IDR 10-Q
Idaho Strategic Resources, Inc. (IDR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the quarterly period ended | |
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OR | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the transition period from _____________ to ____________ | |
Commission File No.
(Name of small business issuer in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. employer identification No.) |
(Address of principal executive offices) (zip code)
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Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
☒ | Small Reporting Company | ☒ | |
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| Emerging Growth Company |
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
APPLICABLE ONLY TO CORPORATE ISSUERS:
At August 1, 2023,
IDAHO STRATEGIC RESOURCES, INC
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2023
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Unregistered Sales of Equity Securities and Use of Proceeds. |
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| Table of Contents |
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Idaho Strategic Resources, Inc. Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
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| June 30, 2023 |
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| December 31, 2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Gold sales receivable |
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Inventories |
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Joint venture receivable |
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Investment in equity securities |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net of accumulated depreciation |
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Mineral properties, net of accumulated amortization |
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Investment in Buckskin Gold and Silver |
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Investment in joint venture |
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Reclamation bond |
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Deposits |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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Accrued payroll and related payroll expenses |
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Note payable related parties, current portion |
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Notes payable, current portion |
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Total current liabilities |
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Asset retirement obligation |
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Note payable related parties, long term |
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Notes payable, long term |
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Total long-term liabilities |
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Total liabilities |
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Commitments (Note 11) |
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Stockholders’ equity: |
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Preferred stock, no par value, |
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Common stock, no par value, |
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Accumulated deficit |
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Total Idaho Strategic Resources, Inc stockholders’ equity |
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Non-controlling interest |
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Total stockholders' equity |
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Total liabilities and stockholders’ equity |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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Idaho Strategic Resources, Inc. Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||||||||
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| June 30, 2023 |
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| June 30, 2022 |
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| Three Months |
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| Six Months |
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| Six Months |
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Revenue: |
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Sales of products |
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Total revenue |
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Costs of Sales: |
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Cost of sales and other direct production costs |
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Depreciation and amortization |
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Total costs of sales |
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Gross profit |
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Other operating expenses: |
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Exploration |
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Management |
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Professional services |
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General and administrative |
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(Gain) loss on disposal of equipment |
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Total other operating expenses |
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Operating income (loss) |
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Other (income) expense: |
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Equity income on investment in Buckskin |
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Timber revenue net of costs |
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Gain on forgiveness of SBA loan |
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Loss on investment in equity securities |
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Interest income |
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Interest expense |
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Total other (income) expense |
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Net income (loss) |
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Net loss attributable to non-controlling interest |
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Net income (loss) attributable to Idaho Strategic Resources, Inc. |
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Net income (loss) per common share-basic |
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Weighted average common share outstanding-basic |
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Net income (loss) per common share-diluted |
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Weighted average common shares outstanding- diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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| Table of Contents |
Idaho Strategic Resources, Inc. Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) For the Three and Six-Month Periods Ended June 30, 2023 and 2022 | ||||||||||||||||||||
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| Common Stock Shares |
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| Common Stock Amount |
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| Accumulated Deficit Attributable to Idaho Strategic Resources, Inc |
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| Non-Controlling Interest |
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Stockholders’ Equity |
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Balance January 1, 2022 |
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Contribution from non-controlling interest in New Jersey Mill Joint Venture |
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Issuance of common stock for cash, net of offering costs |
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Issuance of common stock for services |
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Issuance of common stock for warrants exercised |
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Issuance of common stock for cashless option exercise |
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Conversion of convertible debt to common stock |
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Net loss |
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Balance March 31, 2022 |
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Contribution from non-controlling interest in New Jersey Mill Joint Venture |
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Issuance of common stock for cash, net of offering costs |
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Issuance of common stock for warrants exercised |
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Issuance of common stock for cashless option exercise |
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Net loss |
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Balance June 30, 2022 |
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Balance January 1, 2023 |
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Contribution from non-controlling interest in New Jersey Mill Joint Venture |
