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
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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.
December 31,
Depreciation, depletion, and amortization (575,671) (580,005)
Pre-development expense - 117,440
Less stock based compensation and other non cash items (9,632) (199,096)
All in sustaining cost (AISC) per ounce $ 1,614.13 $ 1,075.36
Financial Condition and Liquidity
For the Years Ended December 31,
Cash and cash equivalents, beginning of period 217,796 248,766
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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
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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.
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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
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New Jersey Mining Company
Table of Contents
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
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New Jersey Mining Company Consolidated Balance Sheets December 31, 2020 and 2019
ASSETS
Current assets:
Mineral properties, net of accumulated amortization 3,455,233 2,363,018
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued payroll and related payroll expenses 143,485 80,402
Notes payable related parties, current portion 37,078 34,924
Small Business Administration loan and interest, current portion 1,741 -
Convertible debt-related party 25,000
Small Business Administration loan and interest, long term 161,251 -
Commitments (Note 6) - -
Stockholders’ equity:
Total New Jersey Mining Company stockholders’ equity 8,313,276 5,653,089
The accompanying notes are an integral part of these consolidated financial statements.
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Cost of sales:
Other operating expenses:
Pre-development expenses - 117,440
Loss on write off of equipment 9,536 -
Loss on abandonment of mineral property - 333,333
Other (income) expense:
Gain on forgiveness of CARES Act loan (358,346) -
Net income (loss) attributable to non-controlling interest (97,063) (116,902)
Net income (loss) per common share-basic and diluted $ 0.00 $ 0.00
The accompanying notes are an integral part of these consolidated financial statements.
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Contribution from non-controlling interest in Mill JV - - - 47,558 47,558
Issuance of common stock for cashless warrant exercise 398,575 - - - -
Contribution from non-controlling interest in Mill JV - - - 44,063 44,063
Issuance of common stock for options exercised 25,000 4,500 - - 4,500
Issuance of common stock for cashless option exercise 550,000 - - - -
The accompanying notes are an integral part of these consolidated financial statements.
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Cash flows from operating activities:
Accretion of asset retirement obligation 9,632 9,077
Stock based compensation - 190,019
Loss on abandonment of mineral property - 333,333
Loss on write off of equipment 9,536 -
Gain on forgiveness of CARES Act loan (358,346) -
Change in operating assets and liabilities:
Joint venture receivable (1,767) (359)
Accrued payroll and related payroll expenses 63,083 22,043
Net cash provided (used) by operating activities (482,418) 206,407
Cash flows from investing activities:
Purchases of property, plant and equipment (502,879) (95,220)
Additions to mineral properties (1,077,799) -
Deposit on mineral property - (25,000)
Deposit on equipment (12,863) -
Proceeds from sale of mineral property - 50,000
Payment received on note receivable - 150,000
Net cash provided (used) by investing activities (1,593,541) 79,780
Cash flows from financing activities:
Sales of common stock and warrants, net of issuance costs 2,906,896 -
Proceeds from exercise of warrants 341,667
Proceeds from exercise of stock options 4,500 -
Principal payments on notes, related parties (62,362) (70,153)
Issuance of convertible debt 1,085,000 -
Proceeds from Small Business Administration loans 518,246 -
Contributions from non-controlling interest 44,063 47,558
Net cash provided (used) by financing activities 4,398,108 (317,157)
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Deposit applied to purchase of equipment and mineral property $ 25,000 $ 11,958
Note from related party for equipment purchase - 50,000
Conversion of convertible debt to common stock 50,000 -
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
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:
NJMJV 65% Yes Consolidated 65% Yes Consolidated
Butte Highlands Joint Venture (“BHJV”) 50% No Cost 50% No Cost
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.
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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.
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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:
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.
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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.
StockBased 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.
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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.2019-12Debt 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
Supplies inventory
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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
Buildings and equipment
Land
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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
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.
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New Jersey Mining Company
Notes to Consolidated Financial Statements
7. Notes Payable
At December 31, 2020 and 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 debt at December 31, 2020 are as follows:
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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:
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
Deferred tax liabilities
Net deferred tax assets $ - $ -
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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
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.
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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
These warrants expire as follows:
Shares Exercise Price Expiration Date
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
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
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.
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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:
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.
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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.
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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.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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. OTHER INFORMATION
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Name & Address Age Position Term
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.
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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. 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
Delbert Steiner(2) 2020 - - - - - - - -
President, Chief Executive Officer, & Chairman 2019 72,000 - - - - - - 72,000
(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.
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Director Compensation
Director Summary Compensation Table
Kevin Shiell 2020 - - - - - - - -
Director 2019 - - - - - - - -
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.
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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
Security Ownership of Management
(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. 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.
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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. 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.
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PART IV
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
14* Code of Ethical Conduct.
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.
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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, 2021By /s/ GRANT A. BRACKEBUSCH
Grant A. Brackebusch, Vice President, Chief Financial Officer
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