UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 2009
[ ] 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, 2009 was $6,657,000.
On March 10, 2010 there were 41,958,262 shares of the registrant’s Common Stock outstanding.
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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.
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.
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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.
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.
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, Golden Chest mine the New Jersey mine, the Silver Strand
mine, the Toboggan exploration project, and several other exploration prospects.
The Company owns 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 processed ore and other mineralized material from the Golden Chest, New Jersey, and Silver Strand properties for the past five years. Our strategy is to produce some income from these properties while we explore them at depth with core drilling, and 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. Feed for the mill in 2009 was from small blocks of accessible ore at the Golden Chest mine until the mine and mill were placed on standby on May 15, 2009.
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We also conduct exploratory diamond drilling and grassroots exploration in the area. 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. The Company competes with other junior mining companies for the
capital necessary to sustain its exploration and development programs. Economic
conditions resulting from the depressed stock market of late 2008 and early 2009
made it difficult for the Company for raise the funding necessary to complete
its development program at the Golden Chest. Since the Company could not raise
the money necessary to finish its ramp to known ore reserves at the Golden
Chest, it suspended activity at the Golden Chest and the New Jersey mill. This
resulted in the Company laying off seven employees in 2009. Market conditions
have improved in early 2010 and the Company has been able to secure the
financing necessary to begin gold and silver production from its Silver Strand
mine in mid 2010.
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 (Hecla Mining Co., U.S. Silver Corp. and Golden Eagle Mining Co.) that have staked lode claims near the Company’s Toboggan Project which is a gold exploration joint venture with Newmont Mining Corporation.
The Company also competes for skilled labor within the mining industry; however, due to the lack of financing in 2009 the Company did not find it necessary to hire employees.
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 surface water quality and access to public
lands. An approved plan of operations (“POO”) and a financial bond are usually
required before exploration or mining activities can be conducted on public land
that is administered by the United States Bureau of Land Management (“BLM”) or
United States Forest Service (“USFS”).
The New Jersey mine, 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, 2009 and 2008,
we have spent $80,733 and $570,549, respectively, on exploration activities.
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.
As an example, 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 haulage of ore from the mine commences 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.
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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 $20,600.
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 7
including President Fred Brackebusch, Vice President Grant Brackebusch and
Secretary Tina Brackebusch. Tina Brackebusch works part-time for the Company.
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 2010. 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 and 10K 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.
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ITEM 2.
DESCRIPTION OF PROPERTIES
Figure 1 - Project Location Map
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 $717 per ounce as of December 31, 2009. 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, with Mine Systems Design, Inc. (MSD) 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.
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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
Concentrate Leach Plant “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 leach
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 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. No exploration or development work was completed by the Company in 2009.
As of December 31, 2009, the Company had a capital cost of $1,119,372 associated with the mineral processing plant and a capitalized development plus investment cost of $604,792 associated with the mine.
Exploration Plans
The Company plans to
start a raise on a portion of the Coleman vein where high-grade gold
mineralization was found and complete exploration drifting to the north.
Drifting on the vein started in early March of 2010.
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 $27.22/gram ($846.57/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 (3.19 gpt), 9.6 ounces per ton silver (329 gpt) 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 haulage of ore to the New Jersey mill starts 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. In 2009 no work was completed except for required environmental 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, 2009, the Company had a capitalized development plus investment cost of $152,576 associated with the Silver Strand mine.
Exploration and Development Plans
The
Company plans to mobilize to the Silver Strand in May of 2010 and begin mining
ore about 30 days after mobilization is complete. Mining activities are limited
from May 1st until October 31st according to the permit.
Usual environmental compliance activities such as water monitoring will also
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).
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 $0.46/gram ($14.35/troy ounce) and $27.22/gram
($846.57/troy ounce), respectively.
9
| 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.
Sliding Scale for Additional NSR Royalty
| Price of Gold, $ / Troy Ounce (using December 2008 CPI-U) |
Additional NSR Royalty |
| < $470 | None |
| $470 to $529 | 1.0% |
| $529 to $588 | 1.5% |
| $588 to $647 | 2.0% |
| > $647 | 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. Production to date under the Mining Lease Agreement has been 1,465 ounces of gold.
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, the mine is on standby as the Company searches for
financing to complete the development of a ramp to access ore reserves on the
Idaho vein.
For each year from 2004 through 2008, the Company 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.
10
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 open pit 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.
As of December 31, 2009, 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 inspected and surveyed the No. 3 level to where it
intersects the Idaho vein. Based on this new information, the Company 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 would 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, the sale of a joint venture interest, 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 actual 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 $27.22/gram ($846.57/troy ounce).
| Classification | Metric Tonnes | Gold Grade (grams per tonne) |
Ounces of Gold |
| Proven & Probable | 242,058 | 5.10 | 39,694 |
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.
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
11
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. No work was completed at the Niagara in 2009.
Exploration and Development Plans
The
Company has submitted a POO to the USFS for a core drilling program at the
Progress gold prospect. The POO is scheduled for approval by the USFS in May of
2010, but the timing of the drilling will be dependent on the Company’s ability
to raise funds.
As of December 31, 2009, the Company had an investment cost of $42,000 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), exploring for gold deposits within a 38 square
mile area north of Murray, Idaho. The project consists of 414 unpatented lode
claims covering an area of approximately 8,000 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, Progress South, 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.
12
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. During
2009, Newmont completed a core drilling program that consisted of six holes for
a total of 1,359 meters. Two holes were drilled at each of the following
prospects: Mineral Ridge, Golden Reward and Gold Butte. The best gold intercept
drilled was at the Gold Butte where a pyritic quartz vein was found at 24.0
meters below the surface that assayed 2.5 gpt gold over 4.0 meters including a
higher grade section that assayed 7.15 gpt gold over 1.0 meter. Thick intercepts
of anomalous, but low-grade gold mineralization were drilled at the Mineral
Ridge and the Golden Reward prospects. Newmont also completed geologic mapping,
surface rock sampling, soil sampling, and additional claim staking.
As of the date of this report, Newmont has spent approximately $1.25 million on the project and is required by the agreement to spend another $0.75 million by March 20, 2011, to earn a 51% interest in the project.
Exploration and Development Plans
Newmont has an exploration program planned for 2010 that includes core
drilling and reverse circulation 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. No work was completed at the Giant Ledge property in 2009.
