management committee.
For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. For those joint ventures in which there is joint control between the parties, the equity method is utilized whereby the Company’s share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount. The Company periodically assesses its investments in joint ventures for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.
At December 31, 2020 and 2019, the Company’s percentage ownership and method of accounting for each joint venture is as follows:
Non-controlling Interest
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling interests represent non-controlling investor’s initial contribution at the date of the original acquisition, ongoing contributions, and percentage share of earnings since inception.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for items such as mineral reserves, depreciation lives and methods, potential impairment of long-lived assets, deferred income taxes, settlement pricing of gold sales, fair value of stock based compensation, estimation of asset retirement obligations and reclamation liabilities. Estimates are based on historical experience and various other assumptions that the Company believes to be reasonable. Actual results could differ from those estimates.
New Jersey Mining Company
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Gold Revenue Recognition and Receivables-Sales of gold sold directly to customers are recorded as revenues and receivables upon completion of the performance obligations and transfer of control of the product to the customer. For concentrate sales, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment at estimated forward prices for the anticipated month of settlement. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. Due to the time elapsed from shipment to the customer and the final settlement with the customer, prices at which sales of our concentrates will be settled are estimated. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. For sales of dore’ and metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner.
Sales and accounts receivable for concentrate shipments are recorded net of charges by the customer for treatment, refining, smelting losses, and other charges negotiated with the customers. Charges are estimated upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from estimates. Costs charged by customers include fixed costs per ton of concentrate and price escalators. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred. See Note 13 for more information on our sales of products.
Other Revenue Recognition-Revenue from harvest of raw timber is recognized when the performance obligation under a contract and transfer of control have both been completed. Sales of timber found on the Company’s mineral properties are not a part of normal operations.
Inventories
Inventories include concentrate inventory and supplies inventory. Concentrate inventory is valued at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, royalties, and milling costs including applicable overhead, depreciation, depletion and amortization relating to the operations. Costs are allocated based on the stage at which the ore is in the production process. Supplies inventory is stated at the lower of first-in, first-out weighted average cost or estimated net realizable value.
Income Taxes
Income taxes are accounted for under the liability method. Under this method deferred income tax liabilities or assets are determined at the end of each period using the tax rate expected to be in effect when the taxes are expected to be paid or recovered. A valuation allowance is recorded to reduce the deferred tax assets if there is uncertainty regarding their realization.
Uncertain tax positions are evaluated in a two-step process, whereby (i) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the related tax authority would be recognized.
Fair Value Measurements
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. At December 31, 2020 and 2019, the Company did not have any assets or liabilities that were valued at a fair value measurement other than its gold sales receivable. Due to the time elapsed from shipment to the customer and the final settlement with the customer, management must estimate the prices at which sales of gold concentrates will be settled. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. See Note 13 for further information.
Financial Instruments
The carrying amounts of financial instruments including cash and cash equivalents, reclamation bond, notes payable to related parties, notes payable, and the Small Business Administration loan approximate their fair values. The fair value of the convertible notes payable at December 31, 2020 is $1,336,111 based on the convertible rate and the trading price of the Company’s stock at December 31, 2020.
New Jersey Mining Company
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing the net amount excluding net income (loss) attributable to a non-controlling interest by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. For the years ended December 31, 2020 and 2019, potentially dilutive common stock equivalents excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive are as follows:
December 31,
December 31,
Stock options
2,100,000
5,262,500
Stock purchase warrants
5,975,027
12,900,123
Convertible debt
5,138,889
-
Total
13,213,916
18,162,623
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2020 financial statement presentation. Reclassifications had no effect on net income (loss), stockholders' equity, or cash flows as previously reported.
Cash and Cash Equivalents
The Company considers cash in banks and other deposits with an original maturity of three months or less when purchased to be cash and cash equivalents. These deposit balances may at times exceed federally insured limits. No losses have been recognized as a result of these balances.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization are based on the estimated useful lives of the assets and are computed using straight-line or units-of-production methods. The expected useful lives of most of the Company’s buildings are up to 50 years and equipment life expectancy ranges between 2 and 10 years. When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in operations.
Mineral Properties
Significant payments related to the acquisition of mineral properties, mineral rights, and mineral leases are capitalized. If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on estimated reserves. If no commercially mineable ore body is discovered, or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value.
Consideration received by the Company pursuant to joint ventures or mineral interest agreements is applied against the carrying value of the related mineral interest. When and if payments received exceed the carrying value, the excess amount is recognized as a gain in the consolidated statement of operations in the period the consideration is received.
Mine Exploration and Development Costs
The Company expenses exploration costs as such in the period they occur. The mine development stage begins once the Company identifies ore reserves which is based on a determination whether an ore body can be economically developed. Expenditures incurred during the development stage are capitalized as deferred development costs and include such costs for drift, ramps and infrastructure. Costs to improve, alter, or rehabilitate primary development assets which appreciably extend the life, increase capacity, or improve the efficiency or safety of such assets are also capitalized. The development stage ends when the production stage of ore reserves begins. Amortization of deferred development costs is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
Pre-Development Activities
Pre-development activities involve cost incurred in the exploration stage that may ultimately benefit production, such as underground ramp development, pumping, and open-pit development, which are expensed due to the lack of evidence of economic development, which is necessary to demonstrate future recoverability of these expenses. These costs are charged to operations as incurred.
New Jersey Mining Company
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Claim Fees
Unpatented claim fees paid at time of staking are expensed when incurred. Recurring renewal fees which are paid annually are recorded as other current assets and expensed over the course of the year.
