UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _____________ to ______________
Commission file number 000-28837
NEW JERSEY MINING COMPANY
(Name of small business issuer in its charter)
| Idaho | 82-0490295 |
| (State or other jurisdiction | (I.R.S. employer identification No.) |
| of incorporation or organization) |
89 Appleberg Road, Kellogg, Idaho 83837
(Address of principal executive offices) (zip code)
(208) 783-3331
Registrant’s telephone
number, including area code
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, No par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X ]
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ___ | Accelerated Filer ___ |
| Non-Accelerated Filer ___ | Smaller reporting company X |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act
Yes [ ] No [X ]
The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the average of the bid and ask prices on June 30, 2008 was $9,960,000.
On March 10, 2009 there were 37,169,692 shares of the registrant’s Common Stock outstanding.
EXPLANATORY NOTE
This amendment to our annual report on Form 10-K, originally filed on March 30, 2009, is furnished to provide corrections to the Executive Officer Compensation Table. Values erroneously placed in the “Option Awards” column have been moved to their correct location in the “Stock Awards” column. No option awards were granted by the company during the period of this report. A total column has also been added to the table.
There are no other material changes to the report.
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TABLE OF CONTENTS
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GLOSSARY OF SIGNIFICANT MINING TERMS
Ag-Silver.
Au-Gold.
Alluvial-Adjectivally used to identify minerals deposited over time by moving water.
Argillites-Metamorphic rock containing clay minerals.
Arsenopyrite-An iron-arsenic sulfide. Common constituent of gold mineralization.
Ball Mill-A large rotating cylinder usually filled to about 45% of its total volume with steel grinding balls. The mill rotates and crushed rock is fed into one end and discharged through the other. The rock is pulverized into small particles by the cascading and grinding action of the balls.
Bedrock-Solid rock underlying overburden.
Cu-Copper.
CIL-A standard gold recovery process involving the leaching with cyanide in agitated tanks with activated carbon. CIL means "carbon-in-leach."
Crosscut-A nominally horizontal tunnel, generally driven at right angles to the strike of a vein.
Dip-Angle made by an inclined surface with the horizontal, measured perpendicular to strike.
Deposit-A mineral deposit is a mineralized body which has been intersected by sufficient closely-spaced drill holes or underground sampling to support sufficient tonnage and average grade(s) of metal(s) to warrant further exploration or development activities.
Development Stage-As defined by the SEC-includes all issuers engaged in the preparation of an established commercially mineable deposit (reserves) for its extraction which are not in the production stage.
Drift-A horizontal mine opening driven on the vein. Driving is a term used to describe the excavation of a tunnel.
Exploration Stage-As defined by the SEC-includes all issuers engaged in the search for mineral deposits (reserves) which are not in either the development or production stage.
Fault-A fracture in the earth's crust accompanied by a displacement of one side of the fracture with respect to the other and in a direction parallel to the fracture.
Flotation-A physiochemical process for the separation of finely divided solids from one another. Separation of these (dissimilar) discrete solids from each other is affected by the selective attachment of the particle surface to gas bubbles.
GPT-grams per metric tonne.
Galena-A lead sulfide mineral. The most important lead mineral in the Coeur d'Alene Mining District.
Grade-A term used to assign the concentration of metals per unit weight of ore. An example-ounces of gold per ton of ore (opt). One troy ounce per short ton is 34.28 parts per million or 34.28 grams per metric tonne.
Mill-A general term used to denote a mineral processing plant.
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Mineralization-The presence of minerals in a specific area or geologic formation.
Ore-A mineral or aggregate of minerals which can be mined and treated at a profit. A large quantity of ore which is surrounded by waste or sub-ore material is called an orebody.
Production Stage-As defined by the SEC-includes all issuers engaged in the exploitation of a mineral deposit (reserve).
Pyrite-An iron sulfide. A common mineral associated with gold mineralization.
Quartz-Crystalline silica (SiO2). An important rock-forming and gangue material in gold veins.
Quartzites-Metamorphic rock containing quartz.
Raise-An underground opening driven upward, generally on the vein.
Ramp-An underground opening usually driven downward, but not always, to provide access to an orebody for rubber-tired equipment such as loaders and trucks. Typically ramps are inclined at about a 15% grade.
Reserves-That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are subcategorized as either proven (measured) reserves, for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes, and grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling, and measurement are spaced so closely and geologic character is so well defined that size, shape, depth, and mineral content are well-established; or probable (indicated) reserves, for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, yet the sites for inspection, sampling and measurement are farther apart.
Stope-An underground void created by the mining of ore.
Strike-The bearing or azimuth of the line created by the intersection of a horizontal plane with an inclined rock strata, vein or body.
Tellurium-Relatively rare chemical element found with gold and silver which can form minerals known as tellurides.
Tetrahedrite-Sulfosalt mineral containing copper, antimony, and silver.
Vein-A zone or body of mineralized rock lying within boundaries separating it from neighboring wallrock. A mineralized zone having a more or less regular development in length, width and depth to give it a tabular form and commonly inclined at a considerable angle to the horizontal.
Wallrock-Barren rock surrounding a vein.
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PART I
ITEM 1.
DESCRIPTION OF THE BUSINESS
BUSINESS DEVELOPMENT
With the exception of historical matters, the matters discussed in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include statements regarding planned levels of exploration and other expenditures, anticipated mine lives, timing of production and schedules for development and permitting. Factors that could cause actual results to differ materially include, among others, metals price volatility, permitting delays, and the Company’s ability to secure funding. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made herein. Readers are cautioned not to put undue reliance on forward-looking statements.
Form and Year of Organization
New
Jersey Mining Company (“the Company” or “NJMC”) is a corporation organized under
the laws of the State of Idaho on July 18, 1996. The Company was dormant until
December 31, 1996, when all of the assets and liabilities of the New Jersey
Joint Venture (a partnership) were transferred to the Company in exchange for
10,000,000 shares of common stock. The New Jersey Joint Venture, a partnership,
was formed in 1994 to develop the New Jersey mine. The partnership consisted of
Mine Systems Design, Inc. [75%], Plainview Mining Company [13%], Silver Trend
Mining Company [10%], Mark C. Brackebusch [1%], and Mascot Silver-Lead Mines,
Inc. [1%].
Any Bankruptcy, Receivership or Similar
Proceedings
There have been no bankruptcy, receivership, or
similar proceedings.
Any Material Reclassification, Merger, Consolidation, or
Purchase or Sale of a Significant Amount of Assets Not in
the Ordinary Course of Business.
There have been no material
reclassifications, mergers, consolidations, purchases, or sales for the past
three years.
BUSINESS OF THE COMPANY
General Description of the Business
The Company is involved in exploring for and developing gold, silver,
and base metal ore resources in the Pacific Northwest of the USA. The Company
has a portfolio of mineral properties including: the Niagara copper
silver-deposit, the Toboggan exploration project, the New Jersey mine, the
Silver Strand mine, the Golden Chest mine, and several other exploration
prospects. The Company operates a 100 tonne-per-day mineral processing facility
(mill) in Kellogg, Idaho.
The Company is executing a strategy of mineral exploration that is focused on the Belt Basin area of northern Idaho and western Montana. See Location Map. Our mineral processing plant has been processing ore and other mineralized material from the Golden Chest, New Jersey, and Silver Strand properties for the past four years. Our strategy is to produce some income from these properties while we explore them at depth by driving ramps or drifts to and along the mineralized structures. We can then mine and process any economic material to help offset our exploration costs. We also conduct exploratory diamond drilling and grassroots exploration in the area. Feed for the mill in 2008 was sourced from the Coleman vein at the New Jersey mine and from the Katie and Clagett veins at the Golden Chest mine. Currently, the mill is not fully utilized as it is operated four 10-hour days per week.
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Our mining operations do not provide enough income to fund our exploration, development activities, and corporate overhead so it is necessary for the Company to raise funds through the sale of common stock in private placements to qualified investors or through the sale of joint venture interests in our properties. Therefore, our exploration and development plans and resulting schedules are dependent on our ability to raise funds. If we cannot raise funds our exploration programs may be deferred or delayed.
Competitive Business Conditions
The
Company competes on several different fronts within the minerals exploration
industry. In the past year, the minerals exploration business has slowed
considerably due to the global economic crisis that occurred in the second half
of 2008. The crash in equity prices was also observed in the stock prices of
junior mining and exploration companies. As a result, it has become more
difficult to raise capital because of the limited capital available and the
relatively large number of junior mining companies. However, the Company is
focused on gold exploration and production and gold prices have remained at
attractive levels throughout the economic turmoil. This should help the Company
to compete for capital within the junior mining market.
We also compete with other mining companies for exploration properties especially for gold properties. In the past year, there have been at least three companies that have staked lode claims near the Company’s Toboggan Project which is a gold exploration joint venture with Newmont Mining Corporation.
The competition for labor within the mining sector has lessened in the past year as base metal prices have crashed causing mines to be shut down and layoff miners and technical personnel. Mineral exploration activity, specifically drilling, has declined substantially leaving a surplus of rigs and qualified personnel.
We are also subject to the risks inherent to the mineral industry. The primary risk of mineral exploration is the low probability of finding a major deposit of ore. We attempt to mitigate this risk by focusing our efforts in an area already known to host ore deposits, and also by acquiring properties we believe have the geologic and technical merits to host potentially economic mineralization. Another significant risk is the price of metals such as copper, gold and silver. If the prices of these metals were to fall substantially, it would, most likely, lead to a loss of investor interest in the mineral exploration sector which would make it more difficult to raise the capital necessary to move our exploration and development plans forward.
Effect of Existing or Probable Governmental Regulations
on the Business
All operating and exploration plans have been
made in consideration of existing governmental regulations. Regulations that
most affect operations are related to water quality. A plan of operations
(“POO”) and a financial bond are usually required before exploration or mining
activities can be conducted on public land that is administered by the United
States Bureau of Land Management (“BLM”) or United States Forest Service
(“USFS”).
The New Jersey mine, the Silver Strand mine, and the Golden Chest properties are part of the expanded Bunker Hill Superfund Site. Current plans for expanded cleanup do not include any of our mines. There is no known evidence that previous operations at the New Jersey mine prior to 1910 caused any groundwater or stream pollution or discharged any tailings into the South Fork of the Coeur d'Alene River; however, such evidence could be uncovered. The nature of the risk would probably be to clean up or cover old mine tailings that may have washed downstream from upstream mining operations. No mineral processing operations were ever conducted at the Silver Strand mine and current water sampling data has not indicated any pollution. There are no mineral processing tailings deposits at the Golden Chest mine. However, at least two old adits have small water discharges. The Company could conceivably be required to conduct cleanup operations at its own expense, however, the Environmental Protection Agency’s (EPA) Record of Decision for the Bunker Hill Mining and Metallurgical Complex Operating Unit 3 does not include any cleanup activities at the Company’s mines. NJMC has not received any notifications that it could be liable for any environmental cleanup.
Estimate of the Amount Spent on Exploration for the Last
Two Years
During the years ending December 31, 2008 and 2007,
we have spent $570,549 and $508,139, respectively, on exploration activities.
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Costs and Effects of Compliance with Environmental Laws
(Federal, State and Local)
No major Federal permits are
required for the New Jersey mine because most operations are on private land and
there are no process discharges to surface waters. Any exploration program
conducted by the Company on unpatented mining claims, usually administered by
the BLM or USFS, requires a POO to be submitted. Our exploration programs can be
delayed for significant periods of time (one to two years) because of the slow
NEPA permitting process applied by the USFS. We believe the USFS permitting
delays are caused by insufficient manpower, complicated regulations, misplaced
priorities, and sympathy for environmental groups who oppose any mining project.
The Company submitted a POO to the USFS in April 2003 for a seasonal, underground mining operation at the Silver Strand mine. The USFS conducted an Environmental Assessment (“EA”) of the plan and requested public comments on the EA in September 2004. In June 2005, the USFS issued a final Decision Notice and Finding of No Significant Impact which essentially approved the Company’s POO, but with 26 stipulations. The stipulations cover various aspects of the plan including, but not limited to, the operating season, public access through the site, water quality monitoring, development rock monitoring, slope stability monitoring, and reclamation standards. In August 2006, both the USFS and the Company signed the final operating plan or Decision Notice. The Company posted a reclamation bond of $119,725 in June of 2007 to begin operations at the Silver Strand. An additional bond of $32,075 is due once surface disturbance exceeds a certain area which gives a total bond of $151,800 for the planned project. Permit compliance activities at the Silver Strand are expected to cost about $3,500 per year.
The Company is also subject to the rules of the U.S. Department of Labor, Mine Safety and Health Administration (“MSHA”) for the New Jersey, Golden Chest, and Silver Strand operations. When a mine or mill is operating, MSHA performs a series of regular quarterly inspections to verify compliance with mine safety laws, and can assess financial penalties for violations of MSHA regulations. A typical mine citation order for a violation that is not significant or substantial is about $200.
The New Jersey mine has two important State of Idaho permits. The first is an Idaho Cyanidation Permit and the second is a reclamation plan for surface mining operations. No permit is required for the current flotation process as there is no discharge of water to surface waters and the tailings impoundments are less than 30 feet high from toe to crest. An Idaho cyanidation permit was granted October 10, 1995 [No. CN-000027]. Construction of the Concentrate Leach Plant (“CLP”) at the New Jersey mine was completed in November of 2007. The Idaho Cyanidation permit requires monthly surface water and quarterly groundwater monitoring during the operation of the CLP. It is estimated that water monitoring cost associated with operating the CLP will be approximately $6,000 per year.
A surface mining reclamation plan for the New Jersey mine was approved by the Idaho State Department of Lands in 1993. The plan calls for grading of steep fill slopes and planting of vegetation on the area disturbed by the open pit mine. An annual reclamation fee of $133 is paid to the Idaho Department of Lands for surface disturbance associated with the New Jersey mine open pit. The Company has estimated its costs to reclaim the New Jersey mine site to be $20,300.
When the Company plans an exploration drilling program on public lands, it must submit a POO to either the BLM or USFS. Compilation of the plan can take several days of professional time and a reclamation bond is usually required to start drilling once the plan is approved. Bond costs vary directly with surface disturbance area, but a small, single set-up drilling program usually requires a bond amount of about $2,500. Upon completion of the reclamation and approval by the managing agency, the bond amount is returned to the Company.
The Company complies with local building codes and ordinances as required by law.
Number of Total Employees and Number of Full Time
Employees
The Company's total number of employees is 11
including President Fred Brackebusch, Vice President Grant Brackebusch and
Secretary Tina Brackebusch. Tina Brackebusch works part-time for the Company.
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REPORTS TO SECURITY HOLDERS
The Company is not required to deliver an annual report to shareholders, however, it plans to deliver an annual report to shareholders in 2009. The annual report will contain audited financial statements. The Company may also rely on the Internet in the future to deliver annual reports to shareholders.
The Company filed a Form 10-SB with the Securities and Exchange Commission on January 11, 2000. The filing became effective on January 27, 2000. The Company has filed the required annual 10-KSB reports, quarterly 10-QSB and 10-Q reports, and occasional 8-K reports since that time.
The public may read a copy of any materials the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, NE., Washington, D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission and SEC.
The Company maintains a website where recent press releases and other information can be found. A link to the Company’s filings with the SEC is provided on the Company’s website-www.newjerseymining.com.
ITEM 2.
DESCRIPTION OF PROPERTIES
Figure 1 - Project Location Map
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NEW JERSEY MINE
Location
The New Jersey mine is an
underground mine and mill complex located four kilometers east of Kellogg,
Idaho, in the Coeur d'Alene Mining District. The property includes the gold
bearing Coleman vein system, a base metal Sullivan-type prospect known as the
Enterprise, and another gold prospect called the Scotch Thistle. The mine is
adjacent to U.S. Interstate 90 and is easily accessed by local roads throughout
the entire year. Three phase electrical power is supplied to the New Jersey mill
by Avista Utilities. The area is underlain by argillites and quartzites of the
Prichard Formation [member of Belt Supergroup] which commonly hosts gold
mineralization.