Exploration and Development Plans
If sufficient
funds are available, the Company will perform a ground-based geophysical survey
utilizing induced polarization (IP).
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 2008 included claim staking, soil sampling, geologic mapping and rock sampling. No work was completed on the Mac prospect in 2009. 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.
13
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 2010. 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. No work was completed on the Copper Camp prospect in 2009.
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
2010.
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, 2009, the Company had an investment
cost of $25,500 associated with this property.
ITEM 3.
LEGAL PROCEEDINGS
The Company is currently a plaintiff along with Shoshone County, Idaho, and George E. Stephenson in a complaint against the USA, Secretary of the Department of Agriculture, Chief of the Forest Service, etc., for Declaratory Judgment and Quiet Title regarding a public right-of-way for the East Fork of Eagle Creek Road near Murray, Idaho. The complaint was filed on October 5, 2009 in the United States District Court, District of Idaho. The plaintiffs are bringing the action to adjudicate/declare under the Quiet Title Act, and under the Declaratory Judgment Act that the East Fork Eagle Creek Road is a public road as it crosses the lands owned by the USA in accordance with R.S. 2477.
ITEM 4.
(REMOVED AND RESERVED)
14
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, 2009 | High Bid | Low Bid |
| First Quarter | $0.37 | $0.18 |
| Second Quarter | $0.35 | $0.18 |
| Third Quarter | $0.32 | $0.19 |
| Fourth Quarter | $0.34 | $0.19 |
| 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 |
Shareholders
As of March 10, 2010
there were approximately 1,200 shareholders of record of the Company's Common
Stock.
Dividend Policy
The Company has not
declared or paid cash dividends or made distributions in the past and the
Company does not anticipate that it will pay cash dividends or make
distributions in the foreseeable future. The Company currently intends to retain
and reinvest future earnings, if any, to finance its operations.
Transfer Agent
The transfer agent for
the Company's Common Stock is 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. In January of 2009, the Board of Directors approved a
compensation plan for Vice President Grant Brackebusch, that awarded him with
restricted common stock for an average of 84.5 hours per month at a rate of $100
per hour. The number of shares is calculated quarterly using the average bid
price for the quarter as quoted by the OTC Bulletin Board. Additionally, in
2009, both Fred W. Brackebusch and Grant Brackebusch have been compensated with
shares in lieu of cash for some of their base salaries as well to conserve
limited cash. 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, 2009 and
2008, the Company issued 651,320 and 198,700 shares, respectively, of its
restricted common stock valued at $195,398 and $72,000, respectively, to Fred
Brackebusch for management services. In 2009 the Company issued 338,000 shares
of its restricted common stock valued at $101,400 to Grant 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, 2009, the Company issued 1,386,840
shares of restricted common stock for management and director’s fees, equipment,
services, exploration, and mining lease payments. A value of $392,646 (for an
average value of $0.28 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.
15
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When we use the terms "New Jersey Mining Company," the "Company," "we," "us," or "our," we are referring to New Jersey Mining Company (the "Company") and its subsidiaries, unless the context otherwise requires.
Cautionary Statement about Forward-Looking Statements
This Report on Form 10-K includes certain statements that may be deemed
to be "forward-looking statements." All statements, other than statements of
historical facts, included in this Form 10-K that address activities, events or
developments that our management expects, believes or anticipates will or may
occur in the future are forward-looking statements. Such forward-looking
statements include discussion of such matters as:
-
The amount and nature of future capital, development and exploration expenditures;
-
The timing of exploration activities; and
-
Business strategies and development of our business plan.
Forward-looking statements also typically include words such as "anticipate," "estimate," "expect," "potential," "could" or similar words suggesting future outcomes. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, including such factors as the volatility and level of metal prices, currency exchange rate fluctuations, uncertainties in cash flow, expected acquisition benefits, exploration mining and operating risks, competition, litigation, environmental matters, the potential impact of government regulations, and other matters related to the mining industry, many of which are beyond our control. Readers are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those expressed or implied in the forward-looking statements.
The Company is under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.
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 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.
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 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 2009 Newmont completed a drilling program, and also conducted soil sampling surveys and geological mapping. Newmont has made plans for additional drilling of certain targets in 2010. 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 five holes since which expanded the resource. Results of the recent drilling also indicate that gold would be a significant byproduct. Preliminary open pit mining studies have been completed. 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 2009, all of the accessible ore pillar remnants were mined but further work on the development ramp to access reserves will have to await financing. During the year, joint venture opportunities were evaluated and toward the end of the year a letter of intent was signed with a potential joint venture party, but a definitive agreement has not been signed to date. The Company will continue to search for joint venture opportunities in order to acquire funding to develop the reserves at the Golden Chest mine. 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 2010. At the Coleman underground mine, it is planned to drive a raise on the vein starting in the first quarter of 2010 to establish whether reserves can be calculated on the deeper parts of the Coleman vein.
The Company conducted core drilling operations at the Toboggan Project for Newmont under a service agreement and plans to continue such drilling in 2010.
The New Jersey mineral processing plant processed 1,469 tonnes during 2009. The plant operated on a regular schedule of 4 days per week, 10 hours per day, processing ore from the Golden Chest mine until May 2009 when ore was depleted. Plans for 2010 include milling development rock from the Coleman and milling ore from the Silver Strand mine when it becomes available, probably in the third quarter of 2010.
16
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 $34,087, and
Figure 1 shows the corresponding balances for previous accounting periods.
Results of Operations
Income Earned
during the Development Stage (Revenue) for 2009 was $450,883 as compared to
$74,284 for 2008. Revenue was higher in 2009 due to increased sales of gold and
contract drilling on the Toboggan Project. Figure 2 shows a net loss for 2009 of
$850,786 compared to $1,423,829 for 2008. The net loss for 2009 was less than
2008 because of higher revenue and lower exploration and G & A costs.
Gold production was 230 ounces in 2009 as compared to 96 ounces for 2008. Gold production for the 2010 is expected to increase due to plans for production from the Coleman and Silver Strand mines.
Ore mining operations at the Golden Chest mine ended in May 2009 when all accessible remnants were mined. If financing can be obtained, ramp access will be extended to the Idaho vein reserves. If the Idaho vein ramp development can be completed there will be more than 200,000 tonnes available. There are no plans in 2010 to commence ramp development unless a joint venture partner can be arranged.
