Idaho Strategic Resources, Inc. - Quarter Report: 2020 June (Form 10-Q)

Commission File No. 000-28837

NEW JERSEY MINING COMPANY

(Exact name of Registrant as specified in its charter)

201 N. Third Street, Coeur d’Alene, ID 83814

(Address of principal executive offices)

Registrant’s telephone number:  (208) 625-9001

Securities registered pursuant to Section 12(g) of the Act:

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨  No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

At August 1, 2020, 125,571,403 shares of the registrant’s common stock were outstanding.

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NEW JERSEY MINING COMPANY 

QUARTERLY REPORT ON FORM 10-Q 

ENDED JUNE 30, 2020 

The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

1. The Company and Significant Accounting Policies 

These unaudited interim consolidated financial statements have been prepared by the management of New Jersey Mining Company (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim consolidated financial statements have been included.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's financial position and results of operations. Operating results for the three and six month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020.

For further information refer to the financial statements and footnotes thereto in the Company’s audited financial statements for the year ended December 31, 2019 as filed with the Securities and Exchange Commission.

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 entities owned by other investors is presented as non-controlling interests on the consolidated balance sheets and statements of operations.

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. 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 4 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 of the timber have both been completed. Sales of timber found on the Company’s mineral properties are not a part of normal operations.

Inventories

Inventories are stated at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, 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 cost or estimated net realizable value.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

1. The Company and Significant Accounting Policies, Continued 

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 that are included in earnings are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.

At June 30, 2020 and December 31, 2019, the Company determined they had no assets or liabilities that required measurement at fair value on a recurring basis.

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.

New Accounting Pronouncement

Accounting Standards Updates Adopted

In August 2018, the FASB issued 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.

2.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.

3. Inventories 

At June 30, 2020 and December 31, 2019, the Company’s inventories consisted of the following:

At June 30, 2020, and December 31, 2019, gold concentrate inventory is carried at allocated production costs as they are lower than estimated net realizable value based on existing metal prices at each period end.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

4. Sales of Products 

Our products consist of both gold flotation concentrates which we sell to a single 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, we have 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 from 30 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. Also, 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 June 30, 2020, metals that had been sold but not final settled thus exposed to future price changes totaled 1,572 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.

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 arsenic, lead and zinc content above a negotiated baseline as well as excessive moisture.

For sales of metals from 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 three and six month periods ended June 30, 2020 and 2019 were as follows:

Sales by significant product type for the three and six month periods ended June 30, 2020 and 2019 were as follows:

At June 30, 2020 and December 31, 2019, our gold sales receivable balance related to contracts with customers of $374,881 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.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

5.Related Party Transactions 

At June 30, 2020 and December 31, 2019, the Company had the following notes and interest payable to related parties:

As of June 30, 2020 and December 31, 2019, there was no accrued interest payable to related parties. Related party interest expense for the three and six months ended June 30, 2020 and 2019 is as follows.

During the six month period ended June 30, 2019, the Company made three $3,000 payments for a total of $9,000 to the Company’s chairman of the board, Del Steiner for consulting purposes. Mr. Steiner retired in July 2019.

All sales of concentrate and the Company’s gold sales receivable are with H&H Metals, owner of 4% of the Company’s outstanding common stock. See Note 4.

In February 2020 the Company’s corporate secretary, Monique Hayes, participated in the Company’s convertible debt offering for $25,000. During the three and six month periods ended June 30, 2020, interest expense on her note was $499 and $734, respectively. See Note 16.

The Company leases office space from certain related parties on a month to month basis. Payments under these short-term lease arrangements are included in general and administrative expenses on the Consolidated Statement of Operations and are as follows:

6. Joint Ventures 

New Jersey Mill Joint Venture Agreement

The Company owns 65% of the New Jersey Mill Joint Venture and has significant influence in its operations. Thus the venture is included in the consolidated financial statements along with presentation of the non-controlling interest. At June 30, 2020 and December 31, 2019, an account receivable existed with Crescent Silver, LLC, the other joint venture participant (“Crescent”), for $5,127 and $2,410, respectively, for shared operating costs as defined in the JV agreement.