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Issuance of common stock for cash, net of offering costs |
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Net income (loss) |
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Balance March 31, 2023 |
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Contribution from non-controlling interest in New Jersey Mill Joint Venture |
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Net income (loss) |
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Balance June 30, 2023 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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Idaho Strategic Resources, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six-Month Periods Ended June 30, 2023 and 2022 | ||||||||
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Cash flows from operating activities: |
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Net income (loss) |
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Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: |
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Depreciation and amortization |
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Loss on disposal of equipment |
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Accretion of asset retirement obligation |
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Issuance of common stock for services |
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Gain on forgiveness of SBA loan |
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Loss in investment in equity securities |
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Equity income on investment in Buckskin |
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Change in operating assets and liabilities: |
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Gold sales receivable |
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Inventories |
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Joint venture receivable |
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Other current assets |
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Accounts payable and accrued expenses |
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Accrued payroll and related payroll expenses |
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Net cash provided (used) by operating activities |
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Cash flows from investing activities: |
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Purchases of property, plant, and equipment |
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Deposits on equipment |
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Proceeds from sale of equipment |
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Purchase of reclamation bonds |
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Additions to mineral property |
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Purchase of equity securities |
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Net cash used by investing activities |
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Cash flows from financing activities: |
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Proceeds from sale of common stock, net of issuance cost |
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Proceeds from exercise of common stock warrants |
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Principal payments on notes payable |
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Principal payments on notes payable, related parties |
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Contributions from non-controlling interest |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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Non-cash investing and financing activities: |
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Deposit on equipment applied to purchase |
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Notes payable for equipment and land purchase |
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Conversion of convertible debt to common stock |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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| Table of Contents |
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. The Company and Significant Accounting Policies
These unaudited interim condensed consolidated financial statements have been prepared by the management of Idaho Strategic Resources, Inc (“IDR”) (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair statement of the interim condensed consolidated financial statements have been included.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's consolidated financial position and results of operations. Operating results for the three and six-month periods ended June 30, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023.
For further information refer to the financial statements and footnotes thereto in the Company’s audited consolidated financial statements for the year ended December 31, 2022, in the Company’s Form 10-K as filed with the Securities and Exchange Commission on March 31, 2023.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, the New Jersey Mill Joint Venture (“NJMJV”). Intercompany accounts and transactions are eliminated. The portion of entities owned by other investors is presented as non-controlling interests on the consolidated balance sheets and statements of operations.
Revenue Recognition
Gold Revenue Recognition and Receivables-Sales of gold sold directly to customers are recorded as revenues and receivables upon completion of the performance obligations and transfer of control of the product to the customer. For concentrate sales, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment at estimated forward prices for the anticipated month of settlement. Due to the time elapsed from shipment to the customer and the final settlement with the customer, prices at which sales of concentrates will be settled are estimated. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. For sales of doré and metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner.
Sales and accounts receivable for concentrate shipments are recorded net of charges by the customer for treatment, refining, smelting losses, and other charges negotiated with the customers. Charges are estimated upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from estimates. Costs charged by customers include fixed costs per ton of concentrate and price escalators. Refining, selling, and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred. See Note 4 for more information on our sales of products.
Other Revenue Recognition-Revenue from harvest of raw timber is recognized when the performance obligation under a contract and transfer of the timber have both been completed. Sales of timber found on the Company’s mineral properties are not a part of normal operations.
Inventories
Inventories are stated at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, and milling costs including applicable overhead, depreciation, depletion, and amortization relating to the operations. Costs are allocated based on the stage at which the ore is in the production process. Supplies inventory is stated at the lower of cost or estimated net realizable value.
Mine Exploration and Development Costs
The Company expenses exploration costs as such in the period they occur. The mine development stage begins once the Company identifies ore reserves which is based on a determination whether an ore body can be economically developed. Expenditures incurred during the development stage are capitalized as deferred development costs and include such costs for drift, ramps, and infrastructure. Costs to improve, alter, or rehabilitate primary development assets which appreciably extend the life, increase capacity, or improve the efficiency or safety of such assets are also capitalized. The development stage ends when the production stage of ore reserves begins. Amortization of deferred development costs is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
Fair Value Measurements
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period that are included in earnings are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. At June 30, 2023, the Company had equity securities measured at fair value using level 1 quoted prices and no liabilities required measurement at fair value. At December 31, 2022, the Company had no assets or liabilities that required measurement at fair value on a recurring basis.
| 7 |
| Table of Contents |
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. The Company and Significant Accounting Policies (continued)
Accounting for Investments in Joint Ventures and Equity Method Investments
Investment in Joint Ventures-For joint ventures where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the venture’s management committee.
For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. For those joint ventures in which there is joint control between the parties, the equity method is utilized whereby the Company’s share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount. The Company periodically assesses its investments in joint ventures for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.