17
Development rock from a raise at the Coleman mine will be available for milling late in the first quarter of 2010.
Ore production is planned at the Silver Strand mine in the second quarter of 2010. Production could commence in 30 days after mobilization in May 2010, 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 major 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. Management expects that work will be done at the Coleman and Silver Strand mines in 2010 and that the mineral processing plant will be started in the first quarter of 2010 and operate the remainder of the year.
The Company raised approximately $500,000 with a private placement in the first quarter of 2010 and has prepared a detailed plan of operations for 2010 assuming no additional funds are produced by financing efforts. This detailed plan includes operation of the Coleman and Silver Strand mines as well as the mineral processing plant for the remainder of 2010. Plans have been 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. We expect to receive cash flow from the gold and silver sales and by providing drilling services to Newmont on our joint venture (see note 8. Mining Venture Agreements–Newmont Venture Agreement).
Changes in Direct Production Costs
Direct
production costs, increased from 2008 to 2009 due to increased production in the
first two quarters of 2009 at the Golden Chest property
Changes in management costs
Although
management costs increased in 2009 over 2008, 80% was paid in common stock to
help conserve available cash funds.
Changes in Exploration costs
Exploration costs decreased in 2009 versus 2008 due to a lack of
discretionary funding being available.
Changes in General and Administrative Costs
General and administrative costs decreased from 2008 to 2009 due to a
lack of discretionary funding and reduced activities in the third and fourth
quarters.
Changes in Contract Income and Expense
Contract drilling income and expense increased because this was the
first year of drilling done on contract for Newmont for the Toboggan Project.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
18
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, 2009 and 2008, 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, 2009 and 2008, 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.
/s/ DeCoria, Maichel & Teague P.S.
DeCoria, Maichel & Teague P.S.
Spokane,
Washington
March 15, 2010
19
New Jersey Mining Company
(A Development Stage
Company)
Table of Contents
20
New Jersey Mining Company
(A Development Stage
Company)
Balance Sheets
December 31, 2009 and 2008
| ASSETS | ||||||
| 2009 | 2008 | |||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 34,087 | $ | 321,254 | ||
| Investment in marketable equity security at market (cost-2009-$3,868, 2008-$6,531) | 21,665 | 16,328 | ||||
| Interest receivable | 309 | 324 | ||||
| Miscellaneous receivable | 919 | 5,516 | ||||
| Prepaid expense | 572 | |||||
| Prepaid claim fees | 18,573 | |||||
| Inventory | 1,833 | 99,092 | ||||
| Total current assets | 77,386 | 443,086 | ||||
| Property, plant and equipment, net of accumulated depreciation | 1,353,369 | 1,470,355 | ||||
| Mineral properties, net of accumulated amortization | 1,407,959 | 1,398,334 | ||||
| Reclamation bonds | 121,088 | 123,520 | ||||
| Total assets | $ | 2,959,802 | $ | 3,435,295 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 62,858 | $ | 44,677 | ||
| Note and interest payable, related party | 72,107 | |||||
| Accrued payroll and related payroll expenses | 7,160 | 45,706 | ||||
| Deposit received on sale of mineral property (Note 7) | 50,000 | |||||
| Obligations under capital lease-current portion | 9,894 | 26,665 | ||||
| Notes payable-current portion | 134,689 | 114,534 | ||||
| Total current liabilities | 336,708 | 231,582 | ||||
| Asset retirement obligation | 25,913 | 53,500 | ||||
| Obligations under capital lease-non-current | 10,398 | 20,292 | ||||
| Notes payable-non-current | 56,650 | 184,147 | ||||
| Total non-current liabilities | 92,961 | 257,939 | ||||
| Total liabilities | 429,669 | 489,521 | ||||
| Commitments and contingencies (Note 12) | ||||||
| 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; 2009-38,685,232 and 2008 -37,160,392 shares issued and outstanding |
9,285,383 | 8,858,237 | ||||
| Deficit accumulated during the development stage | (6,773,046 | ) | (5,922,260 | ) | ||
| Accumulated other comprehensive income: | ||||||
| Unrealized gain on marketable equity security | 17,796 | 9,797 | ||||
| Total stockholders’ equity | 2,530,133 | 2,945,774 | ||||
| Total liabilities and stockholders’ equity | $ | 2,959,802 | $ | 3,435,295 | ||
The accompanying notes are an integral part of these financial statements.
21
New Jersey Mining Company
(A Development Stage
Company)
Statements of Operations and Comprehensive Income (Loss)
For the Years Ended December 31, 2009 and 2008,
And from
Inception (July 18, 1996) through December 31, 2009
| From Inception | |||||||||
| (July 18, 1996) | |||||||||
| December 31, | Through | ||||||||
| December 31, 2009 | |||||||||
| 2009 | 2008 | (Unaudited) | |||||||
| Income earned during the development stage: | |||||||||
| Sales of gold | $ | 275,997 | $ | 50,559 | $ | 425,712 | |||
| Sales of concentrate | 601,168 | ||||||||
| Drilling and exploration contract income | 174,886 | 23,725 | 198,611 | ||||||
| 450,883 | 74,284 | 1,225,491 | |||||||
| Costs and expenses: | |||||||||
| Direct production costs | 317,664 | 184,163 | 1,267,201 | ||||||
| Drilling and exploration contract expense | 88,686 | 88,686 | |||||||
| Management | 416,048 | 304,668 | 1,696,031 | ||||||
| Exploration | 80,733 | 570,549 | 2,250,007 | ||||||
| Gain on sale of mineral property | (90,000 | ) | |||||||
| Gain on default of mineral property sale | (270,000 | ) | (270,000 | ) | |||||
| Depreciation and amortization | 125,465 | 204,284 | 670,093 | ||||||
| General and administrative expenses | 265,186 | 517,413 | 2,391,558 | ||||||
| Total operating expenses | 1,293,782 | 1,511,077 | 8,003,576 | ||||||
| Other (income) expense: | |||||||||
| Timber sales | (54,699 | ) | |||||||
| Timber expense | 14,554 | ||||||||
| Royalties and other income | (373 | ) | (1,500 | ) | (72,076 | ) | |||
| Royalties expense | 9,816 | 656 | 44,089 | ||||||
| Gain on sale of marketable equity security | (22,160 | ) | (92,269 | ) | |||||
| Interest income | (651 | ) | (15,371 | ) | (47,093 | ) | |||
| Interest expense | 21,255 | 3,251 | 81,505 | ||||||
| Write-off of goodwill | 30,950 | ||||||||
| Write-off of investment | 90,000 | ||||||||
| Total other (income) expense | 7,887 | (12,964 | ) | (5,039 | ) | ||||
| Net loss | 850,786 | 1,423,829 | 6,773,046 | ||||||
| Other comprehensive (income) loss: | |||||||||
| Unrealized (gain) loss on marketable equity security | (7,999 | ) | 375,544 | (17,796 | ) | ||||
| Comprehensive loss | $ | 842,787 | $ | 1,799,373 | $ | 6,755,250 | |||
| Net loss per common share-basic | $ | 0.02 | $ | 0.04 | $ | 0.34 | |||
| Weighted average common shares outstanding-basic | 37,745,957 | 35,871,521 | 20,173,340 | ||||||
The accompanying notes are an integral part of these financial statements.