Impairment of Long-Lived Assets
The Company evaluates the carrying amounts of its long-lived assets for impairment whenever events and circumstances indicate the carrying value may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Estimated undiscounted future net cash flows from each mineral property are calculated using estimated future production, three-year average metals prices, operating capital and costs, and reclamations costs. An impairment loss is recognized when the estimated discounted future cash flows expected to result from the use of an asset are less than the carrying amount of the asset. The Company’s estimates of future cash flows are subject to risks and uncertainties. It is reasonably possible that changes in estimates could occur which may affect the expected recoverability of the Company’s investments in mineral properties.
Asset Retirement Obligations and Remediation Costs
Mineral properties are subject to standards for mine reclamation that have been established by various governmental agencies. Asset retirement obligations are related to the retirement of the mine when a contractual obligation has been established and a reasonable estimate of fair value can be determined. These obligations are initially measured at fair value with the resulting cost capitalized at the present value of estimated reclamation costs. An asset and a related liability are recorded for the fair value of these costs. The liability is accreted and the asset amortized over the life of the related asset. Adjustments are made for changes resulting from either the timing or amount of the original estimate underlying the obligation. If there is an impairment to an asset’s carrying value and a decision is made to permanently close the property, changes to the liability are recognized and charged to the provision for closed operations and environmental matters. Separate from asset retirement obligations, the Company records liability for remediation costs when a reasonable estimate of fair value can be determined. Accrued remediation costs are not discounted.
Reclamation Bond
Various laws and permits require that financial assurances be in place for certain environmental and reclamation obligations and other potential liabilities. At December 31, 2020 and 2019, the Company had a $103,320 reclamation bond for the Golden Chest Mine.
Stock Based Compensation
All transactions in which goods or services are received for the issuance of shares of the Company’s common stock or options to purchase shares of common stock are accounted for based on the fair value of the equity interest issued. The value of common stock awards is determined based upon the closing price of the Company’s stock on the date of the award. The Company estimates the fair value of stock-based compensation using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of the fair value of stock-based compensation.
COVID-19 Coronavirus Pandemic Response and Impact
Following the outbreak of the COVID-19 coronavirus global pandemic ("COVID-19") in early 2020, in March 2020 the U.S. Centers for Disease Control issued guidelines to mitigate the spread and health consequences of COVID-19. The impact of the guidelines on our business has been minimal. The Company implemented changes to its operations and business practices to follow the guidelines and minimize physical interaction, including using technology to allow employees to work from home when possible and altering production procedures and schedules, asset maintenance, and limiting discretionary spending. As long as they are required, the operational practices implemented could have an adverse impact on our operating results due to deferred production and revenues or additional costs. The negative impact of COVID-19 remains uncertain, including on overall business and market conditions. It is possible that future restrictions could have an adverse impact on our operations or financial results beyond 2020.
Going Concern
The Company is currently producing from both the open-pit and underground at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its planned production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
New Jersey Mining Company
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
Accounting Standards Updates Adopted
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Auditing Standards Update (“ASU”) No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and makes additions to the disclosure requirements on fair value measurements. The update was adopted as of January 1, 2020, and its adoption did not have a material impact on the Company’s consolidated financial statements.
Accounting Standards Updates to Become Effective in Future Periods
In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. The update is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Management is evaluating the impact of this update on the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU No. 2019-12 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. Management is evaluating the impact of this update on the Company’s consolidated financial statements.
3. Inventories
At December 31, 2020 and 2019, inventories consisted of the following.
Concentrate inventory
In process
$
90,743
$
19,173
Finished goods
230,318
178,689
Total concentrate inventory
321,061
197,862
Supplies inventory
Mine parts and supplies
52,600
12,200
Mill parts and supplies
28,876
15,084
Total supplies inventory
81,476
27,284
Total
$
402,537
$
225,146
New Jersey Mining Company
Notes to Consolidated Financial Statements
4. Note Receivable
On June 6, 2018, the Company loaned $250,000 to West Materials, Inc. and William J. West (collectively “West”) which bore interest at 8% if the loan went into default and had a term of fifteen months. Five equal payments were due quarterly with the first two payments received in cash during 2018 and the remaining outstanding $150,000 received in 2019. The note receivable was collateralized by a mortgage on the Butte Gulch real property and a related net smelter royalty right.
5. Property, Plant and Equipment
Property, plant and equipment at December 31, 2020 and 2019 consisted of the following:
Mill
Land
$
225,289
$
225,289
Building
536,193
536,193
Equipment
4,192,940
4,192,940
4,954,422
4,954,422
Less accumulated depreciation
(914,095)
(759,617)
Total mill
4,040,327
4,194,805
Buildings and equipment
Buildings
297,932
143,725
Equipment
3,250,551
2,628,261
3,548,483
2,771,986
Less accumulated depreciation
(1,229,136)
(818,527)
Total building and equipment
2,319,347
1,953,459
Land
Bear Creek
266,934
266,934
BOW
230,449
230,449
Eastern Star
250,817
250,817
Gillig
79,137
79,137
Highwater
40,133
40,133
Total land
867,470
867,470
Total
$
7,227,144
$
7,015,734
New Jersey Mining Company
Notes to Consolidated Financial Statements
6. Mineral Properties
Mineral properties at December 31, 2020 and 2019 are as follows:
Golden Chest
Mineral Property
$
1,539,001
$
1,524,002
Infrastructure
468,669
153,970
Total Golden Chest
2,007,670
1,677,972
New Jersey
248,289
248,289
McKinley-Monarch
200,000
200,000
Butte Potosi
274,440
274,440
Alder Gulch
773,101
-
Less accumulated amortization
(48,267)
(37,683)
Total
$
3,455,233
$
2,363,018
Golden Chest
The Golden Chest is an open pit and underground mine project currently producing for the Company located near Murray, Idaho consisting of 25 patented and 70 unpatented mining claims. A 2% Net Smelter Royalty is payable on production at the Golden Chest to a former joint venture partner. Royalty expense of $114,204 and $118,223 was recognized as costs of sales and other direct production costs in the years ended December 31, 2020 and 2019, respectively.