Mineral Property
The Company owns 62
acres of patented mining claims, mineral rights to 108 acres of fee land, and
approximately 130 acres of unpatented mining claims. The unpatented claims are
on federal land administered by the BLM. The Coleman pit and the current
underground workings are located on the patented mining claims wholly owned by
the Company.
Mineral Leases
A mineral lease from
William Zanetti in the New Jersey mill area contains about 60 acres. The lease
provides for the Company's exploration, development and mining of minerals on
fee land through October 2008 and thereafter as long as mining operations are
deemed continuous. The lessor may terminate the lease upon the Company's failure
to perform under the terms of the lease. The lease provides for royalties of 5%
of net sales of ores or concentrates less transportation also known as a Net
Smelter Return (“NSR”). Additional royalties of 1% to 5% are due, if the gold
price exceeds $698 per ounce as of December 31, 2008. This additional royalty
gold price is indexed to the Consumer Price Index (“CPI”) with the December 1988
CPI as the base. Also, annual advance royalties totaling $500 per year are
required under the lease. The advance royalties are accumulated and will be
credited against the royalty obligations.
A second mineral lease, known as the Grenfel lease, was acquired from Mine Systems Design, Inc. (MSD) in 2001 in exchange for 1,000,000 shares of the Company's Common Stock. The lease covers the mineral rights to 68 acres located north of the New Jersey mine area. The lease has a fifteen year term and thereafter so long as mining operations are deemed continuous. The lessor may terminate the lease upon the Company's failure to perform under the terms of the lease. A 3% NSR royalty will be paid to the lessor if production is achieved. However, the NSR royalty shall not exceed 10% of the net proceeds, except the NSR royalty shall not be less than 1%. No advance royalties or other advance payments are required by this lease.
History
There are at least 14 gold
prospects in or near the New Jersey mine area. In the late 1800’s and early
1900’s more than 2,500 feet of development workings including drifts, crosscuts,
shafts, and raises, were driven by the New Jersey Mining and Milling Company (an
unrelated company) to develop the Coleman vein and the northwest branch of the
Coleman vein. A 10 stamp gravity mill was built and operated for a short period.
Present Condition and Work Completed on the
Property
A 100 tonne per day flotation mill has been built
and commissioned on the New Jersey mine property. A six foot by six foot ball
mill is used to grind crushed ore. The crushing plant and grinding circuit were
built in 1996, and the flotation circuit was built in 2004. Construction of a
CLP was started in mid-2006, and was completed in November of 2007. The CLP
plant uses cyanidation and direct electro-winning to produce a gold-silver dore’
from gold-bearing pyrite concentrates. Based on leach cycles for the Golden
Chest pyrite concentrate, the capacity of the plant is about 10 tonnes per day.
Since 2001, the Company has drilled 14 holes for a total of 1,765 meters to explore the Coleman vein and associated zones of gold mineralization. The drilling confirmed the continuity of the Coleman vein system and discovered a broad zone of low grade (0.70 gpt gold) gold mineralization known as the Grenfel zone. Reserves on the Coleman vein were not increased as the drilling was too widely spaced to meet the criteria for a reserve calculation. The best intercept was in DDH02-02 which assayed 2.76 gpt gold over 12.5 meters including 2.5
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meters of 6.80 gpt gold. In 2008, about 400 meters of drilling was completed at the Scotch Thistle gold prospect revealing areas of silica enrichment and alteration, but no economic intervals of gold mineralization.
In 2008, the Company completed an underground exploration program of drifting on the Coleman vein on the 740 level. A total of 84 meters of drifting were completed with 20 meters of that on the vein before it was displaced by a fault. The remainder of the drifting was in waste material and was directed at finding the down-dip projection of the vein found by DDH02-2. The vein was not found, but a diamond drill station was established to allow for underground drilling to probe for the vein. A total of 725 dry tonnes were mined from the Coleman vein drifting and processed through the New Jersey mill in 2008.
As of December 31, 2008, the Company had a capital cost of $1,120,845 associated with the mineral processing plant and a capitalized development plus investment cost of $598,451 associated with the mine.
Exploration Plans
The Company plans to
diamond drill from the drill station established at the north end of 740 drift.
The target will be the down-dip extension of the vein found in DDH02-2. Timing
of the drill program will be dependent on the Company’s ability to raise
funds.
Geology and Reserves
The description
of the geology of the New Jersey mine and the calculation of mineral resources
have been completed by the Company. The description of the geology of the area
can be verified from third party published reports by the U.S. Geological Survey
and unpublished reports by Oscar Hershey, former Coeur d'Alene District
geologist. The Company is solely responsible for the reserve calculations.
Geology
The Prichard Formation, which
is 25,000 feet in thickness, underlies the New Jersey mine area which is
adjacent to and north of the major Osburn fault. The Prichard Formation is
divided into nine rock units of alternating argillites, siltites, and
quartzites, and the units exposed in the New Jersey mine area appear to belong
to the lower members. Gold mineralization is associated with sulfide-bearing
quartz veins which cut the bedding in Prichard argillite and quartzite.
Associated sulfides are pyrite, arsenopyrite, chalcopyrite, low-silver
tennatite, galena, and sphalerite.
Reserves
The reserves at the New
Jersey mine, as of this date, are those contained in an underground mine plan.
The designed stope block extends from the surface to the Keyhole Tunnel level.
Grade estimation for the block is based upon calculated head grades from
production from the Coleman vein over the past two years.
Underground Mine (Proven & Probable)
| Ore Block |
Metric Tonnes |
Gold Grade (grams per tonne) |
Ounces (gold) |
| Total | 51,604 | 3.20 | 5,310 |
The reserve tonnage is diluted. That is, the expected dilution from underground mining is accounted for in the grade and tonnage of the reserve block. The ounces stated in the above table are contained ounces. The cutoff grade used was 1.5 grams/tonne gold. The cutoff grade is based on historical costs of underground mining on the Coleman vein with a flotation processing plant recovering 85% of the gold. Gold prices used are based upon a three year average or $23.27/gram ($723.60/troy ounce). Proven and probable reserves are combined as they cannot be readily separated.
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SILVER STRAND MINE
Location
The Silver Strand mine is an
underground mine located in Kootenai County, Idaho, about 20 kilometers
east-northeast of Coeur d'Alene, Idaho. It is situated on Lone Cabin Creek, a
tributary of Burnt Cabin Creek and of the Little North Fork Coeur d'Alene River.
Primary access is from Coeur d'Alene via paved and dirt roads from Fernan Lake
to Lone Cabin Creek.
Mineral Property
The Company's Silver
Strand mine consists of fifteen unpatented lode claims wholly owned by the
Company. The claims are on public lands administered by the U.S. Forest Service.
The claims were acquired from Trend Mining Company pursuant to a purchase
agreement dated July 14, 2000. Mine Systems Design, Inc. assumed Trend’s royalty
on the Silver Strand claims in July 2001. The royalty is a 1.5% NSR capped at
$50,000 after which the NSR royalty decreases to 0.5% .
History
The Silver Strand deposit was
discovered during nearby logging activity during the 1960's and mined during the
1970's and 1980's for siliceous smelter flux. Production was 13,752 tons grading
0.093 ounces per ton gold, 9.6 ounces per ton silver and 87.1% silica. The
mining operation was shut down when the ASARCO Tacoma smelter closed in the
early 1980's. Previous owner/operators include Silver Strand Mining Company,
Silver Trend Mining Company, and Trend Mining Company. Mine Systems Design, Inc.
(MSD) had an exploration agreement with Silver Trend Mining Company that was
terminated in 1997. During the term of that lease, MSD made an agreement with
U.S. Bureau of Mines (USBM), Spokane Research Center to conduct a mining
research project at the Silver Strand mine. The USBM monitored water quality and
flows from the mine, maintained the underground openings, and conducted some
diamond drilling.
Present Condition and Work Completed on the
Property
During 2002, the Company completed an exploration
drilling program which was successful in extending the ore shoot below the No. 3
Level. Given the successful drilling results, the Company initiated the
environmental permitting process for a 1,000 tonne per month seasonal,
underground mining operation. In April 2003, the Company submitted a POO to the
USFS. In June 2005, the USFS affirmed their original Finding of No Significant
Impact with respect to the Company’s POO after an environmental group appealed
their earlier decision. In August 2006, both the USFS and the Company signed the
final operating plan or Decision Notice.
In May of 2007, the Company posted a reclamation bond of $119,725 in order to begin work at the Silver Strand. An additional bond of $32,075 is due once surface disturbance exceeds a certain level which gives a total bond of $151,800 for the planned project. Work completed at the Silver Strand in 2008 included the completion of the new No. 3 portal. No other work was completed except for required water monitoring. No surface infrastructure presently exists at the Silver Strand. There is no energy available at the site, and electrical energy requirements are satisfied with an on-site generator.
As of December 31, 2008, the Company had a capitalized development plus investment cost of $166,204 associated with the Silver Strand mine.
Exploration and Development Plans
The
Company plans for the Silver Strand property to be idle in 2009 unless it can
raise sufficient working capital to commence mining ore. Usual environmental
compliance activities such as water monitoring will take place.
Geology and Reserves
Company
geologists have completed the description of the geology of the Silver Strand
mine. Reserve calculations were completed by the Company’s geologists and
engineers. Verification of the area’s geology can be found from third party
published reports by Alfred L. Anderson of the Idaho Bureau of Mines and Geology
(Pamphlet 53).
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Geology
The upper part of the Revett
Formation outcrops at the mine. The upper Revett member contains alternating
sequences of quartzite and siltite-argillite. Beds dip shallowly to moderately
to the north (30 to 50 degrees). Alfred L. Anderson of the Idaho Bureau of Mines
and Geology mapped the geology and discussed the mineral resources of Kootenai
County in 1940 (Pamphlet 53). There are no large intrusive rock bodies near the
Silver Strand mine except for a diabase dike which has intruded the Silver
Strand mineralized zone. The Burnt Cabin fault is the major geologic structure
near the Silver Strand mine.
The Silver Strand orebody consists of a nearly-vertical, silicified (quartz) replacement zone which cuts the flat to moderately dipping Revett beds. The zone is not a fissure-filling vein. The boundaries and shape of the silicified zone were determined to some extent by a 1997 diamond drilling program completed by a previous operator. The sulfide ore mined to date appears to be enclosed within the quartz zone. The ore is black and very fine-grained. Sulfide minerals are not easy to identify because of the fine-grained texture. Minerals observed by microscopic study during metallurgical tests include: pyrite, tetrahedrite, tennantite, sphalerite, arsenopyrite and stibnite.
Reserves
Ore grades and dimensions of
the reserve blocks are based on chip sampling of the vein underground and
diamond drilling. Reserves were calculated using a gold equivalent cutoff grade
of 5 grams per tonne gold and a minimum mining width of 1.5 meters. The cutoff
grade is based on historical and estimated costs of a 1,000 tonne/month
underground mining operation, hauling ore to the Company’s mineral processing
plant about 40 miles distant, and processing with flotation and recovering 75%
of the silver and gold. Silver and gold prices used are based upon a three year
average or $0.43/gram ($13.31/troy ounce) and $23.27/gram ($723.60/troy ounce),
respectively.
| Classification |
Metric Tonnes |
Gold Grade | Silver Grade | ||
| Grams Per Tonne |
Ounces Per Ton |
Grams Per Tonne |
Ounces Per Ton | ||
| Proven & Probable |
6,903 |
5.43 |
0.158 |
361 |
10.5 |
The reserve tonnages are diluted. That is, the expected dilution from underground mining is accounted for in the grade and tonnage of the reserve blocks. Proven and probable reserves are combined as they cannot be readily separated.
GOLDEN CHEST
Location
The Golden Chest mine is an
underground mine located in Reeder Gulch about 2.4 kilometers east of Murray,
Idaho along Forest Highway 9. The property consists of two mining leases and
unpatented claims covering approximately 500 acres. The site is accessible by an
improved dirt road. A 30 ft by 20 ft steel-clad pole building is present near
the ramp portal and is used as a shop and a dry. Single phase electrical power
supplied by Avista Utilities has been installed to the portal site in Reeder
Gulch.
Mineral Lease
On January 3, 2005, the
Company signed a mining lease on the Golden Chest with Metaline Contact Mines
(MTLI) and J.W. Beasley Interests, LLC (JWBI) that covers about 270 acres. The
Company completed a pre-feasibility study on an open pit resource drilled by
Newmont Exploration Limited (“NEL”)and issued 50,000 shares of its restricted
common stock to both MTLI and JWBI to exercise the mining lease. The term of the
lease is fifteen years and as long thereafter as Leased Substances are mined,
processed or marketed from the Leased Premises. A NSR royalty of 3% is payable
to the Lessors. An additional NSR royalty up to a maximum 3% is payable based on
a sliding scale of increasing gold prices adjusted by the CPI using June 2003
(CPI=183.7) as the base. See table below.
12
Sliding Scale for Additional NSR Royalty
| Price of Gold, $ / Troy Ounce (using December 2008 CPI-U) |
Additional NSR Royalty |
| < $458 | None |
| $458 to $515 | 1.0% |
| $515 to $572 | 1.5% |
| $572 to $629 | 2.0% |
| > $629 | 3.0% |
Finally, the Company will issue 50,000 shares of restricted common stock for each increment of 10,000 troy ounces of gold production.
On January 3, 2005, the Company signed a mining lease with Prichard Creek Resource Partners, LLC that covers about 41 acres of unpatented lode claims. Upon exercising the lease the Company issued 30,000 shares of restricted common stock to Prichard Creek Resource Partners. The term of the lease is fifteen years and as long thereafter as Leased Substances are mined, processed or marketed from the Leased Premises. A NSR royalty of 3% is payable to the lessor. An additional NSR royalty is based on the same sliding scale, presented in the table above, is also payable to Prichard Creek Resource Partners. Finally, if commercial production is commenced from these claims, a one-time payment of 30,000 shares of the Company’s common stock is payable to Prichard Creek Resource Partners.
The Company also holds an additional 195 acres at the Golden Chest property through unpatented claims wholly owned by the Company. The portion of these claims within Sections 4 and 5 of Township 49N, Range 5E, BM are subject to a 1% Net Profits Royalty payable to MTLI.
History
The Golden Chest was the
largest lode producer in the Murray district, producing 65,000 ounces of gold
from narrow high grade veins primarily in the late 1800’s. NEL spent over
$500,000 on an exploration program at the Golden Chest in the late 1980s, which
consisted of soil and rock sampling, surface and underground mapping, and 3,390
meters of drilling. Newmont’s work identified a potential open pit gold
resource. Newmont dropped the property in 1990, apparently because it did not
meet their criterion of a one million ounce open-pit resource. NJMC signed a
mining lease for the property in January 2005.
Present Condition and Work Completed on the
Property
The Company started work on the property in 2004. A
ramp 440 meters in length connecting the surface to the historic No. 3 level,
known as the North Ramp, was completed in the fourth quarter of 2008. The
Company has constructed a development rock storage site, a shop building,
improved the access road, and installed electrical power to the site during the
term of its lease. Currently, a three-man crew of miners is mining ore from
remnant pillars of the Katie vein and from a section of the recently found
Clagett vein at a rate of about 400 tonnes per month. This material is shipped
to the New Jersey mill for processing.
Every year since 2004, the Company has completed an exploration core drilling program on the Golden Chest property. A total of 3,415 meters of core drilling has been completed from the surface. The majority of these holes have been targeted at extending the Idaho vein below the No. 3 level which is the deepest level in the Idaho vein area. This drilling has been successful in extending the Idaho vein at depth. As an example, DDH04-06 intercepted 17.5 meters of quartz veining that assayed 4.83 gpt gold and included a higher grade section of 5.8 meters that assayed 10.13 gpt gold. Based on this intercept and several others, a section of the Idaho vein was converted to proven and probable reserves.
The Company completed studies in 2004 on a potentially open pitable resource drilled by Newmont in the 1980’s. Handbook and scaled costs were used in conjunction with current gold prices and three-year average prices. It was concluded that the resource would not be feasible as a stand-alone project and does not meet the SEC Guide 7 requirements for reserves. Therefore, exploration at the Golden Chest will be directed toward developing resources on the Idaho vein for a larger scale underground mine.