Butte Highlands JV, LLC (“BHJV”)

On January 29, 2016, the Company purchased a 50% interest in Butte Highlands JV, LLC (“BHJV”) from Timberline Resources Corporation for $225,000 in cash and 3,000,000 restricted shares of the Company’s common stock valued at $210,000 for a total consideration of $435,000. Highland Mining, LLC (“Highland”) is the other 50% owner and manager of the joint venture. Under the 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 accounts for its investment on a cost basis. The Company purchased the interest in the BHJV to provide additional opportunities for exploration and development and expand the Company’s mineral property portfolio.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

7.Earnings per Share 

For the three and six month periods ended June 30, 2020 and 2019, potentially dilutive shares including outstanding stock options (Note 13), warrants (Note 12), and convertible debt (Note 16) were excluded from the computation of diluted loss per share because they were anti-dilutive due to net losses in those periods. Total potentially dilutive shares were 12,353,242 and 2,130,623, for June 30, 2020 and 2019, respectively.

8. Property, Plant, and Equipment 

Property, plant and equipment at June 30, 2020 and December 31, 2019 consisted of the following:

9.Mineral Properties 

Mineral properties at June 30, 2020 and December 31, 2019 consisted of the following:

The Company received a non-refundable down payment of $50,000 toward the sale of the McKinley property in the third quarter of 2019. As of June 30 2020, negotiations with the interested parties involving this sale continue.

In December of 2019, the Company abandoned its Crown Point property and recognized a loss of $333,333.

In February 2020, the Company purchased property located in Alder Gulch in Shoshone County, Idaho which consists of 368 acres of real property, including patented mining claims with both surface and mineral rights.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

10. Notes Payable 

At June 30, 2020 and December 31, 2019, notes payable are as follows:

All notes are collateralized by the property or equipment purchased in connection with each note. Future principal payments of notes payable at June 30, 2020 are as follows:

11. Small Business Administration Loans and Grant 

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 matures on April 9, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 9, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

On May 19, 2020 the Company received a loan of $149,900 pursuant to the Small Business Act Section 7(b). The 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 twelve months from the date of the Note.

At June 30, 2020, total accrued interest on the two loans is $1,471 which is included in the current portion of the consolidated balance on the consolidated balance sheet.

Under the terms of both loans, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. Qualifying expenses include payroll costs, costs used to continue group health care benefits, mortgage payments, rent, and utilities. The Company intends to use the entire loan amount for qualifying expenses, but there is no guarantee that the loan will be forgiven.

Amendments to the CARES Act have modified repayment terms with payments beginning in August 2021. Management believes that it is unlikely that the balance of $187,996 shown as current on the consolidated balance sheet will be paid before June 30, 2021 but have chosen to present as current to reflect the provisions of the related Notes.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

During the three months ended June 30, 2020, the Company received $10,000 under Division A, Title I, Section 1110 of the CARES Act. The Company is not required to pay this amount back and thus recognized $10,000 as government grant income during the period.

12. Stockholders’ Equity 

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. In the second quarter of 2019, 1,200,000 warrants were exercised in exchange for 398,575 shares of the Company’s common stock in a cashless warrant exercise.

Stock Purchase Warrants Outstanding

The activity in stock purchase warrants is as follows:

These warrants expire as follows:

13. Stock Options 

No options were granted in the first six months of 2020 or 2019.

Activity in the Company’s stock options is as follows:

At June 30, 2020, outstanding stock options have a weighted average remaining term of approximately 1.32 years and an intrinsic value of approximately $494,025.

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New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)

14. Asset Retirement Obligation 

The Company has established asset retirement obligations associated with the ultimate closing of its mineral properties where there has been or currently are operations. Activity for the six months ended June 30, 2020 and 2019 is as follows:

15. 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 rights.

16. 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.

The Company’s corporate secretary, Monique Hayes, participated in the Company’s convertible debt offering for $25,000. During the three and six month periods ended June 30, 2020, interest expense on her note was $499 and $734, respectively.