Equity Method Investments-Investments in companies and joint ventures in which the Company has the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and representation on governing bodies. Under the equity method of accounting, our share of the net earnings or losses of the investee are included in net income (loss) in the consolidated statements of operations. We evaluate equity method investments whenever events or changes in circumstance indicate the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. At June 30, 2023, and December 31, 2022, the Company's
At June 30, 2023 and December 31, 2022, the Company’s percentage ownership and method of accounting for each joint venture and equity method investment is as follows:
|
| June 30, 2023 |
| December 31, 2022 | |||||||||||||
Joint Venture |
| % Ownership |
|
| Significant Influence? |
| Accounting Method |
| % Ownership |
|
| Significant Influence? |
| Accounting Method | |||
NJMJV |
|
| % |
| Yes |
| Consolidated |
|
| % |
| Yes |
| Consolidated | |||
Butte Highlands Joint Venture (“BHJV”) |
|
| % |
| No |
| Cost |
|
| % |
| No |
| Cost | |||
Buckskin Gold and Silver Inc. |
|
| % |
| Yes |
| Equity |
|
| % |
| Yes |
| Equity | |||
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2023 financial statement presentation. Reclassifications had no effect on net loss, stockholders’ equity, or cash flows as previously reported.
Investments in Equity Securities
Investments in equity securities are generally measured at fair value. Unrealized gains and losses for equity securities resulting from changes in fair value are recognized in current earnings. If an equity security does not have a readily determinable fair value, we may elect to measure the security at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer. At the end of each reporting period, we reassess whether an equity investment security without a readily determinable fair value qualifies to be measured at cost less impairment, consider whether impairment indicators exist to evaluate if an equity investment security is impaired and, if so, record an impairment loss. At the end of each reporting period, unrealized gains and losses resulting from changes in fair value are recognized in current earnings. Upon sale of an equity security, the realized gain or loss is recognized in current earnings.
New Accounting Pronouncement
Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
2. Going Concern
The Company is currently producing from underground at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its planned production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
3. Inventories
At June 30, 2023 and December 31, 2022, the Company’s inventories consisted of the following:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Concentrate inventory |
|
|
|
|
|
| ||
In process |
| $ |
|
| $ |
| ||
Finished goods |
|
|
|
|
|
| ||
Total concentrate inventory |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Supplies inventory |
|
|
|
|
|
|
|
|
Mine parts and supplies |
|
|
|
|
|
| ||
Mill parts and supplies |
|
|
|
|
|
| ||
Core drilling supplies and materials |
|
|
|
|
|
| ||
Total supplies inventory |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total |
| $ |
|
| $ |
| ||
| 8 |
| Table of Contents |
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
4. Sales of Products
Our products consist of both gold flotation concentrates which we sell to a single broker (H&H Metal), and an unrefined gold-silver product known as doré which we sell to a precious metal refinery. At June 30, 2023, metals that had been sold but not finally settled included 5,223 ounces of which 4,276 ounces were sold at a predetermined price with the remaining 947 exposed to future price changes. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable. Sales of products by metal type for the three and six-month periods ended June 30, 2023 and 2022 were as follows:
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
|
| Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
Gold |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Silver |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less: Smelter and refining charges |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Sales by significant product type for the three and six-month periods ended June 30, 2023, and 2022 were as follows:
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
|
| Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
Concentrate sales to H&H Metal |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Dore sales to refinery |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
At June 30, 2023 and December 31, 2022, our gold sales receivable balance related to contracts with customers of $
5. Related Party Transactions
At December 31, 2022, the Company had a note payable to Ophir Holdings, a company owned by two officers and one former officer of the Company, with a balance of $
The Company paid the remaining amount due to Ophir Holdings on May 10, 2023. This payment resulted in a negative net interest charge for the three and six-months ended June 30, 2023. Related party interest expense for the three and six-months ended June 30, 2023 and 2022 is as follows.