13
As of December 31, 2008, the Company had a capitalized development plus investment cost of $644,393 associated with the Golden Chest mine.
Exploration and Development Plans
After the connection of the North Ramp to the historic No. 3 level was
completed, the Company has been able to inspect and survey the No. 3 level to
where it intersects the Idaho vein. Based on this new information, the Company
has revised its plan to access the ore reserve block on the Idaho vein which
includes driving a new adit from the surface. This new adit would be driven a
distance of about 400 meters with an estimated cost of $700,000 and require
about six months to complete. The new adit would provide access to the Idaho
vein ore reserve block as well as a connection with the North Ramp which would
improve ventilation and provide a secondary escape-way. The Company will not be
able to complete the new adit until it raises sufficient capital through an
equity offering or other financing method.
Geology and Reserves
Company
geologists have completed the description of the geology of the Golden Chest
mine. Reserve calculations were completed by the Company’s geologist and
engineer. Verification of the area’s geology can be found from third party
published reports by Philip J. Shenon (Idaho Bureau of Mines Pamphlet No. 47)
and unpublished reports by Newmont Mining Corporation.
Geology
Gold mineralization occurs in
veins associated with a thrust fault that has exploited the top of a quartzite
unit on the east limb of a north-trending synclinal fold. The mineralization
occurs in two types of quartz veins which are generally conformable to bedding
of the Prichard Formation of Proterozoic age. Thin banded veins, occurring in
argillite, contain visible gold, pyrite, arsenopyrite, galena, and sphalerite.
Thicker, massive veins occur in quartzite and contain pyrite, sphalerite,
galena, chalcopyrite, scheelite and rare visible gold. Gold mineralization is of
Mesozoic age and related to granitic intrusive rocks.
Reserves
Ore grades and dimensions of
the reserve block are based on ten diamond drillholes through the Idaho vein
with an average spacing of 40 meters and 30 drift samples. Reserves were
calculated by the Company’s geologist and chief mine engineer using a polygonal
method with a cutoff grade of 2.0 gpt gold, and a minimum mining width of 2
meters.
The reserves were calculated using estimated costs and operating parameters of a 100 tonne-per-day underground mining and mineral processing operation. The estimated costs are based on the Company’s costs of mining and processing ore from the Golden Chest. Overall metallurgical recovery of gold is expected to be 92% based on the Company’s experience at the New Jersey mill and CLP. Gold prices used are based upon a three year average or $23.27/gram ($723.60/troy ounce).
| Classification |
Metric Tonnes |
Gold Grade (grams per tonne) |
Ounces of Gold |
| Proven & Probable | 231,713 | 5.08 | 37,885 |
The reserve tonnages are diluted. That is, the expected dilution from underground mining is accounted for in the grade and tonnage of the reserve blocks. Proven and probable reserves are combined as they cannot be readily separated.
14
NIAGARA PROJECT
Location
The Niagara copper-silver
deposit is located near the forks of Eagle Creek about seven kilometers
northwest of the Company's Golden Chest operation. The property is without known
ore reserves, and consists of 39 unpatented claims that cover about 775 acres.
Access to the site is maintained through the use of a USFS road which is closed
to the general public. No electrical energy is present at the site.
Mineral Agreement
The Company signed
an exploration agreement with Revett Metals Associates (“RMA”) in December 2006.
The exploration agreement has a term of five years, beginning on December 2,
2006, and is for nine unpatented claims that cover the deposit. In addition, the
exploration agreement covers an area of mutual interest within ½ mile of the
property excluding properties which are valued primarily for their gold
mineralization. Upon signing the agreement, the Company issued 30,000 shares of
restricted common stock to RMA and paid $4,500. At each anniversary of the
signing, the Company has agreed to pay $3,000 and issue 30,000 shares of
restricted common stock to RMA. Any time prior to the expiration of the
exploration agreement, the Company can exercise an option to convert the
exploration agreement to a mining agreement. If exercised, the mining agreement
would have a term of 25 years, and the Company would pay a NSR royalty to RMA of
3.0% on ores or concentrates mined on the property. The Company is granted the
option to purchase 90% of the NSR royalty from RMA for $2,500,000 which would
leave a remaining royalty of 0.3% .
As part of the terms of the Company’s Toboggan Exploration Joint Venture agreement with Newmont Mining Corporation, Newmont retains an option to include the Niagara property into the Toboggan Project which is exercisable starting March 20, 2009 and extending for two years. If Newmont elects to include the Niagara property, it would be required to spend at least another $1,000,000 or twice what NJMC spends on exploration of the Niagara, whichever is greater, to earn its 51% interest
History
An exploration program
completed by Earth Resources Company on the Niagara property in the 1970's
identified a large volume of copper-silver mineralization within the Revett
formation. Their exploration program included eight drill holes and six trenches
on the outcrop of the mineralized strata. Earth Resources also completed
metallurgical testwork that indicated conventional flotation will achieve
recoveries of 94% for copper and 90% for silver. Earth Resources also completed
preliminary economic studies on the deposit. Kennecott owned the claims that
cover the Niagara deposit for a period of time after Earth Resources. RMA
re-staked the property in 2004 after Kennecott dropped the claims.
Present Condition and Work Completed on the
Property
During 2008, the Company completed five holes of
core drilling for a total of 1,062 meters at the Niagara project. Three of the
holes were targeted to intercept the copper-silver deposit in the Revett
formation and were successful. The drilling increased the area of copper-silver
mineralization of the Niagara deposit. As an example, drillhole 08-9 drilled
through 19.4 meters grading 0.51% copper, 25 gpt silver and 0.029 gpt gold. A
preliminary engineering study assessing the economic potential of open pit
mining at the Niagara was completed. Two holes for a cumulative total of 413
meters were drilled in the hanging wall of the Murray Peak fault in the Prichard
formation to investigate a gold-in-soil anomaly and magnetic high. Low level,
anomalous gold and tellurium mineralization were found by this drilling.
Also during 2008, the Company staked claims over an area of gold-telluride mineralization near the Niagara deposit and known as the Progress Prospect. Soil sampling indicates a gold anomaly 80 meters wide and 350 meters long. A series of old prospect trenches and adits were found and sampled.
Exploration and Development Plans
The
Company has submitted a Plans of Operations (“POO”) to the USFS for a core
drilling program at the Progress gold prospect and to drill deep holes in the
Revett strata underneath the Niagara copper-silver deposit.
15
The POO would likely be approved in late summer of 2009, and the timing of the drilling will be dependent on the Company’s ability to raise funds.
As of December 31, 2008, the Company had an investment cost of $31,500 associated with the Niagara project.
Geology
The Niagara deposit occurs in
a section of mineralized upper Revett Formation near the axis of a north-south
striking syncline. The western limb of the syncline has been truncated by the
north-south striking Murray Peak fault, a steep, west dipping reverse fault.
Other faults offset the mineralized zone slightly. In the Niagara deposit, the
mineralization occurs in the upper Revett Formation, which here is a light gray,
massive quartzite with thin siltite interbeds. The mineralized horizon crops out
along the East Fork Eagle Creek and is approximately 30 meters below the contact
with the overlying St. Regis Formation. Copper minerals include bornite,
chalcopyrite, chalcocite, native copper, and some copper oxide minerals. Silver
minerals include stomeyerite and jalpaite. Pyrite and galena also occur in trace
amounts
TOBOGGAN PROJECT
Location
The Toboggan project is an
exploration property without known ore reserves. The Toboggan project is a joint
venture with Newmont North American Exploration Limited, a subsidiary of Newmont
Mining Corporation (NYSE: NEM), to explore for gold deposits within a 38 square
mile area north of Murray, Idaho. The project consists of 382 unpatented lode
claims covering an area of approximately 7,257 acres in and near the East Fork
of Eagle Creek drainage. The Toboggan project consists of the following
prospects: Gold Butte, Mineral Ridge, Golden Reward, and Independence. The
claims can be accessed from May through November using a USFS dirt road. No
electrical energy is available at the site.
Mineral Agreement
On March 25, 2008,
the Company announced that it signed a definitive agreement with Newmont North
American Exploration Limited, a subsidiary of Newmont Mining Corporation (NYSE:
NEM) under which the parties created a joint venture, the Toboggan Project, to
explore for gold deposits within a 38 square mile area north of Murray, Idaho.
Under the terms of the agreement, Newmont can earn a 51% interest in the joint
venture by spending $2,000,000 over three years. Newmont can increase its
interest to 70% by spending an additional $10,000,000 or completing a
feasibility study in the years four through seven, whichever comes first.
As part of the terms of the agreement, Newmont retains an option to include the Niagara property into the Toboggan Project which is exercisable starting March 21, 2009, and extends for two years. If Newmont elects to include the Niagara property, it would be required to spend at least another $1,000,000 or twice what NJMC spends on exploration of the Niagara, whichever is greater, to earn its 51% interest.
History
Historic workings are present
at the Gold Butte prospect and consist of seven adits connected by a system of
narrow roads. Most of the underground work appears to have been completed by
1941. Two holes were drilled on the Gold Butte prospect in the 1980’s. Prior
geophysical exploration work by Cominco-American in the Toboggan Creek area in
the mid 1980’s found a large CSAMT geophysical anomaly, roughly two square
kilometers in area. In 1987, Cominco American drilled a hole 500 meters in depth
that was located on the eastern edge of the anomaly. It appears that the hole
was located too far to the east, and that it was not drilled deep enough to
investigate the large geophysical anomaly. Nord-Pacific completed a gold
exploration program in the Mineral Ridge area including a soil sampling program
and a reverse-circulation drilling program in 1992. Nord-Pacific identified
several anomalous gold zones with their soil sampling and completed nine holes
totaling 850 meters in their drilling program. All of the drillholes intercepted
anomalous gold mineralization including a 1.5 meter intercept of 18.9 gpt gold.
Historic workings at the Mineral Ridge prospect, which were completed before
Nord-Pacific’s work, include six adits as well as numerous pits and trenches.
The Independence area was originally staked in 1906 and was active
intermittently through the 1900’s. Work completed included four adits, and
numerous pits and trenches.
16
Present Condition and Work Completed on the
Property
During 2008, Newmont completed a comprehensive early-stage
exploration program. Work completed included the staking of additional claims
significantly increasing the area of the joint venture, soil sampling, rock
sampling, geologic mapping, a ground-based geophysical survey at the Gold Butte,
and an airborne geophysical survey over the entire joint venture area. Newmont
spent approximately $690,000 in the first year of the agreement. NJMC assisted
Newmont in their exploration efforts with technical support and also completed
66 meters of core drilling to finish a hole that had been started in 2007.
Exploration and Development Plans
Newmont has an exploration program planned for 2009 that includes core
drilling at various prospects in the Toboggan project. Plans also call for
geologic mapping, rock sampling, and soil sampling.
Geology
Gold mineralization tends to
occur in structurally controlled zones within the Prichard Formation which are
associated with large potential feeder structures such as the Murray Peak fault,
the Bloom Peak fault, and the Niagara fault. The gold mineralization can occur
either as discrete, high-grade quartz veins or within wide zones of brecciation.
Geochemical analysis of soils and rocks has led to the discovery of very high
levels of tellurium associated with zones of higher grade gold mineralization.
Electron microprobe analysis has shown the presence of gold-silver electrum and
the telluride mineral petzite. The presence of telluride minerals along with the
presence of alkaline intrusive rocks and areas of potassic alteration has led
the Company to believe the gold mineralization is associated with a deeply
buried alkaline intrusion. Alkaline rocks are a type of igneous intrusive rock
characterized by high potassium and sodium and frequently associated with gold
mineralization.
GIANT LEDGE
The Giant Ledge prospect is an
exploration project without known ore reserves. It lies about six kilometers
southeast of Murray, Idaho, in the Granite Creek drainage and is accessed by an
historic road that has been washed out in areas. No electrical power is present
at the site. The Company’s land position consists of 29 wholly owned unpatented
lode claims covering an area of 586 acres. The property hosts polymetallic lead,
copper and gold mineralization in and along the contact of an igneous intrusive.
History
The Giant Ledge prospect was
active in the 1920’s when a 122 meter deep shaft was sunk and about 450 meters
of drift development was completed. A flotation mill was erected and a minor
amount of production was achieved. Bunker Hill Mining Company examined and
mapped the mine workings in the 1950’s. Sunshine Mining Company conducted
exploration at the Giant Ledge in the mid-1980’s and drilled two core holes.
Present Condition and Work Completed on the
Property
NJMC was able to procure the core from Sunshine’s drilling
program, and the core was re-logged and assayed. The best of the mineralization
showed 4.6 meters of 0.908 gpt gold and 0.24% combined copper and lead. An
extensive soil sampling program was completed in conjunction with a VLF and
magnetometer survey. Results of the soil sampling show a 600 meter diameter gold
anomaly and the magnetometer survey shows a magnetic low coincident with the
gold anomaly.
Exploration and Development Plans
If sufficient
funds are available, the Company will perform a ground-based geophysical survey
utilizing induced polarization (IP).
17
MAC PROSPECT
The Mac prospect is an exploration project without known ore reserves. It lies about three kilometers northwest of Murray, Idaho and is accessed by USFS dirt roads. No electrical power is present at the site. The Company’s land position at the Mac Prospect consists of 32 wholly owned unpatented lode claims covering an area of 528 acres. The Mac is a gold exploration project hosted within the rocks of the Prichard formation and geochemical analysis of the gold mineralization indicates anomalous levels of tellurium similar to prospects within the Toboggan Joint Venture. Historic placer and underground mining has taken place on the property, although it is not well documented. Work completed by the Company in the past year includes claim staking, soil sampling, geologic mapping and rock sampling. Exploration plans are dependent on the Company’s ability to raise funds, but may include more soil sampling and geologic analysis to define core drilling targets.
COPPER CAMP
Summary
The Copper Camp is an exploration
project without known ore reserves. Copper Camp lies about eight kilometers
northwest of Murray, Idaho and is accessed by the Lost Creek USFS road.
Electrical power is located adjacent to the site. The Company signed an
exploration agreement with RMA in December of 2007 which covers nine unpatented
claims with an area of about 180 acres. Terms of the agreement call for an
exploration period of five years, and during or at the end of the exploration
period NJMC can decide to enter a mining agreement. Upon entering a mining
agreement, NJMC could exercise an option to buy 90% of the royalty interest for
$2.5 million or NJMC could decide to pay the full Net Smelter Royalty of 3% on
any production with annual minimum royalty requirements. Upon signing of the
agreement, the Company issued 30,000 shares of restricted common stock plus
$4,500. During the subsequent five-year exploration period, the required annual
payments are 30,000 shares and $3,000.
The Copper Camp showing is an early-stage copper and silver exploration project, having been explored with limited drilling by previous operators which include Kennecott, Cominco, and U.S. Borax. Previous operators drilled core holes down dip from the outcrop and three holes penetrated the favorable Revett Formation beds showing low-grade copper-silver mineralization. At least three intercepts were made averaging 10 meters in thickness and grading 0.10% to 0.20% copper and 1.7 to 3.3 grams per tonne (gpt) silver. One short 0.18 meter interval at 173.2 meters of depth had structurally controlled bornite mineralization grading 4.45% copper and 84.0 gpt silver. The Company has submitted a POO to the USFS for a core drilling program at Copper Camp. Approval of the POO is expected in late 2009. The timing of drilling will be dependent on the Company’s ability to secure adequate funding. An additional 13 unpatented lode claims were also staked increasing the property area to about 440 acres.
WISCONSIN-TEDDY PROSPECT
Summary
The Wisconsin-Teddy is an
exploration project without known ore reserves. The project area lies north of
the New Jersey mine and is accessed by a local frontage road. Electrical power
is available adjacent to the site. The Company's claims cover 83 acres. The
claims are unpatented and are on public land administered by the BLM. The
project is a base metal exploration project in the Prichard Formation. Several
tunnels with an aggregate length of 2,000 feet were driven on the property prior
to 1930. This development was related to two veins systems:a copper-gold vein
and a zinc-lead-silver vein. Work completed by the Company included the opening
of the Teddy underground workings, sampling on the surface and underground, and
geologic mapping. Two exploration holes were drilled in the summer of 2003 and
anomalous base metal mineralization was found. No exploration work has been
completed since 2003 and there are no plans for additional exploration work in
2009.