New Jersey
The Coleman property is located at the New Jersey Mine area of interest and consists of 62 acres of patented mining claims, mineral rights to 108 acres of fee land, 80 acres of land for which the Company owns the surface but not the mineral rights, and approximately 130 acres of unpatented mining claims.
McKinley-Monarch
The McKinley-Monarch project is located near the town of Lucille, Idaho. The Company started exploring the property in 2013. In the third quarter of 2019, a $50,000 non-refundable deposit was received from PM&G Company along with a letter of intent contemplating purchase of the McKinley-Monarch project from the Company. The carrying value of the McKinley-Monarch project was reduced by $50,000 in 2019 reflecting receipt of this payment. The Company does not anticipate PM&G Company to continue with its purchase of the project.
Butte Potosi
In 2018, the Company purchased the Butte Potosi property near its Golden Chest mine for $250,440 and a 2% net smelter return on all ores mined and shipped from the property. Also in 2018 the Company incurred an additional $24,000 to improve access to the property. This property consists of patented mining claims some of which include both the surface and mineral rights and some of which include only the mineral rights.
Alder Gulch
In February 2020, the Company purchased property located in Alder Gulch just north of Murray in Shoshone County, Idaho which consists of 368 acres of real property, including patented mining claims with both surface and mineral rights. The Company started exploring the property in 2020.
Crown Point
On March 2, 2018, the Company entered into an agreement with J-J Farms LLC and Achievement Holdings LLC (“Crown Point”) to lease a group of patented and unpatented mining claims. The initial payment was 1,333,333 shares of the Company’s restricted common stock valued at $0.175/share for a fair value of $233,333. An additional payment was made in September of 2018 for $100,000 in cash. Per the agreement, future payments for the mineral property were as follows:
·1,333,333 shares of the Company’s common stock on September 30, 2019.
·Cash payments of $100,000 and $200,000 on September 30, 2019 and 2020, respectively.
The Company made no payments under this agreement in 2019. In December of 2019, the Company abandoned the property and recognized a loss of $333,333.
New Jersey Mining Company
Notes to Consolidated Financial Statements
7. Notes Payable
At December 31, 2020 and 2019, notes payable are as follows:
Paus 2 yrd. LHD, 60 month note payable, 4.78% interest rate payable through October 2024, monthly payments of $5,181
$
217,354
$
267,820
Paus 2 yrd. LHD, 60 month note payable, 3.45% interest rate payable through July 2024, monthly payments of $4,847
195,768
-
Compressor, 48 month note payable, 5.25% interest rate payable monthly through November 2021, monthly payments of $813
9,958
19,018
Caterpillar excavator and skid steer, 48 month note payable, 6.8% interest rate payable monthly through June 2022, monthly payments of $2,392, paid in full in 2020
-
65,835
Atlas Copco loader, 60 month note payable, 10.5% interest rate payable monthly through June 2023, monthly payments of $3,550
93,265
124,238
2018 pick-up truck, 72 month note payable, 9% interest rate payable monthly through June 2024, monthly payments of $701, paid in full in 2020
-
30,863
Property with shop, 48 month note payable, 6.49% interest rate payable monthly through August 2023, monthly payments of $707, paid in full in 2020
-
27,624
2008 pick-up truck, 60 month note payable, 9% interest rate payable monthly through June 2023, monthly payments of $562, paid in full in 2020
-
20,088
Caterpillar 306 excavator, 48 month note payable, 4.6% interest payable monthly through November 2024, monthly payments of $1,512
64,896
-
Caterpillar 938 loader, 60 month note payable, 6.8% interest rate payable monthly through August 2023, monthly payments of $3,751
109,492
145,709
MultiQuip DCA70 Generator, 48 month note payable, 7.25% interest rate payable through August 2022, monthly payments of $635, paid in full in 2020
-
18,433
Caterpillar AD22 haul truck, 48 month note payable, 6.45% interest rate payable monthly through June 2023, monthly payments of $12,979
358,043
485,896
Total notes payable
1,048,776
1,205,524
Due within one year
339,704
303,987
Due after one year
$
709,072
$
901,537
All notes are collateralized by the property or equipment purchased in connection with each note. Future principal payments of debt at December 31, 2020 are as follows:
$
339,704
351,432
257,175
100,465
Total
$
1,048,776
New Jersey Mining Company
Notes to Consolidated Financial Statements
8. Asset Retirement Obligations
The Company has established asset retirement obligations associated with the ultimate closing of its mineral properties where there has been or currently is operations. Obligations were established for the New Jersey mill in 2014 and the Golden Chest mine in 2016. Activity for the years ended December 31, 2020 and 2019 is as follows:
Balance at January 1
$
163,369
$
154,292
Accretion expense
9,632
9,077
Balance at December 31
$
173,001
$
163,369
The original estimated reclamation costs were discounted using credit adjusted, risk-free interest rate of 5.0% from the time the obligation was incurred to the time management expects to pay the retirement obligation.
9. Joint Venture Arrangements
New Jersey Mill Venture Agreement (“NJMJV”)
In January 2011, the Company and United Mine Services, Inc. (“UMS”) entered into a joint venture agreement relating to the New Jersey mineral processing plant. To earn a 35 percent interest in the venture, UMS provided $3.2 million funding to expand the processing plant to 15 tonnes/hr. The Company is the operator of the venture and charges operating costs to UMS for milling its ore up to 7,000 tonnes/month, retain a milling capacity of 3,000 tonnes/month, and as the operator of the venture receive a fee of $2.50/tonne milled. UMS subsequently dissolved and its interest in the mill was transferred to Crescent Silver, LLC (Crescent). As of December 31, 2020 and 2019, an account receivable existed with the Mill Joint Venture from Crescent for $4,177 and $2,410, respectively.