June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ |
| ||
The Company leases office space from certain related parties on a month-to-month basis. $
June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
6. Joint Ventures
New Jersey Mill Joint Venture Agreement
Butte Highlands JV, LLC (“BHJV”)
On January 29, 2016,
| 9 |
| Table of Contents |
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
7. Earnings per Share
Net income (loss) per share is computed by dividing the net amount excluding net income (loss) attributable to a non-controlling interest by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. Such common stock equivalents are included or excluded from the calculation of diluted net income (loss) per share for each period as follows:
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
|
| Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
Incremental shares included in diluted net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock options |
|
|
|
|
|
|
|
| - |
|
|
| - |
| ||
Stock purchase warrants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
| ||
Excluded in diluted net income (loss) per share as inclusion would have an antidilutive effect: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock purchase warrants |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
8. Property, Plant, and Equipment
Property, plant and equipment at June 30, 2023 and December 31, 2022 consisted of the following:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Mill |
|
|
|
|
|
| ||
Land |
| $ |
|
| $ |
| ||
Building |
|
|
|
|
|
| ||
Equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Total mill |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Building and equipment |
|
|
|
|
|
|
|
|
Buildings |
|
|
|
|
|
| ||
Equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Total building and equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Land |
|
|
|
|
|
|
|
|
Bear Creek |
|
|
|
|
|
| ||
BOW |
|
|
|
|
|
| ||
Eastern Star |
|
|
|
|
|
| ||
Gillig |
|
|
|
|
|
| ||
Highwater |
|
|
|
|
|
| ||
Salmon property |
|
|
|
|
|
| ||
Total land |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
9. Mineral Properties
Mineral properties at June 30, 2023 and December 31, 2022 consisted of the following:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Golden Chest |
|
|
|
|
|
| ||
Mineral Property |
| $ |
|
| $ |
| ||
Infrastructure |
|
|
|
|
|
| ||
Total Golden Chest |
|
|
|
|
|
| ||
New Jersey |
|
|
|
|
|
| ||
McKinley-Monarch |
|
|
|
|
|
| ||
Butte Gulch |
|
|
|
|
|
| ||
Potosi |
|
|
|
|
|
| ||
Park Copper |
|
|
|
|
|
| ||
Less accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Total |
| $ |
|
| $ |
| ||
| 10 |
| Table of Contents |
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
9. Mineral Properties (continued)
For the three and six-month periods ended June 30, 2023 and 2022, interest expense was capitalized in association with the ramp access project at the Golden Chest as follows.
June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
10. Investment in Buckskin
The investment in Buckskin is being accounted for using the equity method and resulted in recognition of equity income on the investment of $
11. Notes Payable
At June 30, 2023 and December 31, 2022, notes payable are as follows:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Building in Salmon, Idaho, 60-month note payable, |
| $ |
|
| $ |
| ||
Resemin Muki Bolter, 36-month note payable, |
|
|
|
|
|
| ||
Paus 2 yrd. LHD, 48-month note payable, |
|
|
|
|
|
| ||
Paus 2 yrd. LHD, 60-month note payable, |
|
|
|
|
|
| ||
CarryAll transport, 36-month note payable, |
|
|
|
|
|
| ||
CarryAll transport, 36-month note payable, |
|
|
|
|
|
| ||
Two CarryAll transports, 36-month note payable, |
|
|
|
|
|
| ||
CarryAll transport, 36-month note payable, |
|
| 19,487 |
|
|
|
| |
Two CarryAll transports, 48-month note payable, 5.9% interest rate payable monthly through June 2027, monthly payments of $1,174 |
|
| 50,081 |
|
|
| - |
|
Atlas Copco loader, 60-month note payable, |
|
| - |
|
|
|
| |
Sandvik LH203 LHD, 36-month note payable, |
|
|
|
|
|
| ||
Sandvik LH202 LHD, 36-month note payable, |
|
|
|
|
|
| ||
Doosan Compressor, 36-month note payable, |
|
|
|
|
|
| ||
Caterpillar 306 excavator, 48-month note payable, |
|
|
|
|
|
| ||
Caterpillar 938 loader, 60-month note payable, |
|
|
|
|
|
| ||
Caterpillar R1600 LHD, 48-month note payable, |
|
|
|
|
|
| ||
Caterpillar AD22 underground truck, 48-month note payable, |
|
| - |
|
|
|
| |
Caterpillar AD30 underground truck, 40-month note payable, |
|
|
|
|
|
| ||
Small Business Administration EIDL 30 year note payable, |
|
|
|
|
|
| ||
2022 Dodge Ram, 75-month note payable, |
|
|
|
|
|
| ||
2016 Dodge Ram, 75-month note payable, |
|
|
|
|
|
| ||
2020 Ford Transit Van, 72-month note payable, |
|
|
|
|
|
| ||
Total notes payable |
|
|
|
|
|
| ||
Due within one year |
|
|
|
|
|
| ||
Due after one year |