22
New Jersey Mining Company
(A Development Stage Company)
Statement of Changes in
Stockholders' Equity
For the Years Ended
December 31, 2008, and 2009 (audited), and for the
Period
From Inception (July 18, 1996)
Through December 31, 2009 (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 | |||||||||||
| 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 | |||||||||||
The accompanying notes are an integral part of these financial statements.
23
New Jersey Mining Company
(A Development Stage Company)
Statement of Changes in
Stockholders' Equity, continued:
For the Years Ended December 31, 2008, and 2009
(audited), and for the Period
From
Inception (July 18, 1996) Through
December 31, 2009 (unaudited)
| Accum. Other | Total | |||||||||||||||||
| Common Stock | Accumulated | Comprehensive | Treasury | Stockholders' | ||||||||||||||
| Shares | Amount | Deficit | Income | Stock | Equity | |||||||||||||
| Balance, December 31, 2002 | 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 | ) | 0 | 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 | ) | 0 | 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 | ) | 0 | 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.
24
New Jersey Mining Company
(A Development Stage Company)
Statement of Changes in
Stockholders' Equity, continued:
For the Years Ended December 31, 2008, and 2009
(audited), and for the Period
From
Inception (July 18, 1996) Through
December 31, 2009 (unaudited)
| Accum. Other | Total | ||||||||||||||
| Common Stock | Accumulated | Comprehensive | Stockholders' | ||||||||||||
| Shares | Amount | Deficit | Income | Equity | |||||||||||
| Balance, December 31, 2006 | 27,586,485 | $ | 5,027,317 | $ | (3,045,163 | )$ | $ | 911,250 | $ | 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 | 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 | 2,945,774 | |||||||||
| Issuance of common stock for: | |||||||||||||||
| Cash | 138,000 | 34,500 | 34,500 | ||||||||||||
| Management and directors fees | 1,139,320 | 334,298 | 334,298 | ||||||||||||
| Services | 125,520 | 29,098 | 29,098 | ||||||||||||
| Exploration | 50,000 | 11,250 | 11,250 | ||||||||||||
| Mineral property agreement | 72,000 | 18,000 | 18,000 | ||||||||||||
| Unrealized gain (loss) in marketable equity security | 7,999 | 7,999 | |||||||||||||
| Net loss | (850,786 | ) | (850,786 | ) | |||||||||||
| Balance, December 31, 2009 | 38,685,232 | $ | 9,285,383 | $ | (6,773.046 | ) | $ | 17,796 | $ | 2,530,133 | |||||
The accompanying notes are an integral part of these financial statements.
25
New Jersey Mining Company
(A Development Stage
Company)
Statements of Cash Flows
For the Years Ended
December 31, 2009 and 2008,
And from Inception (July 18, 1996)
through December 31, 2009
| From Inception | |||||||||
| Years Ended | (July 18, 1996) | ||||||||
| December 31, | through | ||||||||
| December 31, 2009 | |||||||||
| 2009 | 2008 | (Unaudited) | |||||||
| Cash flows from operating activities: | |||||||||
| Net loss | $ | (850,786 | ) | $ | (1,423,829 | ) | $ | (6,773,046 | ) |
| Adjustments to reconcile net loss to net cash | |||||||||
| Used by operating activities: | |||||||||
| Depreciation and amortization | 125,465 | 204,284 | 670,093 | ||||||
| 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 | (22,160 | ) | (92,269 | ) | |||||
| Accretion of asset retirement obligation | 443 | 1,000 | 1,443 | ||||||
| Common stock issued for: | |||||||||
| Management and directors’ fees | 334,298 | 108,000 | 1,109,335 | ||||||
| Services and other | 29,098 | 32,000 | 222,408 | ||||||
| Exploration | 11,250 | 15,390 | 95,521 | ||||||
| Mineral property agreement | 15,000 | ||||||||
| Change in: | |||||||||
| Prepaid expense | 572 | (572 | ) | ||||||
| Prepaid claim fees | (18,573 | ) | (18,573 | ) | |||||
| Inventory | 97,259 | (9,575 | ) | (1,833 | ) | ||||
| Miscellaneous receivable | 4,597 | (5,516 | ) | (919 | ) | ||||
| Interest receivable | 15 | 953 | (309 | ) | |||||
| Other assets | (778 | ) | |||||||
| Accounts payable | 18,181 | (18,867 | ) | 72,096 | |||||
| Accrued payroll and related payroll expense | (38,546 | ) | 7,977 | 7,159 | |||||
| Accrued reclamation costs | (20,743 | ) | (500 | ) | (1,443 | ) | |||
| Net cash used by operating activities | (329,630 | ) | (1,359,255 | ) | (4,923,893 | ) | |||
| Cash flows from investing activities: | |||||||||
| Purchases of property, plant and equipment | (4,391 | ) | (101,924 | ) | (1,084,248 | ) | |||
| Purchase of mineral property | (3,000 | ) | (3,000 | ) | (20,904 | ) | |||
| Proceeds from sale of mineral property | 120,000 | ||||||||
| Deposit received on sale of mineral property (Note 7) | 50,000 | 270,000 | 320,000 | ||||||
| Redemption (purchase) of reclamation bonds | 2,432 | 2,553 | (121,088 | ) | |||||
| Purchase of marketable equity security | (7,500 | ) | |||||||
| Proceeds from sales of marketable equity securities | 24,823 | 95,901 | |||||||
| Cash of acquired companies | 38,269 | ||||||||
| Deferral of development costs | (343,107 | ) | (759,209 | ) | |||||
| Net cash provided (used) by investing activities | 69,864 | (175,478 | ) | (1,418,779 | ) | ||||
| Cash flows from financing activities: | |||||||||
| Exercise of stock purchase warrants | 1,740,000 | 2,537,600 | |||||||
| Sales of common stock, net of issuance costs | 34,500 | 950 | 4,261,076 | ||||||
| Principal payments on capital lease | (26,665 | ) | (36,940 | ) | (183,479 | ) | |||
| Principal payments on notes payable | (107,343 | ) | (119,496 | ) | (310,527 | ) | |||
| Note and interest payable, related party, net | 72,107 | 72,107 | |||||||
| Net cash provided (used) by financing activities | (27,401 | ) | 1,584,514 | 6,376,759 | |||||
| Net change in cash and cash equivalents | (287,167 | ) | 49,781 | 34,087 | |||||
| Cash and cash equivalents, beginning of period | 321,254 | 271,473 | 0 | ||||||
| Cash and cash equivalents, end of period | $ | 34,087 | $ | 321,254 | $ | 34,087 | |||
| Supplemental disclosure of cash flow information | |||||||||
| Interest paid in cash, net of amount capitalized | $ | 18,598 | $ | 3,251 | $ | 69,484 | |||
| Non-cash investing and financing activities: | |||||||||
| Common stock issued for: | |||||||||
| Property, plant and equipment | $ | 5,600 | $ | 50,365 | |||||