Butte Highlands Joint Venture
On January 29, 2016, the Company purchased a 50% interest in Butte Highlands JV, LLC (“BHJV”) for a total consideration of $435,000. Highland Mining, LLC (“Highland”) is the other 50% owner and manager of the joint venture. Under the operating agreement, Highland will fund all future project exploration and mine development costs. The Agreement stipulates that Highland is manager of BHJV and will manage BHJV until such time as all mine development costs, less $2 million are distributed to Highland out of the proceeds from future mine production. The Company has determined that because it does not currently have significant influence over the joint venture’s activities, it will account for its investment on a cost basis.
10. Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended December 31, 2020 and 2019.
At December 31, 2020 and 2019, the Company had net deferred tax assets principally arising from the net operating loss carryforward for income tax purposes multiplied by an expected blended federal and state tax rate of 26.9%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset exists at December 31, 2020 and 2019.
The significant components of net deferred tax assets at December 31, 2020 and 2019 were as follows:
Deferred tax assets
Net operating loss carry forward
$
3,984,500
$
3,420,600
Mineral properties
201,200
304,300
Asset retirement obligation
8,400
5,800
Stock based compensation
219,000
219,000
Other
14,800
11,200
Total deferred tax assets
4,427,900
3,960,900
Valuation allowance
(3,286,100)
(2,985,400)
1,141,800
975,500
Deferred tax liabilities
Property, plant, and equipment
(1,141,800)
(975,500)
Total deferred tax liabilities
(1,141,800)
(975,500)
Net deferred tax assets
$
-
$
-
New Jersey Mining Company
Notes to Consolidated Financial Statements
10. Income Taxes (continued)
At December 31, 2020 the Company had net operating loss carry forwards of approximately $14,450,000 for both federal and state purposes, $11,100,000 of which expire between 2021 through 2037. The remaining balance of $3,350,000 will never expire but its utilization is limited to 80% of taxable income in any future year.
The income tax provision (benefit) for the years ended December 31, 2020 and 2019 differ from the statutory rate of 21% as follows:
Provision (benefit) at statutory rate for the period
$
(155,400)
$
(152,600)
State taxes, net of federal taxes
(43,300)
(42,500)
Non-taxable item-CARES Act loan forgiven
(96,200)
-
Adjustment of prior year tax estimates
(5,800)
3,850
Increase (decrease) in valuation allowance
300,700
191,250
Total provision (benefit)
$
-
$
-
The Company is open to examination of our income tax filings in the United States and state jurisdictions for the 2018 through 2020 tax years. Tax attributes from years prior to that can be adjusted as a result of examinations. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.
11. Equity
The Company has authorized 200,000,000 shares of no par common stock at December 31, 2020 and 2019. In addition, the Company has authorized 1,000,000 shares of no par preferred stock, none of which had been issued at December 31, 2020 or 2019.
2020 Activity:
·The Company offered units for sale under a private placement. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.18 for 24 months. The Company sold 1,481,481 units at $0.135 per unit for net proceeds of $200,000.
·The Company offered units for sale under a private placement. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.40 for 24 months. The Company sold 9,718,572 units at $0.28 per unit for net proceeds of $2,706,896. Stock issuance costs for this offering was $14,304.
·In July of 2020, 277,778 shares of the Company’s stock were issued to a holder of convertible debt at a rate of $0.18 per share in exchange for $50,000 for a convertible note in accordance with the terms of the note.
·Common shares of 1,041,667 were issued upon exercise of warrants at $0.20 per share for net proceeds of $208,334.
·Common shares of 666,667 were issued upon exercise of warrants at $0.20 per share for net proceeds of $133,333.
·Common shares of 25,000 were issued pursuant to the exercise of stock purchase options at $0.18 per share for $4,500 in cash.
·Common shares of 550,000 were issued upon exercise of 1,125,000 options on a cashless basis.
2019 Activity
·Common shares of 398,575 were issued upon exercise of 1,200,000 warrants on a cashless basis.
New Jersey Mining Company
Notes to Consolidated Financial Statements
Stock Purchase Warrants Outstanding
Transactions in common stock purchase warrants for the years ended December 31, 2020 and 2019 are as follows:
Number of Warrants
Exercise Prices
Balance December 31, 2018
14,100,123
$0.10-0.22
Exercised
(1,200,000)
0.10
Balance December 31, 2019
12,900,123
$0.18-0.22
Issued
5,600,027
$0.18-0.40
Expired
(10,816,789)
$0.20-0.22
Exercised
(1,708,334)
0.20
Balance December 31, 2020
5,975,027
$0.18-0.40
These warrants expire as follows:
Shares
Exercise Price
Expiration Date
375,000
$0.18
December14, 2023
740,741
$0.18
April 21, 2022
4,859,286
$0.40
August 28, 2022
5,975,027
Stock Options
In April 2014, the Board of Directors of the Company established a stock option plan to authorize the granting of stock options to officers and employees. Upon exercise of the options shares are issued from the available authorized shares of the Company. Options reserved to any one related person on an annual basis may not upon exercise exceed 5% and the aggregate number of all options outstanding will not exceed 10% of the issued outstanding common shares as a whole calculated at that time.