| $ |
|
| $ |
| ||
| 11 |
| Table of Contents |
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
11. Notes Payable (continued)
All notes are collateralized by the property or equipment purchased in connection with each note. Future principal payments of notes payable at June 30, 2023 are as follows:
12 months ended June 30, |
|
|
| |
2024 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
The balance of convertible debt at December 31, 2021 consisted of $
12. Stockholders’ Equity
Stock issuance activity
The Company closed a private placement in February 2023. Under the private placement, the Company sold
The Company closed a private placement in February 2022. Under the private placement, the Company sold
Stock Purchase Warrants Outstanding
In the six months ended June 30, 2022,
The activity in stock purchase warrants is as follows: |
| Number of Warrants |
|
| Exercise Prices |
| ||
Balance December 31, 2021 |
|
|
|
| $ |
| ||
Expired |
|
| ( | ) |
| $ |
| |
Exercised quarter 1, 2022 |
|
| ( | ) |
| $ | 2.52- |
|
Exercised quarter 2, 2022 |
|
| ( | ) |
| $ |
| |
Exercised in remainder of 2022 |
|
| ( | ) |
| $ |
| |
Balance December 31, 2022 and June 30, 2023 |
|
|
|
| $ |
| ||
These warrants expire as follows: |
| Shares |
|
| Exercise Price |
|
| Expiration Date | |||
|
|
|
|
| $ |
|
| ||||
|
|
|
|
| $ |
|
| ||||
|
|
|
|
|
|
|
|
| |||
13. Stock Options
There were no stock options granted during the six months ended June 30, 2023 or 2022. Activity in the Company’s stock options is as follows:
|
| Number of Options |
|
| Weighted Average Exercise Prices |
| ||
Balance December 31, 2021 |
|
|
|
| $ |
| ||
Granted |
|
|
|
| $ | 5.21 |
| |
Exercised quarter 1, 2022 |
|
| (51,789 | ) |
| $ |
| |
Exercised quarter 2, 2022 |
|
| ( | ) |
| $ |
| |
Expired quarter 2, 2022 |
|
| ( | ) |
| $ |
| |
Exercised in remainder of 2022 |
|
| ( | ) |
| $ |
| |
Forfeited |
|
| ( | ) |
| $ |
| |
Balance December 31, 2022 and June 30, 2023 |
|
|
|
| $ |
| ||
Forfeited |
|
| ( | ) |
| $ |
| |
Outstanding and exercisable at June 30, 2023 |
|
|
|
| $ |
| ||
At June 30, 2023, outstanding stock options have a weighted average remaining term of approximately
| 12 |
| Table of Contents |
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
Idaho Strategic Resources, Inc is a gold producer and critical minerals/rare earth elements exploration company focused on a diversified asset base and cash flows from operations. Its portfolio of mineral properties are located in the historic producing silver and gold districts of the Coeur d’Alene Mining region of north Idaho and the Elk City region of north-central Idaho, as well as the historic Rare Earth Elements-Thorium Belt located near the city of Salmon in central Idaho.
The Company’s plan of operation is to generate positive cash flow, increase its gold production and asset base over time while being mindful of corporate overhead. The Company’s management is focused on utilizing its in-house technical and operating skills to build a portfolio of producing mines and milling operations with a focus on gold production and exploration for rare earth elements (“REEs”).
The Company’s gold properties include: the Golden Chest Mine (currently in production), and the New Jersey Mill (majority ownership interest), as well as the Eastern Star exploration property and other less advanced properties. The Company’s primary focus as it relates to its gold properties is to continue to grow production at the Golden Chest Mine and look to reinvest the cash flow into both the Golden Chest Mine, the New Jersey Mill, and furthering its exploration efforts near the Golden Chest - as well as at its rare earth elements properties.
In addition to its gold properties, Idaho Strategic has three rare earth elements exploration properties in Idaho known as Lemhi Pass, Diamond Creek, and Mineral Hill. The Company’s expansion into rare earth elements came about in an effort to diversify its holdings towards the anticipated demand for these elements in the electrification of motorized vehicles and a renewed focus on the United States’ domestic critical minerals supply chain security. To date, Idaho Strategic has conducted numerous exploration programs on its rare earth elements landholdings which include drilling, trenching, sampling, and mapping of certain areas within the Company’s 18,030-acre landholdings.
Idaho Strategic has been able to leverage its track record of operations and experience in mining, milling, and exploring at the Golden Chest Mine to develop relationships with different state government agencies, universities, national labs, and other government and non-government entities to advance its rare earth elements exploration activities on multiple fronts. Idaho Strategic plans to continue to look for additional partnerships to find mutually beneficial solutions to advance the U.S.' domestic rare earth elements supply chain.