| Mineral properties | $ | 18,000 | $ | 21,000 | $ | 333,300 | |||
| Payment of accounts payable | $ | 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 | $ | 482,634 | |||||
The accompanying notes are an integral part of these financial statements.
26
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 in accordance with accounting
guidance for development stage entities 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 requirements, 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.
Drilling and Exploration 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.
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
The table below sets forth our financial assets that were accounted for
at fair value at December 31, 2009 and 2008, and their respective hierarchy
level. 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).We had no other financial assets or liabilities accounted for
at fair value at December 31, 2009 and 2008.
| Balance at December 31, 2009 |
Balance at December 31, 2008 |
Hierarchy Level | |
| Investments in marketable equity securities | $21,665 | $16,328 | Level 1 |
27
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
2. Summary of Significant Accounting Policies, continued:
Fair Values of Financial Instruments,
continued
The Company has one nonfinancial liability that is
accounted for at fair value on a non-recurring basis. Estimates of our
asset retirement obligations fall within Level 3 of the fair value hierarchy, as
the estimates of environmental remediation costs involve unobservable inputs.
The carrying amounts of financial instruments including cash and cash equivalents, reclamation bonds, investment in marketable equity securities, note payable to related party, obligations under capital lease and notes payable are approximated at their fair values.
Investment in Marketable Equity Security
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).
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,
2009 and 2008, 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 9 of the financial statements.
Reclassifications
Certain prior period
amounts have been reclassified to conform to the 2009 financial statement
presentation. These reclassifications had 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 costs 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.
Claim Fees
Unpatented claim fees paid
at time of staking are expensed when incurred. Recurring renewal fees which are
paid annually are recorded as prepaid and expensed over the course of the year.
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.
28
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. Asset retirement obligations
are related to the retirement of the mine, if a reasonable estimate of fair
value can be determined. These obligations are initially measured at fair value
with the resulting cost capitalized at the present value of estimated reclamation
costs. An asset and a related liability are recorded for the present value of
these costs. The liability is accreted and the asset amortized over the life
of the related asset. Adjustments are made for changes resulting from either
the timing or amount of the original 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.
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 balances at December 31, 2009 and 2008, represent 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.
Recent Accounting Pronouncements
None
3. Property, Plant and Equipment
Property, plant and equipment at December 31, 2009 and 2008, consisted of the following:
| 2009 | 2008 | |||||
| Mill building at cost | $ | 128,566 | $ | 128,566 | ||
| Milling equipment at cost | 1,068,662 | 1,064,270 | ||||
| Less accumulated depreciation | (77,856 | ) | (71,991 | ) | ||
| Total mill | 1,119,372 | 1,120,845 | ||||
| Building and equipment at cost | 638,795 | 638,795 | ||||
| Less accumulated depreciation | (483,935 | ) | (368,422 | ) | ||
| Total building and equipment | 154,860 | 270,373 | ||||
| Land | 79,137 | 79,137 | ||||
| Total | $ | 1,353,369 | $ | 1,470,355 |
For years ending December 31, 2009 and 2008, milling and other equipment include assets under capital lease amounting to $132,769 and $150,254 respectively. The leases are being amortized over the terms of the respective lease. Accumulated amortization at December 31, 2009 and 2008 was $103,239 and $96,829, respectively. At December 31, 2009, the estimated future minimum lease payments under capital leases were as follows:
| Year ending December 31, | |||
| 2010 | $ | 11,812 | |
| 2011 | 11,049 | ||
| Total | 22,861 | ||
| Less: Amounts representing interest costs | (2,569 | ) | |
| Net present values | 20,292 | ||
| Less: Capital lease obligations-current portion | (9,894 | ) | |
| Long-term capital lease obligations | $ | 10,398 |
29
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
4. Notes Payable
| At December 31, 2009 and 2008, notes payable are as follows. | 2009 | 2008 | ||||
| Dodge pickup 60
month note payable 0.00% interest rate; collateralized
by pick-up, monthly payments of $557 |
$ 9,471 |
$ 16,156 |
||||
| Hagby Diamond
Drill 48 month note payable, 8.00% interest rate
payable monthly, collateralized by drill, monthly payments of $4,093 |
76,407 |
110,968 |
||||
| Ingersoll Rand
Compressor 36 month note payable, 4.90% interest rate
payable monthly, collateralized by compressor, monthly payments of $670 |
667 |
8,462 |
||||
| Caterpillar 305
Excavator 48 month note payable, 7.81% interest rate
payable monthly, collateralized by excavator, monthly payments of $956 |
15,335 |
25,187 |
||||
| Kubota 5700
Tractor 36 month note payable, 0.00% interest rate,
collateralized by tractor, monthly payments of $674 |
3,370 |
11,456 |
||||
| 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 |
26,089 |
34,786 |
||||
| Eimco Secoma
Drill 24 month note payable, 12.76% interest rate payable
monthly, collateralized by drill, monthly payments of $4,150 |
31,666 |
|||||
| Total notes payable | 191,339 | 298,681 | ||||
| Due within one year | 134,689 | 114,534 | ||||
| Due after one year | $ | 56,650 | $ | 184,147 |
Maturities of debt outstanding at December 31, 2009 are as follows: $134,689 in 2010, $47,954 in 2011, and $8,696 in 2012.