In June 2019, 2,100,000 stock options were granted to non-officer employees. These options vested immediately and are exercisable at $0.14 for 3 years. Total stock based compensation recognized on these options was $190,019. The weighted average fair value of stock option awards granted and the key assumptions used in the Black-Scholes valuation model to calculate the fair value of the options are as follows:
For the Year Ended December 31, 2019
Weighted average fair value
$0.09
Options issued
2,100,000
Exercise price
$0.14
Expected term (in years)
3.0
Risk-free rate
1.81%
Volatility
98.6%
Transactions in stock options for the years ended December 31, 2020 and 2019 are as follows:
Number of Options
Exercise Prices
Balance December 31, 2018
7,054,500
0.10-0.18
Granted
2,100,000
0.14
Expired
(3,892,000)
0.10-0.15
Balance December 31, 2019
5,262,500
0.10-0.18
Exercised
(1,150,000)
0.10-0.18
Expired
(2,012,500)
0.10-0.18
Balance December 31, 2020
2,100,000
0.10-0.14
Exercisable at December 31, 2020
2,100,000
$
0.10-0.14
At December 31, 2020, the stock options have an intrinsic value of approximately $258,300 and have a weighted average remaining term of 1.43 years.
New Jersey Mining Company
Notes to Consolidated Financial Statements
12. Related Party Transactions
At December 31, 2020 and 2019, the Company had the following notes payable to related parties:
Ophir Holdings LLC, a company owned by two officers and one former officer of the Company, 6% interest, monthly payments of $3,777 with a balloon payment of $110,835 in February 2022
$
154,312
$
189,236
H&H Metals, shareholder and concentrate broker, 8% interest, principal and interest due March 2021
-
27,438
Total
154,312
216,674
Current portion
37,078
34,924
Long term portion
$
117,234
$
181,750
At December 31, 2020, $37,078 of related party debt is payable in 2021 and the remaining $117,234 is payable in 2022. Related party interest expense for the years ending December 31, 2020 and 2019 was $10,992 and $15,169, respectively. There is no accrued interest payable at December 31, 2020 or 2019 on these notes.
During the year ended December 31, 2019, the Company paid $9,000, to the Company’s previous chairman of the board, Del Steiner for consulting purposes. He retired in July 2019.
As of December 31, 2020 and 2019, gold sales receivable from former related party H&H Metals, who owns 4% of the Company’s outstanding common stock, were $264,779 and $305,924, respectively. Concentrate sales to H&H Metals were $5,384,597 and $5,857,942, during the years ended December 31, 2020 and 2019, respectively.
In February 2020, the Company’s corporate secretary, Monique Hayes, participated in the Company’s convertible debt offering for $25,000. Interest expense on her note was $1,742 for the year ended December 31, 2020. See Note 14.
The Company leases office space from certain related parties on a month to month basis. Payments under these short-term lease arrangements totaled $24,840 and $24,546 for the years ended December 31, 2020 and 2019, respectively, and are included in general and administrative expenses on the Consolidated Statement of Operations.
13. Sales of Products
Our products consist of both gold flotation concentrates which in 2019 and 2020 we sold to a broker (H&H Metal), and an unrefined gold-silver product known as doré which we sell to a precious metal refinery. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer, and the transaction price can be determined or reasonably estimated.
For gold flotation concentrate sales, the performance obligation is met when the transaction price can be reasonably estimated and revenue is recognized generally at the time when risk is transferred to H&H Metal based on contractual terms. Based on contractual terms, the Company has determined the performance obligation is met and title is transferred to H&H Metal when the Company receives its first provisional payment on the concentrate because, at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the concentrate lot and obtained the ability to realize all of the benefits from the product, 3) the concentrate content specifications are known, have been communicated to H&H Metal, and H&H Metal has the significant risks and rewards of ownership to it, 4) it is very unlikely a concentrate will be rejected by H&H Metal upon physical receipt, and 5) we have the right to payment for the concentrate. Concentrates lots that have been sold are held at our mill up to 60 days, until H&H Metal provides shipping instructions.
Our concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. It is unlikely a significant reversal of revenue for any one concentrate lot will occur. As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known. At December 31, 2020, metals that had been sold but not final settled thus exposed to future price changes totaled 1,380 ounces of gold. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable.
New Jersey Mining Company
Notes to Consolidated Financial Statements
13. Sales of Products, continued
Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment and other charges negotiated by us with H&H Metal, which represent components of the transaction price. Charges are estimated by us upon transfer of risk of the concentrates based on contractual terms, and actual charges typically do not vary materially from our estimates. Costs charged by the customer include fixed treatment, refining and costs per ton of concentrate and may include penalty charges for lead and zinc content above a negotiated baseline as well as excessive moisture.
For sales of doré and of metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer.
Sales of products by metal for the years ended December 31, 2020 and 2019 were as follows:
Sales by significant product type for the years ended December 31, 2020 and 2019 were as follows:
In 2020 and 2019 floatation concentrates sold to H&H Metals Corp, a former related party, accounted 95% and 96%, respectively, of all gold sales. The remaining 5% and 4% in 2020 and 2019, respectively, was doré sold to a third party. At December 31, 2020 and 2019, our gold sales receivable balance related to contracts with customers of $264,779 and $305,924, respectively, consist only of amounts due from H&H Metal. There is no allowance for doubtful accounts. We have determined our contracts do not include a significant financing component. For doré sales, payment is received at the time the performance obligation is satisfied. Consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels at the time the performance obligation is satisfied.
14. Convertible Debt
In February 2020, the Company issued convertible promissory notes with an aggregate principal value of $885,000 from which funds were utilized for the purchase of the Alder Gulch property (Note 9). The notes are collateralized by the Alder Gulch property as well as other unencumbered real property that the Company currently owns. The outstanding principal amount of the notes bears interest at an annual rate of 8.0% with interest payments due monthly and the principal due in February 2023. The principal amount of the notes is convertible at the option of the note holders into shares of the Company’s common stock at a price of $0.18 per share (4,916,667 shares) prior to the maturity date of the notes. In July 2020, one of the participants converted $50,000 in debt for 277,778 shares of the Company’s common stock. Interest payments for these notes was $60,136 for the year ended December 31, 2020 including $1,742 to the Company’s corporate secretary, Monique Hayes, who participated in the Company’s convertible debt offering for $25,000.