Critical Accounting Estimates
We have, besides our estimates of the amount of depreciation on our assets, two critical accounting estimates. The ounces of gold contained in our process and concentrate inventory is based on assays taken at the time the ore is processed and the ounces of gold contained in shipped concentrate which is based upon assays taken prior to shipment however subject to final assays at the refinery, these shipments are also subject to the fluctuation in gold prices between our shipment date and estimated and actual final settlement date. Also, the reclamation bond obligation on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations, and may differ when we cease operations.
Our concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. It is unlikely a significant reversal of revenue for the concentrate receivable as a whole will occur upon final settlement of the lots. As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known. At June 30, 2023, metals that had been sold but not finally settled included 5,223 ounces of which 4,276 ounces were sold at a predetermined price with the remaining 947 exposed to future price changes. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable.
The asset retirement obligation and asset on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations. At June 30, 2023 we reviewed our December 31, 2022 estimate that the cost of the machine and man hours probable to be needed to put our properties in the condition required by our permits once we cease operations. The June 30, 2023 estimated costs would be $103,320 for the Golden Chest property and $203,600 for the New Jersey Mine and Mill. For purposes of the estimate, we evaluated the expected life in years and costs that, initially, are comparable to rates that we would incur at the present. An expected present value technique is used to estimate the fair value of the liability. This includes inflating the estimated costs in today’s dollars using a reasonable inflation rate up to the date of expected retirement and discounting the inflated costs using a credit-adjusted risk-free rate. Upon initial recognition of the liability, the carrying amount of the related long-lived asset is increased by the same amount. The liability is accreted over time through periodic charges to earnings. In addition, the asset retirement cost is amortized over the life of the related asset. We are adding to the liability each year, and amortizing the asset over the estimated life, which decreases our net income in total each year. Changes resulting from revisions to the timing or amount of the original estimate of undiscounted cash flows are recognized as either an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset. Upward revisions of the amount of undiscounted estimated cash flows are discounted using the current credit-adjusted risk-free rate. Downward revisions in the amount of undiscounted estimated cash flows are discounted using the credit-adjusted risk-free rate that existed when the original liability was recognized. The Company reviews, on an annual basis, unless otherwise deemed necessary, the asset retirement obligations. Separately, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable.
Highlights during the second quarter of 2023 include:
| Rare Earth Elements | |
| · | Idaho Strategic announced the expansion (and consolidation) of the Company’s Roberts project with the addition of the Phyllis Gross and Lower Lee Buck claim groups; and the subsequent rebranding of this landholding as the Mineral Hill REE project. |
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| · | Subsequent to the end of the second quarter, Idaho Strategic announced the results of a sample taken during the second quarter from the Company’s Mineral Hill project. The sample returned a grade of 23.5% total rare earth elements (TREE) and was taken from a seam of monazite enveloped between two distinct carbonatites, which each assayed 7.5% TREE respectively. |
| 13 |
| Table of Contents |
| Golden Chest/Operations | |
| · | At the Golden Chest, ore mined from underground stopes totaled approximately 8,700 tonnes with about 60% of that coming from the 797 and 812H-Vein stopes and the remainder from Idaho Vein stopes. A total of 1,800 cubic meters of cemented rockfill were placed during the quarter. The Main Access Ramp (“MAR”) and associated drifts were advanced by 60 meters at depth during the quarter to the 785 meter elevation and a ventilation raise was also completed. |
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|
| · | Near the end of the quarter, the Company started work on a portal at the bottom of the Jumbo Pit as part of an exploration project to drift on the Jumbo Vein to establish vein continuity and gold grade. |
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| · | For the quarter ended June 30, 2023, a total of 11,708 dry metric tonnes (“dmt”) were processed at the Company’s New Jersey mill with a flotation feed head grade of 7.31 gpt gold and gold recovery of 92.6%. The head grade increased 30% over the first quarter as a result of mining on the H-vein which accounted for about one-half of the ore tonnage during the quarter with the remainder from Idaho Vein stopes and a stockpile of Jumbo open pit ore. |