5. Mineral Properties
Mineral properties and deferred development costs are as follows:
| December 31, 2009 | |||||||||
| Deferred | |||||||||
| Properties | Development | Total | |||||||
| New Jersey Mine | |||||||||
| Grenfel/Coleman | $ | 365,000 | $ | 239,792 | $ | 604,792 | |||
| Golden Chest | 65,000 | 579,393 | 644,393 | ||||||
| Silver Strand | 74,704 | 77,872 | 152,576 | ||||||
| Roughwater | 25,500 | 25,500 | |||||||
| Lost Eagle | 5,000 | 5,000 | |||||||
| Revett Niagara | 42,000 | 42,000 | |||||||
| Copper Camp | 42,000 | 42,000 | |||||||
| Less Accumulated | |||||||||
| Amortization | (59,059 | ) | (49,243 | ) | (108,302 | ) | |||
| Total | $ | 560,145 | $ | 847,814 | $ | 1,407,959 | |||
| 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 | |||
During the year ended December 31, 2008, the Company capitalized interest charges of $28,722 as deferred development costs. No interest charges were capitalized in 2009.
30
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
5. Mineral Properties, continued:
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. At December 31, 2009
deferred development includes asset retirement costs of $6,341.
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 $19,572 and $33,200 at December 31, 2009 and 2008
respectively.
Niagara
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 had agreed to
pay $3,000 and issue 30,000 shares of restricted common stock to RMA. In
addition to the 30,000 share scheduled stock payment, in 2008 and 2009, 15,000
and 12,000 shares of restricted common stock were issued, respectively, in lieu
of the scheduled cash payment. 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.
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.
31
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
5. Mineral Properties, continued
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, 2009, the gold price that would cause additional production
royalties to be payable was $717 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-feasibility 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 |
| < $470 | None |
| $470 to $529 | 1.0% |
| $529 to $588 | 1.5% |
| $588 to $647 | 2.0% |
| > $647 | 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. Production to date under the Mining Lease Agreement has been 1,465 ounces of gold.
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.
6. Asset Retirement Obligation
The Company has established asset retirement obligations “AROs” associated with the ultimate closing of its properties. Below is a reconciliation as of December 31, 2009 and 2008 of the Company’s asset retirement obligations. The estimated reclamation costs were discounted using a credit adjusted, risk-free interest rate of 5.6%.
| 2009 | 2008 | |||||
| Balances at January 1 | $ | 53,500 | $ | 47,150 | ||
| Changes in obligations due to disturbance of properties | 5,350 | |||||
| Changes in obligations due to changes in timing of reclamation expenditures | (28,030 | ) | ||||
| Accretion expense | 443 | 1,000 | ||||
| Balances at December 31 | $ | 25,913 | $ | 53,500 |
32
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
7. Mining Venture Agreements
Basin Gold Venture Agreement
The
Company and Basin Gold Mines Inc. ("Basin Gold") entered discussion into a
possible Mining Venture Agreement in November, 2009 relating to the Golden Chest
Property and signed a Letter of Intent outlining the terms of a mining venture
agreement. At that time Basin paid the Company a $50,000 non refundable deposit
which would have been applied towards their purchase of a 50% share in the Joint
Venture should they have chosen to enter into a definitive agreement. The
deadline for closing a definitive agreement was January 15, 2010. The deadline
passed without signing a definitive agreement so the terms expired with no
definitive agreement being signed or no further obligations by the Company with
respect to the proposed agreement.
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. Newmont has completed two field seasons of exploration work and is
planning the third season in 2010. Newmont has made satisfactory progress toward
completing their required expenditures under the agreement.
8. Income Taxes
The Company did not record an income tax provision for the years ended December 31, 2009 or 2008, as it had no taxable income. At December 31, 2009 and 2008, the Company had federal net operating loss carry forwards available for income tax purposes of approximately $6,718,000 and $5,867,000, respectively, which will expire through 2029, and associated deferred tax assets of approximately $2,284,000 and $1,994,800, 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 | ||
| 2029 | 851,000 | ||
| Total | $ | 6,718,000 |
9. 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, 2009 or 2008.
Private Placements
In September 2009, the Company initiated an offering of units consisting of its common stock and common stock purchase warrants in a non brokered private placement. As of December 31, 2009 138,000 units had been sold generating $34,500 in net proceeds. Each unit, selling for $0.25, consists of one share of the Company’s restricted common stock plus one warrant, whereby each warrant may purchase one share of the Company’s restricted common stock at $0.40 until October 19, 2012.
Exercise of Stock Purchase Warrants
During 2008 common 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. No common stock purchase warrants were exercised in 2009
33
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
9. Equity, continued
Stock Purchase Warrants Outstanding
Transactions in common stock purchase warrants for the years ended
December 31, 2009 and 2008, are as follows:
| Number of | Exercise | ||||||
| Warrants | Prices | ||||||
| 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 | |||||
| Issued in connection with private placement | 138,000 | 0.40 | |||||
| Expired | (1,451,427 | ) | 0.50 | ||||
| Balance, December 31, 2009 | 363,250 | 0.40-0.60 |
These warrants expire as follows:
| Shares | Exercise Price | Expiration Date |
| 225,250 | $0.60 | June 1, 2010 |
| 138,000 | $0.40 | October 19, 2012 |
| 363,250 |
Common Stock Issued for Property, Plant and
Equipment
During 2009 and 2008, the Company issued 72,000 and
89,000 shares, respectively, of its restricted common stock for property, plant,
equipment, and mineral properties purchased. The Company recorded $18,000 and
$26,600, respectively, during 2009 and 2008, based upon the value of the shares
issued.