In July 2020, a current convertible debt holder was issued an additional convertible promissory note for a principal balance of $200,000 which funds were utilized for the purchase of a new jumbo underground drill. The note is collateralized by the drill. The outstanding principal amount of the note bears interest at an annual rate of 6.0% with interest payments due monthly and the unpaid principal due in June 2023. The principal amount of the note is convertible at the option of the note holder into shares of the Company’s common stock at a price of $0.40 per share (500,000 shares) prior to the maturity date of the note. Interest payments for this note were $5,000 for the year ended December 31, 2020.
New Jersey Mining Company
Notes to Consolidated Financial Statements
15. Small Business Administration Loans
On April 10, 2020, the Company received a loan of $358,346 pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan, which was in the form of a Note dated April 10, 2020 had a maturity date on April 9, 2022 and an interest rate of 1% per annum, payable monthly commencing on October 9, 2020. The Note could be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan was forgiven after being used for qualifying expenses under the provisions of the CARES Act prior to the filing of these financial statements. Qualifying expenses included payroll costs, costs used to continue group health care benefits, rent, and utilities. The amount of the PPP loan has been recognized as gain on forgiveness of the CARES Act loan in the Company’s consolidated income statement for the year ended December 31, 2020.
In April 2020, the Company received $10,000 under Division A, Title I, Section 1110 of the CARES Act. Additionally, in May 2020, the Company received a loan of $149,900 pursuant to the Small Business Act Section 7(b). The May loan which was in the form of a Note dated May 16, 2020, matures May 16, 2050 and bears interest at a rate of 3.75% per annum. Payments of $731 are due monthly and will begin in May 2021. At December 31, 2020, total accrued interest on the remaining loan is $3,092 which is included in the Small Business Administration loan balance on the consolidated balance sheet.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, our President who also serves as our Chief Accounting Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, it was concluded that our disclosure controls were effective as of the end of the period covered by this report, to ensure that: (i) information required to be disclosed by the Company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified by the Securities & Exchange Commission rules and forms, and (ii) material information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to our management, including our President and Chief Accounting Officer, as appropriate, to allow for accurate and timely decision regarding required disclosure.
Internal Control over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
The management of New Jersey Mining Company is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system has been designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of the Company’s published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The management of New Jersey Mining Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. To make this assessment, we used the criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of December 31, 2020, the Company’s internal control over financial reporting is effective.
Changes in internal control over financial reporting
There was no material change in internal control over financial reporting in the quarter ended December 31, 2020.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Name & Address
Age
Position
Term
John Swallow
201 N. Third Street
Coeur d’Alene, ID 83814
Chief Executive Officer/ President & Chairman of the Board
8/29/2013 to 12/1/2014 and 5/2/2015 to present President 1/20/17 to present CEO and 8/29/2013 to present Director
7/11/2019 to present Chairman
Grant A. Brackebusch
P.O. Box 131
Silverton, ID 83867
Chief Financial Officer, Vice President, & Director
7/18/1996 to present
Kevin Shiell
201 N. Third Street
Cœur d’Alene, ID 83814
Director
1/10/17 to present
Robert Morgan
1335 Cooper St.
Missoula MT 59802
Vice President
1/16/2018 to present
Monique Hayes
4159 E. Mullan Trail Rd
Coeur d’Alene, ID 83814
Secretary
11/20/16 to present
Directors are elected by shareholders at each annual shareholders meeting to hold office until the next annual meeting of shareholders or until their respective successors are elected and qualified.
Executive Officers and Key Employees
John Swallow was named Chief Executive Officer and President on January 10, 2017. Prior to being named as CEO, Mr. Swallow was appointed as the President and a Director of the Company on August 29, 2013. He resigned as president in December 2014, and subsequently reappointed as President on May 5, 2015 following the resignation of Mr. Highsmith. Following Mr. Steiner’s resignation on July 11, 2019 Mr. Swallow became the Chairman of the Board. He holds a B.S. in Finance from Arizona State University. Mr. Swallow was the Vice President of Timberline Drilling, Inc. from November 2011 until accepting the role of President with the Company. From September 2009, until November 2011, Mr. Swallow was self-employed. From January 2006 until September 2009 he served as chairman of Timberline Resources Corporation. He brings wide-ranging experience from within the local mineral exploration industry as well as extensive knowledge of the junior equity markets. Mr. Swallow’s extensive experience in the drilling industry, his previous roles as a chairman of a board and as a vice president of a corporation qualify him to sit on the Board of the Company.
Grant A. Brackebusch, P.E. has served as the Vice President and a Director of the Company since 1996. He holds a B.S. in Mining Engineering from the University of Idaho. He is registered in Idaho as a Professional Engineer. He has worked for New Jersey Mining Company since 1996 and worked for Newmont Mining previously. Currently, he supervises the mining operation at the Golden Chest Mine including the operation of the New Jersey Mill. He has experience with permitting, exploration, open pit and underground mining as well as mineral processing. Mr. Brackebusch’s extensive mining background, knowledge of the Company’s day to day operations, and industry expertise qualifies him to sit on the Board of the Company.
Kevin Shiell has more than 35 years of operating and management experience in the mining and mineral processing industries, primarily in Montana, Idaho and Nevada. He has held executive leadership positions at several public companies, including General Manager and Vice President of Mine Operations at Stillwater Mining Company, Chief Operating Officer at MDM Gold, and various mine supervisory positions at Hecla Mining Company. Mr. Shiell is currently the General Manager of the Hollister and Midas Gold Mines which are owned and operated by Hecla Mines. He brings vast operational knowledge and management experience at a transformational time in the Company’s development.