Results of Operations
Our financial performance during the quarter is summarized below:
| · | Revenue increased 37.2% from $2,358,492 in 2022 to $3,236,515 in 2023 for the three-month period ended June 30, 2023, and increased 49.4% from $4,402,909 to $6,578,111 for the 6-month period ended June 30, 2023. The increase in revenue is largely due to the increased gold production throughout the quarter as well as a higher average gold price recognized on ounces produced. Gold production is expected to remain at approximately this level for the remainder of the year as mining on the H-Vein continues. |
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| · | Gross profit as a percentage of sales increased from 0.3% in the second quarter of 2022 to 24.5% in the second quarter of 2023. For the six months ending June 30, 2022 gross profit as a percentage of sales was 7.1% compared to 25.2% in 2023 |
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| · | Exploration expense decreased in 2023, when compared to 2022, primarily due to a decrease in drilling by the company owned and operated drill rig, and a reduction in overall exploration activity. |
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| · | Professional services remained relatively consistent with the exception of the six-month period where they increased significantly, compared to the same period in 2022. This was due to legal fees related to merger and acquisition activity in the first quarter of 2023. This was a one-time increase and is not expected to continue. |
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| · | Operating income for the three-month period ended June 30, 2023, was $289,987 which is an increase of $1,136,708 from an operating loss of $846,721 in the second quarter of 2022. For the six-month period ending June 30, 2023, operating income of $303,010 was an increase of $1,575,897 over the same period in 2022 which had an operating loss of $1,272,887. |
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| · | Other (income) expense increased $11,363 from an expense of $5,528 in the second quarter of 2022, to income of $5,835 in the same period in 2023. Other (income) expense increased $89,429 from an expense of $52,431 in the six months ending June 30, 2022, to income of $36,998 in the same period in 2023.The increase was from timber sales during the first quarter of 2023, as well as increased interest income from the company’s interest-bearing money market account that was not in place during 2022. Interest expense also decreased significantly due to many of the company’s notes being near the end of their term. |
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| · | Net income increased $1,148,071 from a net loss of $852,249 for the three-month period ended June 30, 2022 to net income of $295,822 for the three-month period ending June 30, 2023. Net income increased $1,665,326 from a net loss of $1,325,318 in the six months ending June 30, 2022, to net income of $340,008 in the same period in 2023. |
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| · | The consolidated net income for the six-month period ending June 30, 2023 and net loss for the six-month period ended June 30, 2022 included non-cash charges as follows: depreciation and amortization of $671,079 ($472,115 in 2022), income on disposal of equipment of $224 (loss of $3,901 in 2022), accretion of asset retirement obligation of $7,856 ($5,069 in 2022), issuance of common stock for services of $0 ($32,326 in 2022), gain on forgiveness of SBA loan of none in 2023 ($10,000 in 2022) and equity income on investment in Buckskin of $1,357 ($671 in 2022). |
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| · | Cash cost and all-in sustaining cost per ounce decreased in 2023 compared to 2022 due to a higher ore grade and tonnes mined. A core drilling exploration program is planned for the Golden Chest for the late third and early fourth quarter which may increase all-in sustaining costs in the second half of 2023. |
| 14 |
| Table of Contents |
Cash Costs and All-In Sustaining Costs Reconciliation to GAAP-Reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (“GAAP”) to cash cost per ounce and all-in sustaining costs (“AISC”) per ounce (“non-GAAP”).
The table below presents reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion, and amortization to the non-GAAP measures of cash cost per ounce and all in sustaining costs per ounce for the Company’s gold production in the three and six-month periods ended June 30, 2023, and 2022.
Cash cost per ounce is an important operating measure that we utilize to measure operating performance. AISC per ounce is an important measure that we utilize to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital. Current GAAP measures used in the mining industry, such as cost of goods sold do not capture all of the expenditures incurred to discover, develop, and sustain gold production.