17.Subsequent Events 

On July 7, 2020, the Company added the Robert Rare Earth Element (“Roberts REE Project”) in Lemhi County, Idaho to its portfolio of projects. The Roberts REE Project is comprised of 12 unpatented mining claims covering an area of approximately 89 hectares (219 acres). This Project is located within the Mineral Hill Mining district, approximately 48 kilometers (30 miles) northwest of the town of Salmon, Idaho.

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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, while reducing debt and growing its production and asset base over time while being mindful of corporate overhead. The Companies management is focused on utilizing its in-house 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 exploration prospects, including the McKinley and Eastern Star located in Central Idaho, and additional holdings near the Golden Chest in the Murray Gold Belt including the 368 acres of patented claims in Alder Gulch purchased in the first quarter of 2020.

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 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. There is uncertainty related to the potential additional impacts COVID-19 could have on our operations and financial results for the year.

Highlights during the second quarter of 2020 include:

·For the quarter ending June 30, 2020 a total of 9,700 dry metric tonnes (dmt) were processed at the Company’s New Jersey mill at a head grade of 2.96 grams gold per tonne (gpt) with gold recovery of 85.5%. Gold sales for the quarter were 844 ounces. 

·Open pit mining progressed from the 976 bench to the 964 bench. Open pit mine production averaged 1,490 tonnes per day (mineralized material and waste). Mining was focused on the completion of the Idaho pit and preparation tasks such as land clearing and topsoil stockpiling were commenced for a new layback of the Idaho pit and start of the Klondike pit. Effort was expended for the maintenance and improvement of sediment control structures (BMPs) around the mine site. Significant engineering time was also spent working with state regulators on the permitting of the new surface mining areas. NJMC personnel also began the construction of a new shop building at the mine. 

·Underground mining focused on the 845 and 836 levels with significant effort spent backfilling the 836 North stope. Development of the new 877 Stope access ramp was started as well as preparations for deepening the main access ramp. Approximately 2,900 tonnes of ore were mined and 1,200 cubic meters of cement backfill were placed. Both the 845 North and 836 North stopes were extended over 40 meters from previous stopes indicating the extension of gold mineralization to the north. 

·On May 27, 2020 the Company announced it had expanded its land holdings to include the Diamond Creek Rare Earth Element (REE) deposit in Lemhi County, Idaho. The Diamond Creek REE Project covers approximately 421 hectares (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 REE bearing veins of the Diamond Creek area are on the short list of the well-recognized and studied occurrences in the United States. In 1979, M.H. Staatz, of the U.S. Geological Survey (USGS) estimated an overall probable resource at Diamond Creek of approximately 70,800 metric tonnes of total rare-earth oxides, using an average grade of 1.22 percent. Reported sample assays show REE oxide contents ranging from 0.59 to 5.51 percent. Additionally, 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. 

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Results of Operations

Our financial performance during the quarter is summarized below:

·The Company had a gross profit for the three and six month periods ending June 30, 2020 of $33,359 and $131,269 respectively compared to a gross profit of $77,535 and $137,464 for the comparable periods in 2019. Gross profit decreased as a result of a decrease in underground production resulting from backfill operations and a transition to a new open pit on the surface. 

·Cash costs and all in sustaining costs per ounce increased for the periods ending June 30, 2020 compared to 2019. Cash cost per ounce increased to $1,221 and $1,149 in the three and six month periods ending June 30, 2020 compared to $1,037 and $965 in 2019. The all in sustaining costs increased to $1,387 and $1,294 for the periods ending June 30, 2020 compared to $1,154 and $1,124 in 2019 per ounce for the same periods ending June 30. The increase in per ounce costs in 2020 was the result of a decrease in underground production resulting from backfill operations and a transition to a new open pit on the surface. 

·Revenue was $1,324,498 and $2,725,331 for the three and six month periods ending June 30, 2020 compared to $1,547,654 and $2,692,328 for the comparable periods of 2019. The second quarter 2020 decrease was a result of a decrease in production resulting from backfill operations in the underground operations and a transition to a new open pit on the surface. 