Robert Morgan has served as the Vice President Exploration of the Company since January 2018. Mr. Morgan has over 22 years of exploration experience, including 20 years focused on gold exploration, of which 12 years were in Northern Idaho and Montana. Mr. Morgan has worked for some of the world's leading gold exploration and mining companies including Newmont and ASARCO throughout the western United States, Alaska and South America. He is practiced in designing, implementing and managing large exploration programs for gold, silver, base metals and rare earth elements. His technical work has included geologic mapping, logging of drill holes, compilation and interpretation of multiple data sets for target identification. Mr. Morgan earned his Bachelor of Science degree in geology from California State University at Chico. He has an extensive environmental background with emphasis on wetlands and water management. Mr. Morgan is a registered professional geologist with the State of Idaho and Professional Land Surveyor registered with the State of Montana.
Monique Hayes was appointed Corporate Secretary in November 2016. She has over 10 years of investor relations corporate governance experience in the mining industry and over 10 years of communications and brand management experience. Prior to joining New Jersey Mining Company, Ms. Hayes worked for Hecla Mining Company, Revett Mining Company and Sterling Mining. Her advertising and communications experience includes working for Publicis Dialog Direct and White Runkle Associates where she worked with national accounts including AT&T Wireless, Bell Atlantic and NordicTrack. Ms. Hayes attended City University where she studied business management, brand strategy and communications.
Legal Proceedings
No Director or Officer has been involved in any legal action involving the Company for the past five years.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, and the regulations thereunder, the Company’s Directors, Executive Officers and beneficial owners of more than 10% of any registered class of the Company’s equity securities are required to file reports of their ownership of the Company’s securities and any changes in that ownership with the SEC.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2020, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with.
Code of Ethics
The Company adopted a Code of Ethics at a Board of Directors meeting on December 9, 2003, that applies to the Company’s executive officers. The Company also adopted a Code of Ethics for all employees at the Board of Directors meeting on February 18, 2008.
Board Nomination Procedures
There have been no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Officers
A summary of cash and other compensation for John Swallow, the Company’s President, Chief Executive Officer, and Chairman of the Board, Delbert Steiner, the Company’s former Chief Executive Officer and former Chairman of the Board Grant Brackebusch, the Company’s Vice President, and Robert Morgan, the Company’s Vice President (the “Named Executive Officers”), for the two most recent years is as follows:
Executive Officer Summary Compensation Table
Name & Principal Position
Year
Salary ($)
Bonus ($)
Stock Awards
($)
Option Awards1
($)
Nonequity Incentive Plan Compensa-
tion
($)
Nonqualified Deferred Compensa-
tion Earnings
($)
All Other Compensa-tion(3)
($)
Total
($)
Delbert Steiner(2)
-
-
-
-
-
-
-
-
Executive Chairman
-
-
-
-
-
-
9,000
9,000
John Swallow
74,208
-
-
-
-
-
74,208
President, Chief
Executive Officer, &
Chairman
72,000
-
-
-
-
-
-
72,000
Grant Brackebusch
121,250
-
-
-
-
-
121,250
Vice President
120,000
-
-
-
-
-
-
120,000
Robert Morgan
90,000
-
-
-
-
-
-
90,000
Vice President
80,000
-
-
-
-
-
-
80,000
(1)Stock Awards and Options Awards include fees earned as Directors. The Company has valued all Stock Awards granted at fair value as computed in accordance with FASB Accounting Standards Codification Topic 718. The compensation of the Named Executive Officers has been set by disinterested members of the Board of Directors to a level competitive with other mining companies of similar size with similar types of operations. The executive stock compensation is for services as directors.
(2)Mr. Steiner resigned as Chief Executive Officer on January 10, 2017, but remained as Chairman of the Board, then resigned as Chairman of the Board on July 11, 2019.
(3)Mr. Steiner in 2019 was paid consulting fees for work completed for the Company.
The Company does not have a retirement plan for its executive officers and there is no agreement, plan or arrangement that provides for payments to executive officers in connection with resignation, retirement, termination or a change in control of the Company.
Outstanding Equity Awards at Fiscal Year-end
As of December 31, 2020, 500,000 Options were vested and outstanding to directors Grant Brackebusch, John Swallow, and Kevin Shiell.
Director Compensation
Director Summary Compensation Table
Name & Principal Position
Year
Salary ($)
Bonus ($)
Stock Awards
($)
Option Awards1
($)
Nonequity Incentive Plan Compensa-
tion
($)
Nonqualified Deferred Compensa-
tion Earnings
($)
All Other Compensa-tion
($)
Total
($)
Kevin Shiell
-
-
-
-
-
-
-
-
Director
-
-
-
-
-
-
-
-
No Option Awards were issued the Directors for service as directors of the Company in 2019 or 2020. No additional fees are paid for attendance at Board of Directors’ meetings, committee membership or committee chairmanship. On occasion, Directors are retained for consulting services unrelated to their duties as Directors. These consulting services are either paid in cash or with unregistered Common Stock according to the Company’s policy for share-based payment of services.
The Company does not have a retirement plan for its Directors and there is no agreement, plan or arrangement that provides for payments to Directors in connection with resignation, retirement, termination or a change in control of the Company.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of March 1, 2020 regarding the shares of Company Common Stock beneficially owned by: (i) each person known by the Company to own beneficially more than 5% of the Company’s Common Stock; (ii) each Director of the Company; (iii) the CEO and CFO of the Company (the “Named Executive Officers”); and (iv) all Directors and the Named Executive Officers of the Company as a group. Except as noted below, each holder has sole voting and investment power with respect to the shares of the Company Common Stock listed as owned by that person.