18
SILVER BUTTON/ROUGHWATER PROSPECT
Summary
The Silver Button is an
exploration project without known ore reserves, covers an area of 20 acres, and
is located in the Clark Fork mining district of northern Idaho. Clark Fork is
about 96 kilometers north of Kellogg, Idaho. The property was staked by the
Company in 2004 and is located in the Lightning Creek drainage. Float collected
from over a 100 m length of a vein subcrop on a talus slope contained silver
minerals as identified by microscopic and chemical analyses. Access to the site
is via foot trail and no electrical power is available at the site. Only
preliminary field sampling and claim staking have taken place at the prospect. A
POO for a helicopter-mobilized core-drilling program has been submitted to the
USFS. Modifications to the POO were made after meeting with the USFS in June of
2005. A site visit was made with USFS personnel in 2006, but the USFS has yet to
indicate if or when the POO will be approved. Exploration drilling will be
dependent on the Company’s ability to raise sufficient funds and the receipt of
a permit from the USFS. As of December 31, 2008, the Company had an investment
cost of $25,500 associated with this property.
ITEM 3.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings and is not aware of any pending or potential legal actions.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth quarter of 2008.
PART II
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's
Common Stock currently trades on the Over the Counter Bulletin Board (“OTCBB”)
under the symbol "NJMC". The following table sets forth the range of high and
low bid prices as reported by the OTCBB for the periods indicated. These
quotations represent inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.
| Year Ending December 31, 2008 | High Bid | Low Bid |
| First Quarter | $0.72 | $0.45 |
| Second Quarter | $0.50 | $0.33 |
| Third Quarter | $0.51 | $0.25 |
| Fourth Quarter | $0.36 | $0.13 |
| Year Ending December 31, 2007 | High Bid | Low Bid |
| First Quarter | $0.93 | $0.51 |
| Second Quarter | $0.85 | $0.65 |
| Third Quarter | $0.65 | $0.34 |
| Fourth Quarter | $0.57 | $0.32 |
Shareholders
As of March 10, 2009
there were approximately 1,100 shareholders of record of the Company's Common
Stock.
19
Dividend Policy
The Company has not
declared or paid cash dividends or made distributions in the past and the
Company does not anticipate that it will pay cash dividends or make
distributions in the foreseeable future. The Company currently intends to retain
and reinvest future earnings, if any, to finance its operations.
Transfer Agent
The transfer agent for
the Company's Common Stock is Columbia Stock Transfer Company, 601 E. Seltice
Way Suite 202, Post Falls, Idaho 83854.
Securities Authorized for Issuance Under Equity
Compensation Plans
The Company has not adopted an equity
compensation plan for the award of options, warrants or rights to employees or
non-employees. However, in April of 2007, the Board of Directors approved a
compensation plan for our President, Fred W. Brackebusch, that states that any
time over 130 hours per month is compensated with restricted common stock at a
rate of $150 per hour. The number of shares is calculated quarterly using the
average bid price for the quarter as quoted by the OTC Bulletin Board. Also, the
Company has issued 2,000 shares to each employee, excluding management and
directors, three times per year after one year of service has been achieved.
During the years ended December 31, 2008 and 2007, the Company issued
198,700 and 154,386 shares, respectively, of its restricted common stock valued
at $72,000 and $82,500, respectively, to Fred Brackebusch for management
services.
Occasionally, we pay for goods and services with restricted common stock. Our policy is to determine the fair value of the goods or services, and then issue the number of corresponding shares using the bid price for our common stock as quoted by the OTC Bulletin Board.
Recent Sales of Unregistered Securities
For the year ending December 31, 2008, the Company issued 516,800 shares
of restricted common stock for management and director’s fees, equipment,
services, exploration, and mining lease payments. A value of $181,990 (for an
average value of $0.35 per share) was assigned to these fees, services, and
equipment. See the statement of shareholder’s equity for a detailed list. The
transactions were strictly limited to persons in the United States who met
certain minimum financial (accredited investors) or sophistication requirements.
In management’s opinion, the securities were issued pursuant to exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6.
SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
The Company is
executing its strategy to conduct exploration for gold, silver and base metal
deposits in the greater Coeur d’Alene Mining District of northern Idaho while
concurrently conducting mining and mineral processing operations on higher grade
ore reserves it has located on its exploration properties. The financial
strategy is to generate cash from these operations to pay for corporate expenses
and to provide additional funds for exploration, thus reducing the need to raise
funds through financing activities including sale of common stock. The strategy
includes finding and developing ore reserves in order to increase production of
gold, silver, and base metals. In addition, the sale or joint venture of mineral
properties is used as a source of funds and to reduce exploration costs.
20
The Company has several properties at which most exploration is being conducted; the Toboggan Project, the Niagara, the Golden Chest, the Silver Strand, the Coleman, and the Giant Ledge. The Toboggan Project is a group of prospects in the Murray, Idaho District that appear to be related to alkaline magmatism and contain gold and silver telluride minerals. The Toboggan Project is being explored by Newmont North America Exploration Limited under a joint venture agreement. Newmont is conducting exploration in a 38 square mile area centered on the prospects that the Company has staked previously and on new claims staked by Newmont. During 2008 Newmont completed soil and stream sediment sampling surveys, geological mapping, and geophysical surveys. Newmont has made plans for drilling certain targets in 2009.
The Niagara copper-silver deposit, also located in the Murray, Idaho area, in the Revett formation was drilled in the 1970’s, and the Company drilled 5 holes in 2008 which expanded the resource. Results of the 2008 drilling also indicate that gold would be a significant byproduct. The Company will continue in-fill drilling on the known resource and is planning to drill to intercept a deeper stratabound target in the Revett formation.
At the Golden Chest mine, during 2008, a ramp was being driven to access a block of reserves discovered by drilling from the surface. Near the end of the third quarter the ramp intersected the #3 level of the old workings thus increasing access to potential drilling targets and providing quicker potential for secondary and haulage access. The ramp development work was suspended near yearend in order to conserve cash, and small scale production from remnants was re-started. Permits are in place and development of infrastructure has been completed in order to be able to begin production of silver-gold ore at the Silver Strand mine in May 2009. At the Coleman underground mine, a drift was completed to the vicinity of a drill intercept which indicates the presence of higher grade gold-silver mineralization. Further work at the Coleman will not be done until drilling is conducted to locate the higher grade vein. The Giant Ledge is a new prospect which was staked in 2008. Geophysical and geological studies were conducted during the year. Gold, lead and copper mineralization is related to an intrusive stock.
The Company continued to conduct core drilling operations in 2008 with its own core drilling machine. Exploration drillholes were drilled near the Coleman mine, at the Niagara deposit, and at the Golden Chest mine. Also one drillhole was completed at the Toboggan Project. During the year, 12 drillholes were completed for a total drilling length of 1,916 meters.
The New Jersey mineral processing plant processed 1,400 tonnes during the year as it was operated only part of the available time. Improvements were made during the year by building a new ore feeder to facilitate cold weather operation, installing a new concentrate filter, and making improvements in the CLP. Near yearend the plant resumed operations on a regular schedule of 4 days per week, 10 hours per day, processing ore from the Golden Chest mine.
Changes in Financial Condition
The
Company maintains an adequate cash balance by increasing or decreasing its
exploration expenditures as limited by availability of cash from operations or
from financing activities. The cash balance at the end of the year was $321,254,
and Figure 1 shows the corresponding balances for previous accounting periods.
21
The cash balance declined during the year from a highpoint of $1,384,884 in the second quarter to the lower balance at the end of 2008 due to exploration and development expenditures, lack of sales and financing activities. Investment in a marketable equity security held by the Company decreased from $391,872 to $16,328 during the year due to decline in the stock price of that security. Figure 1 shows that the yearend cash balance has been very similar for 2006 through 2008.
Results of Operations
Income Earned
during the Development Stage (Revenue) for the year 2008 was $50,559 as compared
to $99,954 for 2007. Figure 2 shows losses in each quarter, which total
$1,423,829 in 2008 compared to an almost identical loss in 2007 of $1,453,268.
Gold production was 128 ounces in 2008 as compared to 108 ounces for 2007. Gold production in 2009 is expected to increase due to plans to mine more tonnage in 2009.
Ore mining operations at the Golden Chest mine are expected to be approximately 400 tonnes/month in the first half of 2009, probably declining after that. If financing can be obtained, ramp access will be extended to the Idaho vein reserves. Once the Idaho vein ramp development is completed there will be enough reserves for many years of mining at the rate of 4,000 tonnes/year.
Ore production is scheduled at the Silver Strand mine in the second quarter of 2009. Production could commence
22
in 30 days after mobilization in May 2009, depending on weather. Operating results at the Silver Strand mine will depend upon the price of silver as well as gold. Present silver and gold prices are sufficient in management’s estimation to generate a gross profit at the Silver Strand mine based on the operating plan which was part of the permitting process.
No large capital expenditures are planned at the New Jersey mineral processing plant.
The amount of money to be spent on exploration at the Company’s mines and prospects will depend upon the amount of gross profit generated by operations and the amount of money raised by financing activities. Basically, management expects to be able to continue the present operating scenario with its three active mines and mineral processing plant indefinitely, but expanded exploration or production activities depend upon the results of financing activities.
The Company has prepared a detailed POO assuming no funds are produced by financing efforts. This detailed plan covers the first four months of 2009. Actions taken under the plan include cutting management cash salaries by 50%, reducing wages and laying off three employees, and deferring expenditures that are not absolutely necessary to the plan. Production from remnant pillars and the newly-found Clagett vein at the Golden Chest is feeding the mineral processing plant at the rate of 400 tonnes/month. It is hoped to maintain a cash balance of $150,000 to $200,000. If no financing is achieved by April 30, 2009, the plan will be reviewed and a decision made to continue the plan or to enter into a “hibernation” plan by laying off most employees and cutting management costs further. Plans are being made for the Company to drill for Newmont at the Toboggan Project on a contract basis during the summer season, and a Service Contract has been signed. Newmont currently pays for all exploration activities on the Toboggan Project.
As shown in the accompanying financial statements, the Company has minimal revenue and incurred an accumulated deficit of $5,922,260 through December 31, 2008. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management intends to seek additional capital from new equity securities offerings and joint venture agreements that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Should the Company be unable to raise capital through future private placements and/or joint venture agreements or achieve significant revenues from its operations, its business, and, as a result, its financial position, results of operations and cash flow will likely be materially adversely impacted. We expect to receive cash flow from the gold sales and by providing drilling services to Newmont on our joint venture (see note 8. Mining Venture Agreements–Newmont Venture Agreement).
For 2009, the Company has plans to reduce its discretionary exploration expenditures as well as its overhead expenses. With these reductions, the Company believes it will only need an estimated $500,000 to continue operations through the next twelve months.
Changes in Costs
Direct production costs, management costs, and exploration costs in 2008 tracked 2007 costs fairly closely. General and administrative costs increased significantly from 2007 due to employee related overhead costs which increased due to an increase in the number and tenure of employees. General and administrative costs also increased due to increased legal fees which were incurred relating to the new SEC format along with proxy preparation and for road access research relating to the Company’s mining claims.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
23
ITEM 8.
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Board of Directors
New Jersey Mining Company
We have audited the accompanying balance sheets of New Jersey Mining Company (A Development Stage Company) (“the Company”) as of December 31, 2008 and 2007, and the related statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of New Jersey Mining Company as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has minimal revenue and accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DeCoria, Maichel & Teague P.S.
DeCoria, Maichel & Teague P.S.
Spokane, Washington
March 18, 2009
24
New Jersey Mining Company
(A Development Stage
Company)
Table of Contents
25
| New Jersey Mining Company |
| (A Development Stage Company) |
| Balance Sheets |
| December 31, 2008 and 2007 |
| ASSETS | ||||||
| 2008 | 2007 | |||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 321,254 | $ | 271,473 | ||
| Investment in marketable equity security at market | ||||||
| (cost-$6,531) | 16,328 | 391,872 | ||||
| Interest receivable | 324 | 1,277 | ||||
| Miscellaneous receivable | 5,516 | |||||
| Prepaid expense | 572 | |||||
| Inventories | 99,092 | 89,517 | ||||
| Total current assets | 443,086 | 754,139 | ||||
| Property, plant and equipment, net of accumulated depreciation | 1,470,355 | 1,524,463 | ||||
| Mineral properties, net of accumulated amortization | 1,398,334 | 1,004,444 | ||||
| Reclamation bonds | 123,520 | 126,073 | ||||
| Total assets | $ | 3,435,295 | $ | 3,409,119 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 44,677 | $ | 63,544 | ||
| Accrued payroll and related payroll expenses | 45,706 | 37,730 | ||||
| Obligations under capital lease-current portion | 26,665 | 36,940 | ||||
| Notes payable-current portion | 114,534 | 118,046 | ||||
| Total current liabilities | 231,582 | 256,260 | ||||
| Accrued reclamation costs | 53,500 | 19,800 | ||||
| Obligations under capital lease-non-current | 20,292 | 46,956 | ||||
| Notes payable-non-current | 184,147 | 263,896 | ||||
| Total non-current liabilities | 257,939 | 330,652 | ||||
| Total liabilities | 489,521 | 586,912 | ||||
| Commitments and contingencies (Note 13) | ||||||
| Stockholders’ equity: | ||||||
| Preferred stock, no par value, 1,000,000 shares | ||||||
| authorized; no shares issued and outstanding | ||||||
| Common stock, no par value, 50,000,000 | ||||||
| shares authorized; 2008-37,160,392 and 2007- | ||||||
| 32,291,192 shares issued and outstanding | 8,858,237 | 6,935,297 | ||||
| Deficit accumulated during the development stage | (5,922,260 | ) | (4,498,431 | ) | ||
| Accumulated other comprehensive income: | ||||||
| Unrealized gain on marketable equity security | 9,797 | 385,341 | ||||
| Total stockholders’ equity | 2,945,774 | 2,822,207 | ||||
| Total liabilities and stockholders’ equity | $ | 3,435,295 | $ | 3,409,119 | ||
The accompanying notes are an integral part of these financial statements.
26
| New Jersey Mining Company |
| (A Development Stage Company) |
| Statements of Operations and Comprehensive Income (Loss) |
| For the Years Ended December 31, 2008 and 2007, |
| And from Inception (July 18, 1996) through December 31, 2008 |
| From Inception | |||||||||
| (July 18, 1996) | |||||||||
| December 31, | Through | ||||||||
| December 31, 2008 | |||||||||
| 2008 | 2007 | (Unaudited) | |||||||
| Income earned during the development stage: | |||||||||
| Sales of gold | $ | 50,559 | $ | 49,447 | $ | 149,715 | |||
| Sales of concentrate | 50,507 | 601,168 | |||||||
| 50,559 | 99,954 | 750,883 | |||||||
| Costs and expenses: | |||||||||
| Direct production costs | 184,163 | 189,342 | 949,537 | ||||||
| Management | 304,668 | 326,807 | 1,279,983 | ||||||
| Exploration | 570,549 | 508,139 | 2,169,274 | ||||||
| Gain on sale of mineral property | (90,000 | ) | |||||||
| Gain on default of mineral | |||||||||
| property sale (Note 8) | (270,000 | ) | (270,000 | ) | |||||
| Depreciation and amortization | 204,284 | 159,768 | 544,628 | ||||||
| General and administrative expenses | 517,413 | 434,767 | 2,126,372 | ||||||
| Total operating expenses | 1,511,077 | 1,618,823 | 6,709,794 | ||||||
| Other (income) expense: | |||||||||
| Timber sales | (487 | ) | (54,699 | ) | |||||
| Timber expense | 14,554 | ||||||||
| Royalties and other income | (1,500 | ) | (1,889 | ) | (71,703 | ) | |||
| Royalties expense | 656 | 6,541 | 34,273 | ||||||
| Contract income | (23,725 | ) | (23,725 | ) | |||||
| Gain on sale of marketable equity security | (70,109 | ) | (70,109 | ) | |||||
| Interest income | (15,371 | ) | (26,969 | ) | (46,442 | ) | |||
| Interest expense | 3,251 | 27,312 | 60,250 | ||||||
| Write-off of goodwill | 30,950 | ||||||||
| Write-off of investment | 90,000 | ||||||||
| Total other (income) expense | (36,689 | ) | (65,601 | ) | (36,651 | ) | |||
| Net loss | 1,423,829 | 1,453,268 | 5,922,260 | ||||||
| Other Comprehensive income: | |||||||||
| Unrealized (gain) loss on marketable | |||||||||
| equity security | 375,544 | 525,909 | (9,797 | ) | |||||
| Comprehensive loss | $ | 1,799,373 | $ | 1,979,177 | $ | 5,912,463 | |||
| Net loss per common share-basic | $ | 0.04 | $ | 0.05 | $ | 0.32 | |||
| Weighted average common | |||||||||
| shares outstanding-basic | 35,871,521 | 30,717,377 | 18,708,956 | ||||||
The accompanying notes are an integral part of these financial statements.