·An operating loss of $194,751 and $344,286 for the three month and six periods ending June 30, 2020 compared to operating losses of $310,935 and $532,573 in the comparable periods of 2019. 

·Exploration costs decreased in the first six months of 2020 compared to 2019 as focus in 2020 has been on production at the Golden Chest however in the second quarter exploration costs for Rare Earth metals has increased. 

·Professional services expenses increased in 2020 compared to 2019. Contributing to these increases were legal fees relating to the Company’s delisting in Canada, other legal fees for document preparation, and Covid-19 related work. 

·Timber revenue increased in 2020 from sale of timber at the Company’s Alder Gulch property. 

·Interest expense increased in 2020 compared to 2019 due to greater outstanding debt in 2020 compared to the same period in 2019, in particular new convertible debt of $885,000 and the new Caterpillar haul truck. 

·The consolidated net loss for the six months ended June 30, 2020 and 2019 included non-cash charges as follows: depreciation and amortization of $269,317 ($270,858 in 2019), write off of equipment of $9,537 (none in 2019), accretion of asset retirement obligation of $4,745 ($4,471 in 2019), and stock based compensation of $0 in 2020 ($190,019 in 2019). 

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 and all in sustaining costs per ounce for the Company’s gold production in the three month periods ending June 30, 2020 and 2019.

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.

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Financial Condition and Liquidity

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.

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 matures on April 9, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 9, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

On May 19, 2020 the Company received a loan of $149,900 pursuant to the Small Business Act Section 7(b). The 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 twelve months from the date of the Note.

At June 30, 2020, total accrued interest on the two loans is $1,471 which is included in the current portion of the consolidated balance on the consolidated balance sheet.

Under the terms of both loans, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. Qualifying expenses include payroll costs, costs used to continue group health care benefits, mortgage payments, rent, and utilities. The Company intends to use the entire loan amount for qualifying expenses, but there is no guarantee that the loan will be forgiven.

Amendments to the CARES Act have modified repayment terms with payments beginning in August 2021. Management believes that it is unlikely that the balance of $187,996 shown as current on the consolidated balance sheet will be paid before June 30, 2021 but have chosen to present as current to reflect the provisions of the related Notes.

During the three months ended June 30, 2020, the Company received $10,000 under Division A, Title I, Section 1110 of the CARES Act. The Company is not required to pay this amount back and thus recognized $10,000 as government grant income during the period.

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Not required for small reporting companies.

Disclosure Controls and Procedures

At June 30, 2020, 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) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a 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.

Based upon that evaluation, it was concluded that our disclosure controls were effective as of June 30, 2020, to ensure timely reporting with the Securities and Exchange Commission. Specifically, the Company’s corporate governance and disclosure controls and procedures provided reasonable assurance that required reports were timely and accurately reported in our periodic reports filed with the Securities and Exchange Commission.

Changes in internal control over financial reporting

None.

Neither the constituent instruments defining the rights of the Company’s securities filers nor the rights evidenced by the Company’s outstanding common stock have been modified, limited or qualified.

During the second quarter of 2020, the Company issued 1,481,481 shares of unregistered common stock at $0.135 per share for net proceeds of $200,000 net of commission and brokerage costs as a result of a private placement offering. In the second quarter of 2019 1,200,000 warrants were exercised in exchange for 398,576 shares of the Company’s common stock in a cashless warrant exercise.

The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D Rule 506(b). The common shares are restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Securities Act of 1933, as amended.

The Company has no outstanding senior securities.

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None.

* Filed with the Registrant’s Form 10 on June 4, 2014. 

**Filed July 2, 2014 

***Filed March 31, 2015. 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

NEW JERSEY MINING COMPANY 

By:   /s/ John Swallow 

John Swallow, 

its: President and Chief Executive Officer 

Date August 14, 2020 

By:   /s/ Grant Brackebusch 

Grant Brackebusch, 

its: Vice President and Chief Financial Officer 

Date: August 14, 2020 

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