Common Stock Issued for Services and
Exploration
During 2009 and 2008, the Company issued 175,520
and 109,100 shares, respectively, of its restricted common stock for exploration
and other services rendered the Company. The Company recorded $40,348 and
$47,390, respectively, based upon the value of the services rendered and the
shares issued.
10. 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 5 and 11, the Company had the following transactions with related parties:
-
During the years ended December 31, 2009 and 2008, the Company issued 651,320 and 198,700 shares, respectively, of its restricted common stock valued at $195,398 and $72,000, respectively, to Fred Brackebusch for management services. During the year ended December 31, 2009 the Company issued 338,000 shares of its restricted common stock valued at $101,400 to Grant Brackebusch for management services. During 2009 and 2008 the Company issued 25,000 and 20,000 shares respectively, of its restricted stock valued at $6,250 and $6,000, respectively, to Tina Brackebusch for services as the Corporate Secretary.
-
During the years ended December 31, 2009 and 2008, the Company issued 125,000 and 100,000 shares, respectively, 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 $31,250 and $30,000, respectively, based upon the estimated value of the shares issued and services rendered. Fred and Grant Brackebusch each received 25,000 and 20,000 shares in 2009 and 2008, respectively, as Directors of the Company.
-
During each of the two years ended December 31, 2009 and 2008 the Company paid $6,000 to MSD for office rent. The December 31, 2009 note payable to related party balance includes $6,000 for the 2009 office rent.
-
During 2009 an unsecured line of credit with annual interest rates ranging from 1% to 5.25% and a maximum of $100,000 has been extended to the Company by President Fred Brackebusch for cash shortfalls. As of December 31, 2009 the note payable to related party balance was $72,107 which included $2,657 in interest and fees that was recognized as an expense during the year ended December 31, 2009.
34
New Jersey Mining Company
(A Development Stage
Company)
Notes to Financial Statements
11. Investment in Marketable Security
In 2006, the Company purchased 1,875,000 common shares of Gold Crest Mines Inc for $7,500. In 2009 the Company sold 665,620 of those shares for cash proceeds of $24,823, resulting in a realized gain of $22,160. No shares were sold in 2008.
At December 31, 2009, the Company held 967,180 of these shares with a market value of $0.02 per share, for a total market value of $21,665. At December 31, 2009, the excess market value of $17,796 over the $3,868 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.
12. 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.
13. Subsequent Events
The private placement initiated by the Company in September of 2009 was amended in February of 2010 from a unit cost of $0.25 to $0.17. Each unit included one share of unregistered common stock and one common stock purchase warrant whereby each warrant may purchase one share of the Company’s unregistered common stock at $0.30 until January 31, 2013. This amended placement was brokered in part by Pennaluna & Company for 10% of gross proceeds. In addition to the units discussed in Note 9, as of March 10, 2009 3,205,588 additional units were sold in the first quarter of 2010. Total gross proceeds of $544,950 were raised, $32,400 from non-brokered sales and $512,550 from brokered sales, producing net proceeds of $493,695. In addition, 64,941 units were issued to investors who participated in the private placement at $0.25 to bring their share contribution to an equivalent of $0.17 per share.
35
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, 2009, 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, 2009, 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, 2009. 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, 2009, 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
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, 2009 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, 2009.
36
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 |
65 |
President, Director & Treasurer |
7/18/1996 |
| Grant A. Brackebusch P.O. Box 131 Silverton, ID 83867 |
40 |
Vice President & Director |
7/18/1996 |
| Ivan R. Linscott 7150 Burke Road Wallace, ID 83873 |
67 |
Director |
9/21/2004 |
| William C. Rust (1) P.O. Box 648 Wallace, ID 83873 |
63 |
Director |
9/21/2004 |
| M. Kathleen Sims (1) 2745 Seltice Way Coeur d’Alene, ID 83814 |
65 |
Director |
9/25/2003 |
| Tina C. Brackebusch P.O. Box 131 Silverton, ID 83867 |
40 |
Secretary |
1/1/1997 |
(1) Member of the Audit Committee
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 40 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.
37
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.
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 2009 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 ($) |
Nonequity Incentive Plan Compensa- tion ($) |
Nonqualified Deferred Compensa- tion Earnings ($) |
All Other Compensa- tion ($) |
Total ($) |
| Fred Brackebusch President |
2009 | 26,250 | 0 | 201,648 | 0 | 0 | 0 | 0 | 227,898 |
| 2008 | 84,000 | 0 | 78,000 | 0 | 0 | 0 | 0 | 160,000 | |
| Grant Brackebusch Vice Pres. |
2009 | 46,263 | 0 | 107,650 | 0 | 0 | 0 | 0 | 153,913 |
| 2008 | 95,000 | 0 | 6,000 | 0 | 0 | 0 | 0 | 101,000 |
(1) Stock Awards include fees earned as Directors.
The compensation of the Named Executive Officers has been set by disinterested members of the Board of Directors. 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. In January of 2009, the Board of Directors approved a compensation plan for Vice President Grant Brackebusch that awarded him with restricted common stock for an average of 84.5 hours per month at a rate of $100 per hour. The number of shares is calculated quarterly using the average bid price for the quarter as quoted by the OTC Bulletin Board. Additionally, in 2009, both Fred W. Brackebusch and Grant Brackebusch have been compensated with shares in lieu of cash for some of their base salaries as well to conserve limited cash. The number of shares to be awarded is calculated quarterly by using the average bid price of the Company’s Common Stock. Shares issued to Fred Brackebusch were 198,700 in 2008, and 651,320 in 2009. The shares were valued at an average price of $0.36 per share in 2008, and $0.30 per share in 2009. Shares issued to Grant Brackebusch in 2009 were 338,000 valued at an average price of $0.30 per share.
The Company does not have a retirement plan for its executive officers and there is no agreement, plan or arrangement that provides for payments to executive officers in connection with resignation, retirement, termination or a change in control of the Company.
38
In January of 2009, the cash salaries of Fred Brackebusch and Grant Brackebusch were reduced by at least 50% from their 2008 level in an effort to conserve the Company’s cash.
Outstanding Equity Awards at Fiscal Year-end
The Company does not currently award the Named Executive Officers
options to purchase the Company’s shares, and there were no outstanding equity
awards as of December 31, 2009.