27
| New Jersey Mining Company |
| (A Development Stage Company) |
| Statement of Changes in Stockholders' Equity |
| For the Years Ended December 31, 2007, and 2008 (audited), and for the Period |
| From Inception (July 18, 1996) Through December 31, 2008 (unaudited) |
| Accum. Other | Total | |||||||||||||||||
| Common Stock | Accumulated | Comprehensive | Treasury | Stockholders' | ||||||||||||||
| Shares | Amount | Deficit | Income | Stock | Equity | |||||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Assets and liabilities of New Jersey Joint Venture | 10,000,000 | $ | 207,968 | $ | $ | $ | $ | 207,968 | ||||||||||
| Acquisition of Plainview Mining Company | 1,487,748 | 148,000 | 148,000 | |||||||||||||||
| Cash from sales | 228,816 | 110,115 | 110,115 | |||||||||||||||
| Services | 14,000 | |||||||||||||||||
| Net loss | (44,174 | ) | (44,174 | ) | ||||||||||||||
| Balance, December 31, 1997 | 11,730,564 | 466,083 | (44,174 | ) | 421,909 | |||||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Acquisition of Plainview Mining Company | 1,512,252 | 152,000 | 152,000 | |||||||||||||||
| Cash from sales | 117,218 | 29,753 | 29,753 | |||||||||||||||
| Services | 18,000 | |||||||||||||||||
| Treasury stock acquired with Plainview acquisition | (136,300 | ) | (136,300 | ) | ||||||||||||||
| Net loss | (30,705 | ) | (30,705 | ) | ||||||||||||||
| Balance, December 31, 1998 | 13,378,034 | 647,836 | (74,879 | ) | (136,300 | ) | 436,657 | |||||||||||
| Issuance of common stock for services | 79,300 | - | ||||||||||||||||
| Net loss | (23,738 | ) | (23,738 | ) | ||||||||||||||
| Balance, December 31, 1999 | 13,457,334 | 647,836 | (98,617 | ) | (136,300 | ) | 412,919 | |||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Silver Strand property | 50,000 | 68,750 | 68,750 | |||||||||||||||
| Services | 62,100 | 4,313 | 4,313 | |||||||||||||||
| Net loss | (20,492 | ) | (20,492 | ) | ||||||||||||||
| Balance, December 31, 2000 | 13,569,434 | 720,899 | (119,109 | ) | (136,300 | ) | 465,490 | |||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Grenfel lease | 1,000,000 | 100,000 | 100,000 | |||||||||||||||
| Lost Eagle property | 50,000 | 5,000 | 5,000 | |||||||||||||||
| Roughwater property | 255,000 | 25,500 | 25,500 | |||||||||||||||
| Services | 68,400 | 6,840 | 6,840 | |||||||||||||||
| Net loss | (6,448 | ) | (6,448 | ) | ||||||||||||||
| Balance, December 31, 2001 | 14,942,834 | 858,239 | (125,557 | ) | (136,300 | ) | 596,382 | |||||||||||
The accompanying notes are an integral part of these financial statements.
28
| New Jersey Mining Company |
| (A Development Stage Company) |
| Statement of Changes in Stockholders' Equity, continued: |
| For the Years Ended December 31, 2007, and 2008 (audited), and for the Period |
| From Inception (July 18, 1996) Through December 31, 2008 (unaudited) |
| Accum. Other | Total | |||||||||||||||||
| Common Stock | Accumulated | Comprehensive | Treasury | Stockholders' | ||||||||||||||
| Shares | Amount | Deficit | Income | Stock | Equity | |||||||||||||
| Balance, December 31, 2001 | 14,942,834 | $ | 858,239 | $ | (125,557 | ) | $ | $ | (136,300 | ) | $ | 596,382 | ||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 1,700,000 | 255,000 | 255,000 | |||||||||||||||
| Services | 9,835 | 1,475 | 1,475 | |||||||||||||||
| Directors’ fees | 15,000 | 2,250 | 2,250 | |||||||||||||||
| Acquisition of Gold Run Gulch Mining Company | 1,916,250 | 273,954 | 273,954 | |||||||||||||||
| Net loss, as previously reported | (51,307 | ) | (51,307 | ) | ||||||||||||||
| Balance, December 31, 2002, as previously reported | 18,583,919 | 1,390,918 | (176,864 | ) | (136,300 | ) | 1,077,754 | |||||||||||
| Change in accounting for exploration costs | (9,883 | ) | (9,883 | ) | ||||||||||||||
| Correction of error in accounting for stock issuance costs | (25,500 | ) | 25,500 | |||||||||||||||
| Balance, December 31, 2002, restated | 18,583,919 | 1,365,418 | (161,247 | ) | (136,300 | ) | 1,067,871 | |||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Exercise of stock purchase warrants | 810,000 | 200,750 | 200,750 | |||||||||||||||
| Cash, net of issuance costs | 795,000 | 318,000 | 318,000 | |||||||||||||||
| Management and directors’ fees | 381,200 | 144,326 | 144,326 | |||||||||||||||
| Equipment | 5,000 | 3,000 | 3,000 | |||||||||||||||
| Services | 21,915 | 7,262 | 7,262 | |||||||||||||||
| Exploration lease | 20,000 | 8,000 | 8,000 | |||||||||||||||
| Treasury stock cancelled | (1,947,144 | ) | (136,300 | ) | 136,300 | |||||||||||||
| Net loss | (379,274 | ) | (379,274 | ) | ||||||||||||||
| Balance, December 31, 2003 | 18,669,890 | 1,910,456 | (540,521 | ) | 1,369,935 | |||||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Exercise of stock purchase warrants | 1,437,500 | 398,750 | 398,750 | |||||||||||||||
| Cash | 1,184,550 | 511,440 | 511,440 | |||||||||||||||
| Management and directors’ fees | 153,460 | 102,273 | 102,273 | |||||||||||||||
| Equipment | 28,650 | 16,476 | 16,476 | |||||||||||||||
| Services | 26,750 | 14,550 | 14,550 | |||||||||||||||
| Exploration lease | 20,000 | 12,000 | 12,000 | |||||||||||||||
| Net loss | (922,555 | ) | (922,555 | ) | ||||||||||||||
| Balance, December 31, 2004 | 21,520,800 | 2,965,945 | (1,463,076 | ) | 1,502,869 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
29
| New Jersey Mining Company |
| (A Development Stage Company) |
| Statement of Changes in Stockholders' Equity, continued: |
| For the Years Ended December 31, 2007, and 2008 (audited), and for the Period |
| From Inception (July 18, 1996) Through December 31, 2008 (unaudited) |
| Accum. Other | Total | |||||||||||||||||
| Common Stock | Accumulated | Comprehensive | Treasury | Stockholders' | ||||||||||||||
| Shares | Amount | Deficit | Income | Stock | Equity | |||||||||||||
| Balance, December 31, 2004 | 21,520,800 | $ | 2,965,945 | $ | (1,463,076 | ) | $ | $ | $ | 1,502,869 | ||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 309,100 | 125,000 | 125,000 | |||||||||||||||
| Exercise of stock purchase warrants | 195,250 | 78,100 | 78,100 | |||||||||||||||
| Management and directors’ fees | 334,275 | 132,725 | 132,725 | |||||||||||||||
| Services | 82,170 | 37,826 | 37,826 | |||||||||||||||
| Exploration and lease | 149,400 | 74,321 | 74,321 | |||||||||||||||
| Equipment | 11,500 | 4,700 | 4,700 | |||||||||||||||
| Value of shares issued in prior years | 24,050 | 24,050 | ||||||||||||||||
| Net loss | (590,485 | ) | (590,485 | ) | ||||||||||||||
| Balance, December 31, 2005 | 22,602,495 | 3,442,667 | (2,053,561 | ) | 1,389,106 | |||||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 4,521,250 | 1,368,500 | 1,368,500 | |||||||||||||||
| Management and directors’ fees | 236,480 | 127,063 | 127,063 | |||||||||||||||
| Services | 162,860 | 56,137 | 56,137 | |||||||||||||||
| Exploration | 10,000 | 5,750 | 5,750 | |||||||||||||||
| Lease | 30,000 | 15,000 | 15,000 | |||||||||||||||
| Equipment | 23,400 | 12,200 | 12,200 | |||||||||||||||
| Unrealized gain in marketable equity security | 911,250 | 911,250 | ||||||||||||||||
| Net loss | (991,602 | ) | (991,602 | ) | ||||||||||||||
| Balance, December 31, 2006 | 27,586,485 | 5,027,317 | (3,045,163 | ) | 911,250 | 0 | 2,893,404 | |||||||||||
The accompanying notes are an integral part of these financial statements.
30
| New Jersey Mining Company |
| (A Development Stage Company) |
| Statement of Changes in Stockholders' Equity, continued: |
| For the Years Ended December 31, 2007, and 2008 (audited), and for the Period |
| From Inception (July 18, 1996) Through December 31, 2008 (unaudited) |
| Accum. Other | Total | |||||||||||||||||
| Common Stock | Accumulated | Comprehensive | Treasury | Stockholders' | ||||||||||||||
| Shares | Amount | Deficit | Income | Stock | Equity | |||||||||||||
| Balance, December 31, 2006 | 27,586,485 | $ | 5,027,317 | $ | (3,045,163 | ) | $ | 911,250 | $ | 0 | $ | 2,893,404 | ||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 4,014,761 | 1,533,319 | 1,533,319 | |||||||||||||||
| Exercise of warrants | 200,000 | 120,000 | 120,000 | |||||||||||||||
| Management and directors fees | 274,386 | 142,500 | 142,500 | |||||||||||||||
| Services | 52,104 | 27,157 | 27,157 | |||||||||||||||
| Exploration | 52,200 | 32,560 | 32,560 | |||||||||||||||
| Mineral property agreement | 60,000 | 30,000 | 30,000 | |||||||||||||||
| Property, plant and equipment | 20,756 | 10,239 | 10,239 | |||||||||||||||
| Accounts payable | 30,500 | 12,205 | 12,205 | |||||||||||||||
| Unrealized gain (loss) in marketable equity security | (525,909 | ) | (525,909 | ) | ||||||||||||||
| Net loss | (1,453,268 | ) | (1,453,268 | ) | ||||||||||||||
| Balance, December 31, 2007 | 32,291,192 | 6,935,297 | (4,498,431 | ) | 385,341 | 0 | 2,822,207 | |||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 2,400 | 950 | 950 | |||||||||||||||
| Exercise of warrants | 4,350,000 | 1,740,000 | 1,740,000 | |||||||||||||||
| Management and directors fees | 318,700 | 108,000 | 108,000 | |||||||||||||||
| Services | 74,000 | 32,000 | 32,000 | |||||||||||||||
| Exploration | 35,100 | 15,390 | 15,390 | |||||||||||||||
| Mineral property agreement | 75,000 | 21,000 | 21,000 | |||||||||||||||
| Property, plant and equipment | 14,000 | 5,600 | 5,600 | |||||||||||||||
| Unrealized gain (loss) in marketable equity security | (375,544 | ) | (375,544 | ) | ||||||||||||||
| Net loss | (1,423,829 | ) | (1,423,829 | ) | ||||||||||||||
| Balance, December 31, 2008 | 37,160,392 | $ | 8,858,237 | $ | (5,922,260 | ) | $ | 9,797 | $ | 0 | $ | 2,945,774 | ||||||
The accompanying notes are an integral part of these financial statements.
31
| New Jersey Mining Company |
| (A Development Stage Company) |
| Statements of Cash Flows |
| For the Years Ended December 31, 2008 and 2007, |
| And from Inception (July 18, 1996) through December 31, 2008 |
| From Inception | |||||||||
| Years Ended | (July 18, 1996) | ||||||||
| December 31, | through | ||||||||
| December 31, 2008 | |||||||||
| 2008 | 2007 | (Unaudited) | |||||||
| Cash flows from operating activities: | |||||||||
| Net loss | $ | (1,423,829 | ) | $ | (1,453,268 | ) | $ | (5,922,260 | ) |
| Adjustments to reconcile net loss to net cash | |||||||||
| Used by operating activities: | |||||||||
| Depreciation and amortization | 204,284 | 159,768 | 544,628 | ||||||
| Write-off of equipment | 11,272 | ||||||||
| Write-off of goodwill and investment | 120,950 | ||||||||
| Gain on sale of mineral property | (90,000 | ) | |||||||
| Gain on default of mineral property sale | (270,000 | ) | (270,000 | ) | |||||
| Gain on sale of marketable equity securities | (70,109 | ) | (70,109 | ) | |||||
| Common stock issued for: | |||||||||
| Management and directors’ fees | 108,000 | 142,500 | 775,037 | ||||||
| Services and other | 32,000 | 27,157 | 193,310 | ||||||
| Exploration | 15,390 | 32,560 | 84,271 | ||||||
| Mineral property agreement | 15,000 | 15,000 | |||||||
| Change in: | |||||||||
| Prepaid expense | (572 | ) | (572 | ) | |||||
| Inventories | (9,575 | ) | 42,569 | (99,092 | ) | ||||
| Miscellaneous receivable | (5,516 | ) | 13,628 | (5,516 | ) | ||||
| Interest receivable | 953 | (1,277 | ) | (324 | ) | ||||
| Other assets | (778 | ) | |||||||
| Accounts payable | (18,867 | ) | (36,884 | ) | 53,913 | ||||
| Accrued payroll and related payroll expense | 7,977 | 6,209 | 45,706 | ||||||
| Accrued reclamation costs | 500 | 1,800 | 20,300 | ||||||
| Net cash used by operating activities | (1,359,255 | ) | (1,120,347 | ) | (4,594,264 | ) | |||
| Cash flows from investing activities: | |||||||||
| Purchases of property, plant and equipment | (101,924 | ) | (195,992 | ) | (1,079,856 | ) | |||
| Purchase of mineral property | (3,000 | ) | (4,500 | ) | (17,904 | ) | |||
| Proceeds from sale of mineral property | 120,000 | ||||||||
| Deposit received on sale of mineral property (Note 8) | 270,000 | 270,000 | |||||||
| Purchase of reclamation bonds | 2,553 | (123,573 | ) | (123,520 | ) | ||||
| Purchase of certificates of deposits | (200,000 | ) | |||||||
| Proceeds from sales of certificates of deposits | 200,000 | 200,000 | |||||||
| Purchase of marketable equity security | (7,500 | ) | |||||||
| Proceeds from sales of marketable equity securities | 71,078 | 71,078 | |||||||
| Cash of acquired companies | 38,269 | ||||||||
| Deferral of development costs | (343,107 | ) | (190,567 | ) | (759,209 | ) | |||
| Net cash used by investing activities | (175,478 | ) | (243,554 | ) | (1,488,642 | ) | |||
| Cash flows from financing activities: | |||||||||
| Exercise of stock purchase warrants | 1,740,000 | 120,000 | 2,537,600 | ||||||
| Sales of common stock, net of issuance costs | 950 | 1,533,319 | 4,226,576 | ||||||
| Principal payments on capital lease | (36,940 | ) | (35,473 | ) | (156,832 | ) | |||
| Principal payments on notes payable | (119,496 | ) | (59,293 | ) | (203,184 | ) | |||
| Net cash provided by financing activities | 1,584,514 | 1,558,553 | 6,404,160 | ||||||
| Net change in cash and cash equivalents | 49,781 | 194,652 | 321,254 | ||||||
| Cash and cash equivalents, beginning of period | 271,473 | 76,821 | 0 | ||||||
| Cash and cash equivalents, end of period | $ | 321,254 | $ | 271,473 | $ | 321,254 | |||
| Supplemental disclosure of cash flow information | |||||||||
| Interest paid in cash, net of amount capitalized | $ | 3,251 | $ | 27,311 | $ | 50,886 | |||
| Non-cash investing and financing activities: | |||||||||
| Common stock issued for: | |||||||||
| Property, plant and equipment | $ | 5,600 | $ | 10,239 | $ | 50,365 | |||
| Mineral properties | $ | 21,000 | $ | 15,000 | $ | 315,300 | |||
| Payment of accounts payable | $ | 12,205 | $ | 12,205 | |||||
| Acquisitions of companies, excluding cash | $ | 743,653 | |||||||
| Capital lease obligation incurred for equipment acquired | $ | 178,588 | |||||||
| Notes payable for property and equipment acquired | $ | 36,235 | $ | 401,112 | $ | 482,634 | |||
The accompanying notes are an integral part of these financial statements.