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
|
| Three Months |
|
| Six Months |
|
| Three Months |
|
| Six Months |
| ||||
Cost of sales and other direct production costs and depreciation and amortization |
| $ | 2,442,932 |
|
| $ | 4,918,929 |
|
| $ | 2,351,035 |
|
| $ | 4,089,310 |
|
Depreciation and amortization |
|
| (343,042 | ) |
|
| (671,079 | ) |
|
| (241,906 | ) |
|
| (472,115 | ) |
Change in concentrate inventory |
|
| (109,648 | ) |
|
| (36,979 | ) |
|
| (40,229 | ) |
|
| (432,580 | ) |
Cash Cost |
| $ | 1,990,242 |
|
| $ | 4,210,871 |
|
| $ | 2,068,900 |
|
| $ | 3,184,615 |
|
Exploration |
|
| 207,369 |
|
|
| 480,811 |
|
|
| 386,781 |
|
|
| 782,905 |
|
Less rare earth exploration costs |
|
| (122,760 | ) |
|
| (334,358 | ) |
|
| (154,130 | ) |
|
| (242,624 | ) |
Sustaining capital |
|
| 214,107 |
|
|
| 334,856 |
|
|
| 165,582 |
|
|
| 262,291 |
|
General and administrative |
|
| 123,765 |
|
|
| 387,063 |
|
|
| 273,977 |
|
|
| 475,289 |
|
Less stock-based compensation and other non-cash items |
|
| 514 |
|
|
| (9,155 | ) |
|
| 3,885 |
|
|
| (30,626 | ) |
All in sustaining costs |
| $ | 2,413,237 |
|
| $ | 5,070,088 |
|
| $ | 2,744,995 |
|
| $ | 4,431,850 |
|
Divided by ounces produced |
|
| 2,152 |
|
|
| 3,877 |
|
|
| 1,589 |
|
|
| 2,730 |
|
Cash cost per ounce |
| $ | 924.83 |
|
| $ | 1,086.12 |
|
| $ | 1,302.01 |
|
| $ | 1,166.53 |
|
All in sustaining cost (AISC) per ounce |
| $ | 1,121.39 |
|
| $ | 1,307.73 |
|
| $ | 1,727.50 |
|
| $ | 1,623.39 |
|
Financial Condition and Liquidity
|
| For the Six Months Ended June 30, |
| |||||
Net cash provided (used) by: |
| 2023 |
|
| 2022 |
| ||
Operating activities |
| $ | 1,143,346 |
|
| $ | (1,694,476 | ) |
Investing activities |
|
| (869,741 | ) |
|
| (889,004 | ) |
Financing activities |
|
| 318,382 |
|
|
| 3,740,585 |
|
Net change in cash and cash equivalents |
|
| 591,987 |
|
|
| 1,157,105 |
|
Cash and cash equivalents, beginning of period |
|
| 1,638,031 |
|
|
| 1,976,518 |
|
Cash and cash equivalents, end of period |
| $ | 2,230,018 |
|
| $ | 3,133,623 |
|
The Company is currently producing from the underground mine at the Golden Chest. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its planned production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
| 15 |
| Table of Contents |
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for small reporting companies.
ITEM 4: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At June 30, 2023, our Vice President who also serves as our Chief Accounting Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified by the Securities & Exchange Commission rules and forms.
Based upon that evaluation, it was concluded that our disclosure controls were effective as of June 30, 2023, to ensure timely reporting with the Securities and Exchange Commission. Specifically, the Company’s corporate governance and disclosure controls and procedures provided reasonable assurance that required reports were timely and accurately reported in our periodic reports filed with the Securities and Exchange Commission.
Changes in internal control over financial reporting
There was no material change in internal control over financial reporting in the quarter ended June 30, 2023.
| 16 |
| Table of Contents |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Neither the constituent instruments defining the rights of the Company’s securities filers nor the rights evidenced by the Company’s outstanding common stock have been modified, limited or qualified.
The Company closed a private placement in February 2023. Under the private placement, the Company sold 123,365 shares at $5.50 per share and 35,088 shares at $5.70 per share for net proceeds of $878,503.
The Company closed a private placement in February 2022. Under the private placement, the Company sold 360,134 shares at $7.50 per share for net proceeds of $2,701,000. In the first quarter of 2022 the Company issued 3,572 shares of common stock at $9.05 per share for services provided for a total value of $32,326.
The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D Rule 506(b). The common shares are restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has no outstanding senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this report.
ITEM 5. OTHER INFORMATION
None.
| 17 |
| Table of Contents |
ITEM 6. EXHIBITS
Exhibits
| ||
| ||
| ||
| Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| Mine safety information listed in Section 1503 of the Dodd-Frank Act. | |
101.INS**** |
| XBRL Instance Document |
101.SCH**** |
| XBRL Taxonomy Extension Schema Document |
101.CAL**** |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF**** |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB**** |
| XBRL Taxonomy Extension Label Linkbase Document |
101.PRE**** |
| XBRL Taxonomy Extension Presentation Linkbase Document |
_____________
****Filed herewith.
| 18 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
IDAHO STRATEGIC RESOURCES, INC | |||
| By: | /s/ John Swallow | ||
| John Swallow, its: President and Chief Executive Officer Date August 14, 2023 | ||
| By: | /s/ Grant Brackebusch | ||
| Grant Brackebusch, its: Vice President and Chief Financial Officer Date: August 14, 2023 |
| |
19 |