Director Compensation
A summary of compensation for the Company’s non-employee Directors, including Ivan R. Linscott, William C. Rust and M. Kathleen Sims for the two most recent years is as follows:
Director Compensation Table
| Name 1 |
Year |
Fees Earned or Paid in Cash ($) |
Stock Awards ($) |
Option Awards ($) |
Nonequity Incentive Plan Compensa- tion ($) |
Nonqualified Deferred Compensa- tion Earnings ($) |
All Other Compensa- tion ($) |
Total ($) |
| Ivan R. Linscott | 2009 | 0 | 6,250 | 0 | 0 | 0 | 0 | 6,250 |
| 2008 | 0 | 6,000 | 0 | 0 | 0 | 0 | 6,000 | |
| William C. Rust | 2009 | 0 | 6,250 | 0 | 0 | 0 | 0 | 6,250 |
| 2008 | 0 | 6,250 | 0 | 0 | 0 | 0 | 6,000 | |
| M. Kathleen Sims | 2009 | 0 | 6,250 | 0 | 0 | 0 | 0 | 6,250 |
| 2008 | 0 | 6,000 | 0 | 0 | 0 | 0 | 6,000 |
(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 2008, each of the Directors of the Company were paid 20,000 shares of unregistered Common Stock valued at $6,000. At a Board of Directors meeting on November 9, 2009, the Directors approved a compensation plan for the Board of Directors under which each Director receives 25,000 shares of unregistered Common Stock. In 2009 these shares were valued at $6,250. No additional fees are paid for attendance at Board of Directors’ meetings, committee membership or committee chairmanship. On occasion, Directors are retained for consulting services unrelated to their duties as Directors. These consulting services are either paid in cash or with unregistered Common Stock according to the Company’s policy for share-based payment of services.
The Company does not have a retirement plan for its Directors and there is no agreement, plan or arrangement that provides for payments to Directors in connection with resignation, retirement, termination or a change in control of the Company.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of March 10, 2010 regarding the shares of Company Common Stock beneficially owned by: (i) each person known by the Company to own beneficially more than 5% of the Company’s Common Stock; (ii) each Director of the Company; (iii) the CEO and CFO of the Company (the “Named Executive Officers”); and (iv) all Directors and the Named Executive Officers of the Company as a group. Except as noted below, each holder has sole voting and investment power with respect to the shares of the Company Common Stock listed as owned by that person.
Security Ownership of Certain Beneficial Owners
| Title of Class |
Name and Address Of Beneficial Owner |
Amount and Nature of
Beneficial Owner |
Percent of Class1
|
| Common |
Fred W. Brackebusch P.O. Box 1019 Kellogg, Idaho 83837 |
7,900,077 indirect (a)
1,753,025 direct |
23.01% |
| Common |
Constance Meisel 105 East Atlantic Avenue Delray Beach, FL 33444 |
3,158,607 | 7.53% |
| Common |
Terry & Marguerite Tyson County Road U Lipscomb, TX 79056 |
1,608,528 direct 933,900 indirect |
6.06% |
| Common |
William Ritger 750 Ocean Royale Way Juno Beach, FL 33408 |
3,162,425 | 7.54% |
(1) Based upon 41,958,262 outstanding shares of common stock as of March 10, 2010.
39
(a) Fred Brackebusch owns 89.6% of Mine Systems Design, Inc. (MSD) which is an S corporation that owns 8,817,050 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.
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 |
7,900,077 indirect (a)
1,753,025 direct |
23.01% |
| Common | Grant A. Brackebusch 89 Appleberg Road Kellogg, Idaho 83837 |
916,973 indirect (b)
700,920 direct |
3.86% |
| Common | Ivan R. Linscott, Director 7150 Burke Road Wallace, Idaho 83873 |
135,500 | 0.32% |
| Common | William C. Rust, Director P.O. Box 648 Wallace, Idaho 83873 |
95,000 | 0.22% |
| Common | M. Kathleen Sims, Director 2745 Seltice Way Coeur d’Alene, Idaho 83814 |
108,000 | 0.26% |
| Common | All Directors and Executive Officers as a group (5 individuals) |
11,609,495 | 27.67% |
(1) Based upon 41,958,262 outstanding shares of common stock at March 10, 2010.
(a) Fred Brackebusch owns 89.6% of Mine Systems Design, Inc. (MSD) which is an S corporation that owns 8,817,050 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 8,817,050 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.
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 unregistered Common Stock in addition to his salary,
for 2008 and 2009, for any hours worked over 130 hours per month at a rate of
$150 per hour. The Board awarded Grant Brackebusch unregistered Common Stock in
addition to his salary in 2009, for an average of 84.5 hours per month at a rate
of $100 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 unregistered 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 2009, the Company
issued 120,000 and 150,000 shares, respectively, of its unregistered 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 $31,250,
respectively, for directors and $6,000 and $6,250, 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 25,000
shares in 2009 as Directors or Officers in each respective year.
During the years ended December 31, 2008 and 2009, the Company issued 198,700 and 651,320 shares, respectively, of its unregistered common stock valued at $72,000 and $195,398, respectively, to Fred Brackebusch for management services. During the year ended December 31, 2009, the Company issued 338,000 shares of its unregistered common stock valued at $101,400 to Grant Brackebusch for management services.
40
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.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed
for professional services rendered by the Company’s principal accountant for the
audit of the annual financial statements included in the Company’s annual report
on Form 10-K for the fiscal years ended December 31, 2008 and December 31, 2009
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 $29,479
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.
41
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. |
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SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
New Jersey Mining Company
| Date: March 29, 2010 | By /s/ FRED W. BRACKEBUSCH |
| Fred W. Brackebusch, President, Treasurer & Director | |
| Date: March 29, 2010 | By /s/ GRANT A. BRACKEBUSCH |
| Grant A. Brackebusch, Vice President & Director | |
| Date: March 29, 2010 | By /s/ IVAN R. LINSCOTT |
| Ivan R. Linscott, Director | |
| Date: March 29, 2010 | By /s/ WILLIAM C. RUST |
| William C. Rust, Director | |
| Date: March 29, 2010 | By /s/ M. KATHLEEN SIMS |
| M. Kathleen Sims, Director |
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