32
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to 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 and developing 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 has started minor production from high grade reserves located near the surface with the strategy to generate cash to be used for additional exploration to discover major mineral resources on its properties. The Company has not yet developed sufficient reserves to justify investment in a major mine, thus it remains in the development stage.
2. Summary of Significant Accounting Policies
Development Stage Enterprise
The
Company's financial statements are prepared pursuant to the provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting for
Development Stage Enterprises,” as it devotes substantially all of its efforts
to acquiring and developing mining interests that will eventually provide
sufficient net profits to sustain the Company’s existence. Until such interests
are engaged in major commercial production, the Company will continue to prepare
its financial statements and related disclosures in accordance with entities in
the development stage.
In conjunction with development stage disclosure required by SFAS No. 7, inception to date figures are included in the financial statements. These figures while labeled “unaudited” have all been audited by various accounting firms in their respective years. However, they have not as a whole been audited by the current auditing firm resulting in the unaudited classification.
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. Actual
results could differ from those estimates.
Revenue Recognition
As a development
stage company our revenue from operations is referred to as income earned during
the development stage. Revenue is recognized when title and risk of ownership of
metals or metal bearing concentrate have passed and collection is reasonably
assured. Revenue from the sale of metals may be subject to adjustment upon final
settlement of estimated metal prices, weights and assays, and are recorded as
adjustments to revenue in the period of final settlement of prices, weights and
assays; such adjustments are typically not material in relation to the initial
invoice amounts.
Inventory
Dore' and process
inventories are stated at the lower of average cost incurred or net realizable
value.
Timber Sales
Revenue from harvest of
raw timber is recognized when a contract has been established, the timber has
been shipped, and payment is deemed probable. These sales of timber found on the
Company’s mineral properties are not a part of normal operations.
Contract Income
Revenue received from
drilling and exploration contracts with third parties is recognized when the
contract has been established, the services are rendered and payment is deemed
probable. These services are not a part of normal operations.
33
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
2. Summary of Significant Accounting Policies, continued:
Income Taxes
Income taxes are
accounted for under the liability method. Under this method deferred income tax
liabilities or assets at the end of each period are determined 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.
Fair Values of Financial Instruments
Effective January 1, 2008, we adopted the provisions of SFAS No. 157,
“Fair Value Measurements,” for our financial assets and financial liabilities
without a material effect on our results of operations or financial position.
The effective date of SFAS No. 157 for non-financial assets and non-financial
liabilities has been deferred by FSP 157-2 to fiscal years beginning after
November 15, 2008, and we do not anticipate the impact of adopting SFAS 157 for
non-financial and non-financial liabilities to have a material impact on our
results of operations or financial position.
SFAS No. 157 expands disclosure requirements to include the fair value measurement, and its fair value hierarchy level, for each major category of assets and liabilities that are measured at fair value. Hierarchy level is determined by segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).
The table below sets forth our financial asset that was accounted for at fair value at December 31, 2008, and its respective hierarchy level. We had no other financial assets or liabilities accounted for at fair value at December 31, 2008.
| Balance at December 31, 2008 |
Balance at December 31, 2007 |
Hierarchy Level | |
| Investments in marketable equity securities |
$16,328 | $391,872 | Level 1 |
| Inventories | 99,092 | 89,517 | Level 2 |
We also adopted the provisions of SFAS No. 159, “The Fair Value Option for Financial Liabilities,” effective January 1, 2008. SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. The adoption of SFAS No. 159 has not had a material effect on our financial position or results of operations as of and for the periods ending December 31, 2007 and 2008. The carrying amounts of financial instruments including cash and cash equivalents, reclamation bonds, investment in marketable equity securities, accounts payable, obligations under capital lease and notes payable are approximated at their fair values.
Investment in Marketable Equity Security
In compliance with Statement of Financial Accountings Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS
115), marketable equity securities are classified as available for sale and are
valued at the market price. Realized gains and losses on the sale of securities
are recognized on a specific identification basis. Unrealized gains and losses
are included as a component of accumulated other comprehensive income (loss),
unless an other than temporary impairment in value has occurred, which would
then be charged to current period net income (loss).
34
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
2. Summary of Significant Accounting Policies, continued:
Net Loss Per Share
Net loss per share
is computed by dividing net loss by the weighted average number of common shares
outstanding during the year. Diluted net 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,
2008 and 2007, the effect of the Company’s potential issuance of shares from the
exercise of warrants would have been anti-dilutive. Accordingly, only basic net
loss per share has been presented. Outstanding warrants are discussed in detail
in note 10 of the financial statements.
Reclassifications
Certain prior period
amounts have been reclassified to conform to the 2008 financial statement
presentation. These reclassifications have no effect on net loss as previously
reported.
Cash Equivalents
The Company considers
cash in banks and other deposits with an original maturity of three months or
less, that can be liquidated without prior notice or penalty, to be cash and
cash equivalents.
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of cost or
estimated net realizable value. 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 life of most of the Company’s
buildings is up to 50 years and equipment life expectancy ranges between two and
ten 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 proven and probable 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.
Mine Exploration and Development Costs
The Company records exploration costs as such in the period they occur.
Mine development costs are capitalized as deferred development costs after
proven and probable reserves have been identified. Interest cost incurred during
the development stage are capitalized. Amortization is calculated using the
units-of-production method over the expected life of the operation based on the
estimated recoverable mineral ounces.
Property Evaluations
Annually, or more
frequently as circumstances require, the Company evaluates the carrying amounts
of its mineral properties, including deferred development costs, to assess
whether such amounts are recoverable. 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 future
cash flows (undiscounted and without interest) 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.
35
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
2. Summary of Significant Accounting Policies, continued:
Asset Retirement Obligations (“ARO”) and Remediation
Costs
Mineral properties are subject to standards for mine
reclamation that have been established by various governmental agencies. A
liability is recorded for the present value of estimated reclamation costs and a
related asset is established. The liability is accreted and the asset is
depreciated over the life of the related asset. Adjustments are made for changes
resulting from the passage of time and changes to either the timing or amount of
the original present value 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.
For non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Accruals for estimated losses from environmental remediation obligations have historically been recognized no later than completion of the remedial feasibility study for such facility and are charged to provision for closed operations and environmental matters. Costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is to be performed within current laws and regulations. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.
It is reasonably possible that, due to uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology, the ultimate cost of reclamation and remediation could change in the future. The Company periodically reviews accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that its liabilities have potentially changed.
Reclamation Bonds
Various laws and
permits require that financial assurances be in place for certain environmental
and reclamation obligations and other potential liabilities. The reclamation
bond balance at December 31, 2008 represents an investment in U.S. government
agency bonds. The bonds are restricted to ensure that reclamation is performed
at certain properties where the Company is conducting mining and exploration
activities.
Share Based Compensation or Payments
All transactions in which goods or services are received for the
issuance of shares of the Company’s common stock are accounted for based on the
fair value of the consideration received or the fair value of the common stock
issued, whichever is more reliably measurable as defined by SFAS No. 123(R).
Recent Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, or SFAS
141(R), which replaces SFAS 141. SFAS 141( R ) establishes principles and
requirements for how an acquirer in a business combination recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any controlling interest; recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS 141(R) is to be applied prospectively to business combinations
for which the acquisition date is on or after the entity's fiscal year that
begins after December 15, 2008. The Company will assess the impact of SFAS
141(R) if, and when, a future acquisition occurs.
36
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
2. Summary of Significant Accounting Policies, continued:
Recent Accounting Pronouncements, continued:
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51, or SFAS 160.
SFAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. Specifically, this statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parent's equity. The amount of net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement. SFAS 160 clarifies
that changes in a parent's ownership interest in a subsidiary that do not result
in deconsolidation are equity transactions if the parent retains its controlling
financial interest. In addition, this statement requires that a parent recognize
a gain or loss in net income when a subsidiary is deconsolidated. Such gain or
loss will be measured using the fair value of the noncontrolling equity
investment on the deconsolidation date. SFAS 160 also includes expanded
disclosure requirements regarding the interests of the parent and its
noncontrolling interest. SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
Earlier adoption is prohibited. The Company does not have consolidated financial
statements, so does not anticipate any impact on its financial statements from
the adoption of SFAS 160.
In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161), to provide an understanding of how and why an entity uses derivative instruments, how they are accounted for, and how they affect an entity's financial statements. SFAS No. 161 is effective for both interim and annual reporting periods beginning after November 15, 2008. We do not expect any material effect to our financial statements from the enactment of SFAS No. 161.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” which identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. SFAS 162 is effective for both interim and annual reporting periods beginning after November 13, 2008. The adoption of SFAS No. 162 is not expected to have a material impact on our financial statements.
3. Going Concern
As shown in the accompanying financial statements, the Company has minimal revenue and incurred an accumulated deficit of $5,922,260 through December 31, 2008. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management intends to seek additional capital from new equity securities offerings and joint venture agreements that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Should the Company be unable to raise capital through future private placements and/or joint venture agreements or achieve significant revenues from its operations, its business, and, as a result, its financial position, results of operations and cash flow will likely be materially adversely impacted. We expect to receive cash flow from the gold sales and by providing drilling services to Newmont on our joint venture (see note 8. Mining Venture Agreements–Newmont Venture Agreement).
37
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
3. Going Concern, continued:
For 2009, the Company has plans to reduce its discretionary exploration expenditures as well as its overhead expenses. With these reductions, the Company believes it will only need an estimated $500,000 to continue operations through the next twelve months.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 2008 and 2007, consisted of the following:
| 2008 | 2007 | |||||
| Mill building at cost | $ | 128,566 | $ | 128,566 | ||
| Milling equipment at cost | 1,064,270 | 981,402 | ||||
| Less accumulated depreciation | (71,991 | ) | (62,702 | ) | ||
| Total mill | 1,120,845 | 1,047,266 | ||||
| Land | 79,137 | 79,137 | ||||
| Building and equipment at cost | 638,795 | 577,904 | ||||
| Less accumulated depreciation | (368,422 | ) | (179,844 | ) | ||
| Total building and equipment | 349,510 | 477,197 | ||||
| Total | $ | 1,470,355 | $ | 1,524,463 |
For both years ending December 31, 2008 and 2007, milling and other equipment include assets under capital lease amounting to $150,254. The leases are being amortized over the terms of the respective lease. Accumulated amortization at December 31, 2008 and 2007 was $96,829 and $66,999, respectively. At December 31, 2008, the estimated future minimum lease payments under capital leases were as follows:
| Year ending December 31, | |||
| 2009 | $ | 30,532 | |
| 2010 | 11,812 | ||
| 2011 | 11,049 | ||
| Total | 53,393 | ||
| Less: Amounts representing interest costs | (6,436 | ) | |
| Net present values | 46,957 | ||
| Less: Capital lease obligations-current portion | (26,665 | ) | |
| Long-term capital lease obligations | $ | 20,292 |
38
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
5. Notes Payable
At December 31, 2008 and 2007, notes payable are as follows.
| 2008 | 2007 | |||||
| Dodge pick-up 60 month note payable, 0.00% interest rate; | ||||||
| collateralized by pick-up, monthly payments of $557 | $ | 16,156 | $ | 22,842 | ||
| Hagby Diamond Drill 48 month note payable, 8.00% interest rate | ||||||
| payable monthly, collateralized by drill, monthly payments of | ||||||
| $4,093 | 110,968 | 149,520 | ||||
| Ingersoll Rand Compressor 36 month note payable, 4.90% interest | ||||||
| rate payable monthly, collateralized by compressor, monthly | ||||||
| payments of $670 | 8,462 | 15,885 | ||||
| Caterpillar 305 Excavator 48 month note payable, 7.81% interest | ||||||
| rate payable monthly, collateralized by excavator, monthly | ||||||
| payments of $956 | 25,187 | 34,302 | ||||
| Kubota 5700 Tractor 36 month note payable, 0.00% interest rate, | ||||||
| collateralized by tractor, monthly payments of $674 | 11,456 | 19,543 | ||||
| Property with shop 36 month note payable, 0.25% plus prime | ||||||
| variable interest rate paid monthly, full principal of note due in one | ||||||
| payment at end of term, monthly payments vary depending upon | ||||||
| interest rate | 60,000 | 60,000 | ||||
| Bobcat S250 50 month note payable, 0.00% interest rate | ||||||
| collateralized by bobcat, monthly payments of $725 | 34,786 | |||||
| Kubota RTV 36 month note payable, 0.00% interest rate; | ||||||
| collateralized by RTV, monthly payments of $494 | 5,436 | |||||
| Eimco Secoma Drill 24 month note payable, 12.76% interest rate | ||||||
| payable monthly, collateralized by drill, monthly payments of | ||||||
| $4,150 | 31,666 | 74,414 | ||||
| Total notes payable | 298,681 | 381,942 | ||||
| Due within one year | 114,534 | 118,046 | ||||
| Due after one year | $ | 184,147 | $ | 263,896 |
Maturities of debt outstanding at December 31, 2008 are as follows: $114,534 in 2009, $136,212 in 2010, $39,239 in 2011, and $8,696 in 2012.
39
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
6. Mineral Properties
Mineral properties and deferred development costs are as follows:
| December 31, 2008 | |||||||||
| Deferred | |||||||||
| Properties | Development | Total | |||||||
| New Jersey Mine | |||||||||
| Grenfel/Coleman | $ | 365,000 | $ | 233,451 | $ | 598,451 | |||
| Golden Chest | 65,000 | 579,393 | 644,393 | ||||||
| Silver Strand | 74,704 | 91,500 | 166,204 | ||||||
| Roughwater | 25,500 | 25,500 | |||||||
| Lost Eagle | 5,000 | 5,000 | |||||||
| Revett Niagara | 31,500 | 31,500 | |||||||
| Copper Camp | 31,500 | 31,500 | |||||||
| Less Accumulated | |||||||||
| Amortization | (58,647 | ) | (45,567 | ) | (104,214 | ) | |||
| Total | $ | 539,557 | $ | 858,777 | $ | 1,398,334 | |||
| December 31, 2007 | |||||||||
| Deferred | |||||||||
| Properties | Development | Total | |||||||
| New Jersey Mine | |||||||||
| Grenfel/Coleman | $ | 365,000 | $ | 233,451 | $ | 598,451 | |||
| Golden Chest | 65,000 | 236,286 | 301,287 | ||||||
| Silver Strand | 74,704 | 58,300 | 133,004 | ||||||
| Roughwater | 25,500 | 25,500 | |||||||
| Lost Eagle | 5,000 | 5,000 | |||||||
| Revett Niagara | 19,500 | 19,500 | |||||||
| Copper Camp | 19,500 | 19,500 | |||||||
| Less Accumulated | |||||||||
| Amortization | (55,954 | ) | (41,844 | ) | (97,798 | ) | |||
| Total | $ | 518,250 | $ | 486,193 | $ | 1,004,444 | |||
During the year ended December 31, 2008, the Company capitalized interest charges of $28,722 as deferred development costs.