Security Ownership of Certain Beneficial Owners
Title of Class
Name and Address Of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of Class(1)
Common
John Swallow
201 N. Third Street
Coeur d’Alene, ID 83814
17,782,558 (a)
11.79%
Security Ownership of Management
Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of Class1
Common
John Swallow
201 N. Third Street
Coeur d’Alene, ID 83814
17,782,558 (a)
11.79%
Common
Grant A. Brackebusch
89 Appleberg Road
Kellogg, Idaho 83837
1,656,093 (b)
1.10%
Common
Kevin Shiell
201 N. Third St.
Cœur d’Alene, ID 83814
600,000 (c)
0.40%
Common
Rob Morgan
1335 Cooper St.
Missoula MT 59802
195,000 (d)
0.13%
Common
Monique Hayes
4159 E. Mullan Trail
Coeur d’Alene, Idaho 83814
338,688 (e)
0.22%
Common
All Directors and Executive Officers as a group (6 individuals)
20,572,339
13.64%
(1) Based upon 137,573,309 outstanding shares of common stock 5,975,027 warrants, 2,100,000 vested options, and 5,139,889 shares into which debt can be converted at March 1, 2021.
a)Consists of 17,347,373 shares of common stock, presently exercisable options to purchase 250,000 shares and presently exercisable warrants to purchase 185,185 shares.
b)Consists of 1,406,093 shares of common stock and presently exercisable options to purchase 250,000.
c)Consists of 600,000 shares of common stock.
d)Consists of 195,000 shares of common stock.
e)Consists of 199,800 shares of common stock and 138,888 shares into which debt can be converted.
None of the Directors or Officers has the right to acquire any additional securities pursuant to options, warrants, conversion privileges or other rights. No shares are pledged as security.
Securities Authorized for Issuance under Equity Plans
In April 2014, the Company established a stock option plan to authorize the granting of stock options to officers and employee. The Company occasionally pays for goods or services with unregistered Common Stock and uses the average bid price of the stock, as quoted on the OTCQB, at the time to determine the number of shares to be issued.
Changes in Control
None.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
None
Director Independence
The Board of Directors has determined that John Swallow and Grant Brackebusch are not independent directors. Kevin Scheill is an independent director.
The Board of Directors does not have separately designated nominating or compensation committees. The entire Board performs these functions. The Company’s audit committee is comprised of one non-executive member Kevin Shiell, and one executive member, John Swallow.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the annual financial statements included in the Company’s annual report on Form 10-K for the fiscal years ended December 31, 2020 and December 31, 2019 and the review for the financial statements included in the Company’s quarterly reports on Form 10-Q during those fiscal years, were $54,374 and $52,821 respectively.
Audit Related Fees
The Company incurred no fees during the last two fiscal years for assurance and related services by the Company’s principal accountant that were reasonably related to the performance of the audit or review of the Company’s financial statements, and not reported under “Audit Fees” above.
Tax Fees
$6,300 in 2020 and $5,400 in 2019 was paid to the Company's principal accountant for tax compliance, tax advice, and tax planning services.
All Other Fees
No other fees were incurred during the last two fiscal years for products and services rendered by the Company’s principal accountant.
Audit Committee Pre-Approval Policies
The Board of Directors has adopted an audit committee pre-approval policy. The audit committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.
PART IV
ITEM 15.
ITEM 15. EXHIBITS
3.0*
Articles of Incorporation of New Jersey Mining Company filed July 18, 1996
3.1*
Articles of Amendment filed September 29, 2003
3.2*
Articles of Amendment filed November 10, 2011
3.3*
Bylaws of New Jersey Mining Company
10.1*
Venture Agreement with United Mine Services, Inc. dated January 7, 2011.
10.2**
Rupp Mining Lease dated May 3, 2013
10.3***
Consent, Waiver and Assumption of Venture Agreement by Crescent dated February 14, 2014
10.4
Form of Forward Gold Purchase Agreement dated July 29, 2016 between the Registrant and Investors and incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on August 2, 2016.
10.5
Registrant’s Grant of Options to Directors and Officers dated December 30, 2016, incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on January 4, 2017.
10.6
Form of Agreement to Purchase the “Four Square Property Group” of Patented and Un-Patented Mining Claims dated March 2, 2018, incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on March 7, 2018
10.7
Form of Convertible Note Purchase Agreement dated as of February 18, 2020, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on February 20, 2020.
10.8
Form of Convertible Promissory Note dated as of February 18, 2020, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on February 20, 2020.
14*
Code of Ethical Conduct.
Subsidiaries of the Registrant, incorporated by reference to the Company’s Form 10-K as filed with the Securities and Exchange Commission on February 26, 2018.
31.1****
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2****
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1****
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2****
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99(i)
Audit Committee Pre-Approval Policies-Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003 and incorporated by reference herein.
101.INS****
XBRL Instance Document
101.SCH****
XBRL Taxonomy Extension Schema Document
101.CAL****
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF****
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB****
XBRL Taxonomy Extension Label Linkbase Document
101.PRE****
XBRL Taxonomy Extension Presentation Linkbase Document
* Filed with the Registrant’s Form 10 on June 4, 2014.
**Filed July 2, 2014
***Filed March 31, 2015.
****Filed herewith.
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
New Jersey Mining Company
Date: March 31, 2021By /s/ JOHN SWALLOW
John Swallow, President, Chief Executive Officer
Date: March 31, 2021 By /s/ GRANT A. BRACKEBUSCH
Grant A. Brackebusch, Vice President, Chief Financial Officer