Grenfel
The Company's Grenfel property is a
leasehold interest covering the mineral rights of 68 acres located at the New
Jersey Mine area of interest. The lease was acquired from Mine Systems Design
("MSD") in 2001 in exchange for 1,000,000 shares of the Company’s common stock.
The 1,000,000 shares were valued at $0.10 per share, which approximated the
market price for the restricted common stock on the date of the lease. MSD is
also a major shareholder of the Company and is owned by Fred Brackebusch and
Grant Brackebusch, officers and directors of the Company. The lease has a
fifteen year term, and includes a 3% net smelter return (“NSR”) royalty that
will be paid to MSD on any production achieved from the property.
Coleman
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, and approximately 130 acres of
unpatented mining claims. The Coleman property was acquired in October 2002,
with the acquisition of Gold Run Gulch Mining Company.
40
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
6. Mineral Properties, continued:
Silver Strand
The Silver Strand mine consists
of 15 unpatented claims and was acquired from Trend Mining Company (“Trend”) in
2000. The property was purchased in exchange for 50,000 shares of the Company’s
common stock and a 1.5% NSR royalty initially capped at $50,000 and then
decreasing to 0.5% . In July of 2001, MSD assumed Trend’s position in the
agreement, and retained the NSR royalty interest. Deferred development includes
asset retirement costs of $33,200.
Niagara Project
The Company signed an
exploration agreement with Revett Metals Associates (“RMA”) in December 2006.
The exploration agreement has a term of five years, beginning on December 2,
2006, and is for nine unpatented claims that cover the deposit. In addition, the
exploration agreement covers an area of mutual interest within ½ mile of the
property excluding properties which are valued primarily for their gold
mineralization. Upon signing the agreement, the Company issued 30,000 shares of
restricted common stock valued at $0.50 to RMA and paid $4,500. At each
anniversary of the signing, the Company has agreed to pay $3,000 and issue
30,000 shares of restricted common stock to RMA. Any time prior to the
expiration of the exploration agreement, the Company can exercise an option to
convert the exploration agreement to a mining agreement. If exercised, the
mining agreement would have a term of 25 years, and the Company would pay a NSR
royalty to RMA of 3.0% on ores or concentrates mined on the property. The
Company is granted the option to purchase 90% of the NSR royalty from RMA for
$2,500,000 which would leave a remaining royalty of 0.3% .
Copper Camp
The Company signed an exploration
agreement with RMA in November 2007. The exploration agreement has a term of
five years, beginning on November 28, 2007, and is for nine unpatented claims
that cover the prospect. In addition, the exploration agreement covers an area
of mutual interest within ½ mile of the property, excluding properties which are
valued primarily for their gold mineralization. Upon signing the agreement, the
Company issued 30,000 shares of restricted common stock valued at $0.50 to RMA
and paid $4,500. At each anniversary of the signing, the Company has agreed to
pay $3,000 and issue 30,000 shares of restricted common stock to RMA. Any time
prior to the expiration of the exploration agreement, the Company can exercise
an option to convert the exploration agreement to a mining agreement. If
exercised, the mining agreement would have a term of 25 years, and the Company
would pay a NSR royalty to RMA of 3.0% on ores or concentrates mined on the
property. The Company is granted the option to purchase 90% of the NSR royalty
from RMA for $2,500,000 which would leave a remaining royalty of 0.3% .
Roughwater/Silver Button
The Silver Button
claim is the remaining property of the ten claims acquired from Roughwater
Mining Company. During 2005, the other nine Roughwater unpatented claims were
dropped. In 2001, the Company purchased the property through the issuance of
255,000 shares of its common stock to Roughwater Mining Company. The shares were
valued at $0.10 per share, for a total acquisition cost of $25,500.
Lost Eagle
Lost Eagle is a gold and silver
exploration project consisting of five claims covering 100 acres of federal land
administered by the U.S. Forest Service. In 2001, the Company issued 50,000
shares of stock to an individual to acquire the property. The shares were valued
at $0.10 per share for a total acquisition cost of $5,000.
41
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
6. Mineral Properties, continued
Wisconsin Teddy
The Wisconsin Teddy is an
exploration project that lies north of the New Jersey Mine and covers 83 acres
of unpatented claims on federal land administered by the U.S. BLM. The project
has no carrying value.
Zanetti Mining Lease
The Company has been
assigned a mining lease with William Zanetti. The lease provides for the
Company's exploration, development and mining of minerals on fee land through
October 2008 and thereafter, as long as mining operations are deemed continuous.
The lease provides for production royalties of 5% of net sales of ores or
concentrates. Additional production royalties of 1% to 5% are due if gold
exceeds a certain price per troy ounce as adjusted annually by the CPI. At
December 31, 2008, the gold price that would cause additional production
royalties to be payable was $697 per troy ounce. Also, advance royalties of $500
are required annually under the lease. These advance royalties are charged to
expense as incurred, but are still accumulated and will be credited against
production royalty obligations if and when production ensues. The lessor may
terminate the lease upon the Company's failure to perform under the terms of the
lease; and the Company has the right to terminate the lease at any time.
Golden Chest Mining Leases
On January
3, 2005, the Company signed a mining lease on the Golden Chest with Metaline
Contact Mines (MTLI) and J.W. Beasley Interests, LLC (JWBI) that covers about
270 acres. The Company completed a pre-feasiblity study on an open pit resource
drilled by Newmont Exploration Limited and issued 50,000 shares of its
restricted common stock to both MTLI and JWBI to exercise the mining lease. The
term of the lease is fifteen years and as long thereafter as Leased Substances
are mined, processed or marketed from the property. A NSR royalty of 3% is
payable to the Lessors. An additional NSR royalty up to a maximum 3% is payable
based on a sliding scale of increasing gold prices adjusted by the CPI using
June 2003 (CPI = 183.7) as the base. See table below.
Sliding Scale for Additional NSR Royalty:
| Price of Gold, $ / Troy Ounce (using December 2008 CPI-U) |
Additional NSR Royalty |
| < $458 | None |
| $458 to $515 | 1.0% |
| $515 to $572 | 1.5% |
| $572 to $629 | 2.0% |
| > $629 | 3.0% |
Finally, the Company will issue 50,000 shares of restricted common stock for each increment of 10,000 troy ounces of gold production.
On January 3, 2005, the Company signed a mining lease with Prichard Creek Resource Partners, LLC that covers about 41 acres of unpatented lode claims. Upon exercising the lease the Company issued 30,000 shares of restricted common stock to Prichard Creek Resource Partners. The term of the lease is fifteen years and as long thereafter as Leased Substances are mined, processed or marketed from the Leased Premises. A NSR royalty of 3% is payable to the Lessors. An additional NSR royalty is based on the same sliding scale, presented in the table above, is also payable to Prichard Creek Resource Partners. Finally, if commercial production is commenced from these claims a one-time payment of 30,000 shares of the Company’s common stock is payable to Prichard Creek Resource Partners.
42
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
7. Asset Retirement Obligation “ARO”
On January 1, 2008, the Company established an asset retirement obligation of $27,350 associated with the ultimate closing of its Silver Strand property. The estimated reclamation costs was discounted using a credit-adjusted risk-free interest rate of 5.45% from the time the obligation was incurred until the Company expects to pay the retirement obligation, or five years. During 2008, accretion of approximately $1,000 and an additional layer of reclamation costs of approximately $4,750 were added to the obligation balance. At December 31, 2008, the balance of the asset retirement obligation is $33,200.
8. Mining Venture Agreements
Silver Star Venture Agreement
The
Company and Silverstar Mining Corp. ("Silverstar") entered into a Mining Venture
Agreement on April 1, 2008, relating to the Silver Strand Property. During the
three months ended June 30, 2008, Silverstar paid the Company $270,000 of
$500,000 to acquire a 50% mining rights and property interest in the Silver
Strand property. On July 31, 2008 Silverstar defaulted on the terms of the
agreement by not making the final payment when due on July 31, 2008. The Company
was not required to refund the initial $270,000 deposit and recognized it as
income in the third quarter of 2008.
Newmont Venture Agreement
The Company
entered into a venture agreement with Newmont North America Exploration Limited
("Newmont") in March 2008, relating to exploration of the Company's Toboggan
Project. Newmont is conducting exploration in a 38 square mile area centered on
the prospects that the Company has staked in the past two years. To earn a
participating interest in the Venture, Newmont is required to contribute
$2,000,000 in exploration expenditures as follows: $300,000 on or before March
2009, an additional $700,000 by March 2010, and an additional $1,000,000 by
March 2011.
9. Income Taxes
The Company did not record an income tax provision for the years ended December 31, 2008 or 2007, as it had no taxable income. At December 31, 2008 and 2007, the Company had federal net operating loss carry forwards available for income tax purposes of approximately $5,867,000 and $4,443,000, respectively, which will expire through 2028, and associated deferred tax assets of approximately $1,994,800 and $1,510,700, respectively. The deferred tax assets were calculated assuming a 34% marginal tax rate, and have been fully reserved as management believes it is more likely than not that the deferred tax assets will not be utilized.
The Company’s net operating loss carry forwards expire as follows:
| Years | Carry Forwards | ||
| 2017 | $ | 33,000 | |
| 2018 | 27,000 | ||
| 2021 | 4,000 | ||
| 2022 | 36,000 | ||
| 2023 | 380,000 | ||
| 2024 | 930,000 | ||
| 2025 | 590,000 | ||
| 2026 | 990,000 | ||
| 2027 | 1,453,000 | ||
| 2028 | 1,424,000 | ||
| Total | $ | 5,867,000 |
43
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
10. Equity
The Company has authorized 50,000,000 shares of no par common stock. In addition, the Company has authorized 1,000,000 shares of no par preferred stock, none of which had been issued at December 31, 2008 or 2007.
Private Placements
On February 12, 2007, the Company completed an offering of units consisting of its common stock and common stock purchase warrants, in a non-brokered private placement. The Company sold 2,684,584 units at $0.40 per unit and generated $1,073,819 in net proceeds. Of this, 121,250 units and $48,500 in net proceeds occurred in 2006. Each unit consisted of one share of the Company’s restricted common stock plus one half warrant, whereby each whole warrant could purchase one share of the Company’s restricted common stock at $0.55 per share until December 31, 2008.
On November 13, 2007, the Company completed an offering of units consisting of its common stock and common stock purchase warrants, in a non-brokered private placement. The Company sold 1,451,427 units at $0.35 per unit and generated $507,600 in net proceeds. Each unit consisted of one share of the Company’s restricted common stock plus one warrant, whereby each warrant could purchase one share of the Company’s restricted common stock at $0.50 per share until August 31, 2009.
Exercise of Stock Purchase Warrants
During 2008 and 2007common stock purchase warrants were exercised by
warrant holders that had purchased units of common stock and common stock
purchase warrants during the Company's previous private placement offerings.
During 2008, the Company issued 4,350,000 shares of its restricted common stock
at $0.40 per share, generating net proceeds of $1,740,000 pursuant to the
exercise of these warrants. During 2007, the Company issued 200,000 shares of
its restricted common stock at $0.60 per share, generating net proceeds of
$120,000 pursuant to the exercise of these warrants.
Stock Purchase Warrants Outstanding
Transactions in common stock purchase warrants for the years ended
December 31, 2008 and 2007, are as follows:
| Number of | Exercise | ||||||
| Warrants | Prices | ||||||
| Balance, December 31, 2006 | 5,088,875 | $ | 0.50-0.60 | ||||
| Issued in connection with private placement | 2,733,095 | 0.50-0.55 | |||||
| Exercised | (200,000 | ) | 0.60 | ||||
| Balance, December 31, 2007 | 7,621,970 | 0.50-0.60 | |||||
| Exercised | (4,350,000 | ) | 0.40 | ||||
| Expired | (1,595,293 | ) | 0.50-0.60 | ||||
| Balance, December 31, 2008 | 1,676,677 | 0.50-0.60 |
These warrants expire as follows:
| Shares | Exercise Price | Expiration Date |
| 1,451,427 | $0.50 | August 31, 2009 |
| 225,250 | $0.60 | June 1, 2010 |
| 1,676,677 |
44
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
10. Equity, continued:
Common Stock Issued for Property, Plant and
Equipment
During 2008 and 2007, the Company issued 14,000 and
20,756 shares, respectively, of its restricted common stock for Property, Plant
and Equipment purchased. The Company recorded $5,600 and $10,239, respectively,
during 2008 and 2007, based upon the value of the equipment purchased and shares
issued.
Common Stock Issued for Services
During 2008 and 2007, the Company issued 74,000 and 52,104 shares,
respectively, of its restricted common stock for services rendered the Company.
The Company recorded $32,000 and $27,157, respectively, based upon the value of
the services rendered and the shares issued.
11. Related Party Transactions
Fred Brackebusch is President, Treasurer, and a Director of the Company. Grant Brackebusch, Fred Brackebusch's son, is the Vice-President and a Director of the Company. Grant Brackebusch's wife, Tina Brackebusch, is the Company's Corporate Secretary. Fred Brackebusch and Grant Brackebusch own 89.6% and 10.4%, respectively of Mine Systems Design, Inc. ("MSD"), a firm that has various related party transactions with the Company.
In addition to the related party transactions described in Note 6 and 12 the Company had the following transactions with related parties:
-
During the years ended December 31, 2008 and 2007, the Company issued 198,700 and 154,386 shares, respectively, of its restricted common stock valued at $72,000 and $82,500, respectively, to Fred Brackebusch for management services. During 2008 and 2007 the Company issued 20,000 and 20,000 shares respectively, of its restricted stock valued at $6,000 and $10,000, respectively, to Tina Brackebusch for services as the Corporate Secretary.
-
During each of the years ended December 31, 2008 and 2007, the Company issued 100,000 shares of its restricted common stock to members of the Board of Directors for their services as directors. These stock awards were recorded as directors' fees of $30,000 and $50,000, respectively, based upon the estimated value of the shares issued and services rendered. Fred and Grant Brackebusch each received 20,000 shares in both 2008 and 2007 as Directors of the Company.
-
During each of the two years ended December 31, 2008 and 2007 the Company paid $6,000 to MSD for office rent.
12. Investment in Marketable Security
In 2006, the Company purchased 1,875,000 common shares of Gold Crest Mines Inc for $7,500. In 2007 the Company sold 242,200 of those shares for $71,078 which included a gain of $70,109, no additional shares were sold in 2008.
At December 31, 2008, the Company held 1,632,800 shares with a market value of $0.01 per share, for a total market value of $16,328. At December 31, 2008, the excess market value of $9,796 over the $6,531 remaining cost basis of the shares was recognized as accumulated other comprehensive income in the equity section of the Company’s balance sheet.
The Company’s president became a director of Gold Crest in 2006. He resigned in February of 2008.
45
| New Jersey Mining Company |
| (A Development Stage Company) |
| Notes to Financial Statements |
13. Commitments and Contingencies
The Company owns or leases several mineral properties located in the Coeur d’Alene River Basin. In recent years, certain other companies involved in mining activities on property interests upland of the Coeur d'Alene River Basin have been identified as potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and have entered into consent decrees with the EPA and the state of Idaho, concerning environmental remediation obligations and damages to or loss of natural resources in the Coeur d'Alene River Basin. The Company has not received any notification of a pending action or proceeding against the Company relating to environmental claims or assessments. It is possible, however, that the Company’s obligation could change in the near or longer term, and the resultant liability or claim for damages could have a material adverse effect on the Company.
46
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A(T).
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At December 31, 2008, 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 December 31, 2008, 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.
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, 2008. To make this assessment, we used the criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of December 31, 2008, the Company’s internal control over financial reporting is effective.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
Fred Brackebusch, President, CEO and CFO
New Jersey Mining
Company
47
Internal Control over Financial Reporting, continued:
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions.
Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in internal control over financial reporting.
The President and Principal Accounting Officer conducted evaluations of our internal controls over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There was no material change in internal control over financial reporting in the quarter ended December 31, 2008.
ITEM 9B
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE;
| Name & Address | Age | Position | Date First Elected |
| Fred W. Brackebusch P.O. Box 1019 Kellogg, Idaho 83837 |
64 |
President, Director & Treasurer |
7/18/1996 |
| Grant A. Brackebusch P.O. Box 131 Silverton, ID 83867 |
39 |
Vice President & Director |
7/18/1996 |
| Ivan R. Linscott 7150 Burke Road Wallace, ID 83873 |
66 |
Director |
9/21/2004 |
| William C. Rust (1) P.O. Box 648 Wallace, ID 83873 |
62 |
Director |
9/21/2004 |
| M. Kathleen Sims (1) 2745 Seltice Way Coeur d’Alene, ID 83814 |
64 |
Director |
9/25/2003 |
| Tina C. Brackebusch P.O. Box 131 Silverton, ID 83867 |
39 |
Secretary |
1/1/1997 |
48
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.
Fred W. Brackebusch, P.E. has served as Chairman of the Board, President, Chief Executive Officer and Treasurer of the Company since 1996. He has a B.S. and an M.S. in Geological Engineering both from the University of Idaho. He is a consulting engineer with extensive experience in mine development, mine backfill, mine management, permitting, process control, and mine feasibility studies. He has over 35 years of experience in the Coeur d'Alene Mining District, about half of which was with Hecla Mining Co. He has been the principal owner of Mine Systems Design, Inc., a mining consulting business which is a large shareholder in the Company, since 1987.
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 worked for Newmont Gold Co. on the Carlin Trend in open pit mine planning and pit supervision for three years. He also has worked with Mine Systems Design, Inc. performing various engineering and geotechnical tasks. He has worked for New Jersey Mining Company since 1996; he supervises the daily operations of the various mining operations, mill operations, performs various engineering tasks, and coordinates environmental permitting.
Ivan R. Linscott, PhD has served as a Director of the Company since 2004. He is a physicist at Stanford University. He is a Senior Research Associate for radioscience spacecraft instrument development and is Co-Investigator and Science Team Member for the New Horizons Mission to encounter the planet Pluto. Dr. Linscott has a strong interest in doing research on exploration techniques in the Coeur d’Alene Mining District. He has made significant contributions to the Company’s exploration program through the innovative use of geophysical techniques.
William C. Rust has served as a Director of the Company since 2004. He is a metallurgical engineer with extensive experience in the Silver Valley. He worked for Asarco as Chief Metallurgist. Later he worked for CoCa mines at the Grouse Creek mine in Central Idaho and for McCulley, Frick, and Gilman, an environmental consulting firm. He was with Getchell Gold Inc. in Nevada where he was Mill Manager and Senior Metallurgist for a 3,200 ton/day gold plant. Currently, Mr. Rust is self-employed as a metallurgical engineering consultant. Mr. Rust is a member of the Audit Committee.
M. Kathleen Sims has served as a Director of the Company since 2004. She is a successful businesswoman who is majority owner of a Honda car dealership in Coeur d’Alene, Idaho. She is a former State Senator in the Idaho Legislature. She is a former member of the State of Idaho Human Rights Commission and is active in the Idaho Republican Party. She has extensive experience in starting a business with all the necessary experience in financing, business plans and management. Ms. Sims is the chairperson of the Audit Committee.
Tina C. Brackebusch has served as Secretary of the Company since 1996. She has served as Office Manager for the Company since 1996. She holds a B.S. in Secondary Education from the University of Idaho and teaches English at Kellogg High School.
Family Relationships
Fred W.
Brackebusch is the father of Grant A. Brackebusch. Tina C. Brackebusch is the
wife of Grant A. Brackebusch.
Legal Proceedings
No Director or
Officer has been involved in any legal action involving the Company for the past
five years.
49
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 its review of copies of these reports and any written
representations from such reporting persons, the Company believes that during
2008 such filing requirements 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. It can be found at the Company’s website
www.newjerseymining.com. The Company also
adopted a Code of Ethics for all employees at the Board of Directors meeting on
February 18, 2008.
Board Committee
At a Board of
Directors meeting on September 21, 2004, the Directors approved an audit
committee comprised of William C. Rust and M. Kathleen Sims. Each member of the
audit committee is deemed to be an independent director as that term is defined
in Rule 4200(a)(14) of the NASD’s listing standards. M. Kathleen Sims is the
Audit Committee Financial Expert as defined by Section 407 of the Sarbanes-Oxley
Act. The Board 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.
ITEM 11.
EXECUTIVE COMPENSATION
Compensation of Officers
A summary of cash and other compensation for Fred Brackebusch, the Company’s President and Chief Executive Officer, and Grant Brackebusch, the Company’s Vice President, (the “Named Executive Officers”), for the two most recent years is as follows:
Executive Officer Compensation Table
| Name & Principal Position |
Year | Salary ($) |
Bonus ($) |
Stock Awards1 ($) |
Option Awards ($) |
Nonequity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
| Fred Brackebusch President |
2008 | 84,000 | 0 | 76,000 | 0 | 0 | 0 | 0 | 160,000 |
| 2007 |
75,000 |
0 |
92,500 |
0 |
0 |
0 |
0 |
167,500 | |
| Grant Brackebusch Vice Pres. |
2008 | 95,000 | 0 | 6,000 | 0 | 0 | 0 | 0 | 101,000 |
| 2007 |
88,500 |
0 |
10,000 |
0 |
0 |
0 |
0 |
98,500 |
(1) Stock Awards include fees earned as Directors.
There is no employment agreement between the Company and Fred Brackebusch, and there is no employment agreement between the Company and Grant Brackebusch. The compensation of the Named Executive Officers has been set by disinterested members of the Board of Directors. The Board awarded Fred Brackebusch restricted Common Stock in addition to his salary, for 2007 and 2008, for any hours worked over 130 hours per month at a rate of $150 per hour. The number of shares to be awarded is calculated quarterly by using the average bid price of the Company’s Common Stock. Shares issued were 154,386 in 2007, and 198,700 in 2008. The shares were valued at an average price of $0.53 per share in 2007, and $0.36 per share in 2008.
50
The Company does not have a retirement plan for its executive officers and there is no agreement, plan or arrangement that provides for payments to executive officers in connection with resignation, retirement, termination or a change in control of the Company.
In January of 2009, the cash salaries of Fred Brackebusch and Grant Brackebusch were reduced 50% from their 2008 level in an effort to conserve the Company’s cash.
Outstanding Equity Awards at Fiscal Year-end
The Company does not currently award the Named Executive Officers
options to purchase the Company’s shares, and there were not outstanding equity
awards as of December 31, 2008.
Director Compensation
A summary of compensation for the Company’s non-employee Directors, including Ivan R. Linscott, William C. Rust and M. Kathleen Sims for the two most recent years is as follows:
Director Compensation Table
| Name 1 |
Year | Fees Earned or Paid in Cash ($) |
Stock Awards ($) |
Option Awards ($) |
Nonequity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
| Ivan R. Linscott |
2008 | - | 6,000 | - | - | - | - | 6,000 |
| 2007 | - | 31,200 | - | - | - | - | 31,200 | |
| William C. Rust |
2008 | - | 6,000 | - | - | - | - | 6,000 |
| 2007 | - | 10,000 | - | - | - | - | 10,000 | |
| M. Kathleen Sims |
2008 | - | 6,000 | - | - | - | - | 6,000 |
| 2007 | - | 10,000 | - | - | - | - | 10,000 |
(1) Directors Fred W. Brackebusch and Grant A. Brackebusch are executive officers of the Company, therefore, disclosure regarding their compensation as Directors is included in the Executive Officer Compensative Table above
During 2007, each of the Directors of the Company were paid 20,000 shares of restricted Common Stock valued at $10,000. At a Board of Directors meeting on May 27, 2008, the Directors approved a compensation plan for the Board of Directors under which each Director receives 20,000 shares of restricted Common Stock. In 2008 these shares were valued at $6,000. 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 restricted Common Stock according to the Company’s policy for share-based payment of services.
The Company does not have a retirement plan for its Directors and there is no agreement, plan or arrangement that provides for payments to Directors in connection with resignation, retirement, termination or a change in control of the Company.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of March 10, 2009 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.
51
Security Ownership of Certain Beneficial Owners
| Title of Class |
Name and Address Of Beneficial Owner |
Amount and Nature of Beneficial Owner |
Percent of Class1 |
| Common |
Fred W. Brackebusch P.O. Box 1019 Kellogg, Idaho 83837 |
7,915,757 indirect (a) 1,076,705 direct |
24.19% |
| Common |
Constance Meisel 105 East Atlantic Avenue Delray Beach, FL 33444 |
3,158,607 |
8.50% |
| Common |
Terry & Marguerite Tyson County Road U Lipscomb, TX 79056 |
1,608,528 direct 933,900 indirect |
6.84% |
| Common |
William Ritger Ocean Royale Way Juno Beach, FL 33408 |
1,930,000 (b) |
5.19% |
(1)Based upon 37,169,692 outstanding shares of common stock at March 10, 2009.
(a) Fred Brackebusch owns 89.6% of Mine Systems Design, Inc. (MSD) which is an S corporation that owns 8,834,550 common shares of the Company. Neither MSD nor Fred Brackebusch has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.
(b) William Ritger holds 600,000 warrants exercisable at a price of $0.50 with an expiration date of August 31, 2009.
Security Ownership of Management
| Title of Class |
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Owner |
Percent of Class1 |
| Common |
Fred W. Brackebusch 89 Appleberg Road Kellogg, Idaho 83837 |
7,915,757 indirect (a) 1,076,705 direct |
24.19% |
| Common |
Grant A. Brackebusch 89 Appleberg Road Kellogg, Idaho 83837 |
1,016,793 indirect (b) 337,920 direct |
3.64% |
| Common |
Ivan R. Linscott, Director 7150 Burke Road Wallace, Idaho 83873 |
110,500 |
0.30% |
| Common |
William C. Rust, Director P.O. Box 648 Wallace, Idaho 83873 |
70,000 |
0.19% |
| Common |
M. Kathleen Sims, Director 2745 Seltice Way Coeur d’Alene, Idaho 83814 |
83,000 |
0.22% |
| Common |
All Directors and Executive Officers as a group (5 individuals) |
10,610,675 |
28.55% |
(1) Based upon 37,169,692 outstanding shares of common stock at March 10, 2009.
(a) Fred Brackebusch owns 89.6% of Mine Systems Design, Inc. (MSD) which is an S corporation that owns 8,834,550 common shares of the Company. Neither MSD nor Fred Brackebusch has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.
(b) Grant Brackebusch owns 10.4% of Mine Systems Design, Inc. (MSD) which is an S corporation that owns 8,834,550 common shares of the Company. Neither MSD nor Grant Brackebusch has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.
52
None of the Directors or Officers has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights. No shares are pledged as security.
Securities Authorized for Issuance under Equity
Plans
The Company does not have an equity compensation plan
for issuance of warrants, options or rights. However, the Board of Directors has
awarded Fred Brackebusch restricted Common Stock in addition to his salary, for
2007 and 2008, for any hours worked over 130 hours per month at a rate of $150
per hour. The number of shares to be awarded is calculated quarterly by using
the average bid price of the Company’s Common Stock. The Company also
occasionally pays for goods or services with restricted Common Stock and uses
the average bid price of the stock 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
During each of the years ended December 31, 2008 and 2007, the Company
issued 120,000 shares of its restricted common stock to members of the Board of
Directors and Officers for their services. These stock awards were recorded as
directors' fees of $30,000 and $50,000, respectively, for directors and $6,000
and $10,000, respectively, for management based upon the estimated value of the
shares issued and services rendered. Fred, Grant, and Tina Brackebusch each
received 20,000 shares in 2008 and 20,000 shares in 2007 as Directors or
Officers in each respective year.
During the years ended December 31, 2008 and 2007, the Company issued 198,700 and 154,386 shares, respectively, of its restricted common stock valued at $72,000 and $82,500, respectively, to Fred Brackebusch for management services.
During each of the two year’s ended December 31, 2008 and 2007, the Company paid $6,000 to MSD for office rent.
During the year ended December 31, 2007 the Company issued 30,500 shares of its restricted common stock valued at $21,200 to Ivan Linscott, a Director, for exploration services.
Director Independence
The Board of
Directors has determined that each of the following Directors is an “independent
director” as such term is defined by the rules of the Financial Industry
Regulatory Authority (“FINRA”), and the Securities and Exchange Commission
(“SEC”): Ivan R. Linscott, William C. Rust, and M. Kathleen Sims. These three
Directors comprise a majority of the Board of Directors. The rules of FINRA and
the SEC generally provide that an “independent director” is a person other than
an officer or employee of the Company or any individual having a relationship
that, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
Director. The FINRA rules also provide specific criteria that, if met,
disqualify a director from being independent.
The Board of Directors does not have separately designated nominating or compensation committees. The entire Board performs these functions. At a Board of Directors meeting on September 21, 2004, the Directors approved an audit committee comprised of William C. Rust and M. Kathleen Sims. Each member of the audit committee is deemed to be an independent director as that term is defined in Rule 4200(a)(14) of the NASD’s listing standards. M. Kathleen Sims is the chairperson of the Audit Committee and the Audit Committee Financial Expert as defined by Section 407 of the Sarbanes-Oxley Act.
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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 year ended December 31, 2008 and Form 10-KSB for the
fiscal year ended December 31, 2007 and the review for the financial statements
included in the Company’s quarterly reports on Form 10-Q during those fiscal
years, were $30,208 and $28,384 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
The Company incurred no fees
during the last two fiscal years for professional services rendered by the
Company’s principal accountant for tax compliance, tax advice and tax planning.
All Other Fees
The Company incurred no
other fees 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)(i) | Articles of Incorporation-Filed as an exhibit to the registrant's registration statement on Form 10- SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (3)(ii) | Bylaws-Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (10)(1) | Lease Agreement with William Zanetti-Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (10)(2) | Articles of Merger For Plainview Mining Company Inc. and New Jersey Mining Co.-Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (10)(3) | Lease Agreement with Mine Systems Design, Inc.-Filed as an exhibit to the registrant's annual report on Form 10-KSB for the year ended December 31, 2001 and incorporated by reference herein. |
| (10)(4) | Articles of Merger for Gold Run Gulch Mining Company and New Jersey Mining Co.-Filed as an exhibit to the registrant's annual report on Form 10-KSB for the year ended December 31, 2002 and incorporated by reference herein. |
| (10)(5) | Exploration Agreement and Option to Lease between Paymaster Resources, Inc. and New Jersey Mining Company with the approval of J.W. Beasley Interests LLC.-Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003 and incorporated by reference herein. |
| (10)(6) | Exploration Agreement and Option to Lease between Prichard Creek Resource Partners LLC and New Jersey Mining Company.-Filed as an exhibit to the registrant’s annual report on Form 10- KSB for the year ended December 31, 2003 and incorporated by reference herein. |
| (10)(7) | Exploration Agreement and Option to Convert to Mining Agreement between RMA and New Jersey Mining Company. Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2006 and incorporated by reference herein. |
| (10)(8) | Exploration Agreement and Option to Convert to Mining Agreement between RMA and New Jersey Mining Company. Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2007. |
| (14) | Code of Ethics.-Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003, and incorporated by reference herein. |
| (16) | Letter on Change in Certifying Accountant.-Filed as an 8-K report on December 10, 2003 and later filed as an 8-K/A on February 2, 2004, and incorporated by reference herein. |
| (31) | Rule 13a-15(e)/15d-15(e) Certifications |
| (31)(i) | |
| (32) | Section 1350 and Rule 13a-15(d) Certifications |
| (32)(i) | |
| (99)(i) | Audit Committee Pre-Approval Policies.-Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003 and incorporated by reference herein. |
55
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: April 7, 2009 | By | /s/ FRED W. BRACKEBUSCH |
| Fred W. Brackebusch, President, Treasurer & Director | ||
| Date: April 7, 2009 | By | /s/ GRANT A. BRACKEBUSCH |
| Grant A. Brackebusch, Vice President & Director | ||
| Date: April 7, 2009 | By | /s/ IVAN R. LINSCOTT |
| Ivan R. Linscott, Director | ||
| Date: April 7, 2009 | By | /s/ WILLIAM C. RUST |
| William C. Rust, Director | ||
| Date: April 7, 2009 | By | /s/ M. KATHLEEN SIMS |
| M. Kathleen Sims, Director |
56