UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
[ ] TRANSITION REPORT PURSUANT TO 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 ]
Indicate by check mark 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
[ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes[X] No [ ]
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, 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 all common stock held by non-affiliates of the registrant, based on the average of the bid and ask prices on June 30, 2011 was $8,020,000.
On March 1, 2012 there were 45,305,862 shares of the registrant’s Common Stock outstanding.
1
TABLE OF CONTENTS
2
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.
Net Smelter Royalty-A royalty, usually paid to a mineral claim owner, that is a percentage of the proceeds from the sale of metal-bearing concentrate or metal to a smelter or refinery. Also known as an NSR, the cost of smelting, refining, and transport to the smelter is deducted before the royalty is applied. However, the cost of mining and milling is not deducted. Typical net smelter royalty rates are from 1% to 5%.
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.
Patented Claim-A mineral claim where the title has been obtained from the U.S. federal government through the patent process of the 1872 Mining Law. The owner of the patented claim is granted title to the surface and mineral rights.
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.
3
Quartzites-Metamorphic rock containing quartz.
Raise-An underground opening driven upward, generally on the vein.
Ramp-An underground opening usually driven downward, but not always, to provide access to an orebody for rubber-tired equipment such as loaders and trucks. Typically ramps are inclined at about a 15% grade.
Reserves-That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are subcategorized as either proven (measured) reserves, for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes, and grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling, and measurement are spaced so closely and geologic character is so well defined that size, shape, depth, and mineral content are well-established; or probable (indicated) reserves, for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, yet the sites for inspection, sampling and measurement are farther apart.
Stope-An underground void created by the mining of ore.
Strike-The bearing or azimuth of the line created by the intersection of a horizontal plane with an inclined rock strata, vein or body.
Tellurium-Relatively rare chemical element found with gold and silver which can form minerals known as tellurides.
Tetrahedrite-Sulfosalt mineral containing copper, antimony, and silver.
Vein-A zone or body of mineralized rock lying within boundaries separating it from neighboring wallrock. A mineralized zone having a more or less regular development in length, width and depth to give it a tabular form and commonly inclined at a considerable angle to the horizontal.
Unpatented Claim-A mineral claim staked on United States Public Domain (USPD) that is open for mineral entry. Unpatented lode claims can be no more than 1,500 feet long by 600 feet wide. The claimant owns the mineral rights, but does not own the surface which is USPD. Any exploration or mining on the claim must first be submitted in a plan of operations (POO) for approval to the appropriate federal land management entity.
Wallrock-Usually 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
not in the ordinary course of business for the past three years.
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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 Golden Chest mine, the
Niagara copper silver-deposit, the New Jersey mine and mill, the Toboggan
exploration project, and several other exploration prospects. The New Jersey
Mill Joint Venture is a consolidated subsidiary.
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. The exploration focus for the Company is primarily gold with silver and base metals of secondary emphasis. In addition to mineral exploration, the Company is also the manager of the New Jersey Mill Joint Venture which will process both silver and gold ores through an expanded 350 tonnes per day flotation plant. The Company also provides contract drilling and engineering services to its joint venture partners which provides another source of revenue. The Company modified its strategy in 2010. The former strategy was 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 new strategy now de-emphasizes the generation of cash by mining and milling and emphasizes the exploration of its properties in order to increase the amount of reserves before making a production decision. The new financial strategy involves forming joint ventures with partners who contribute cash to earn their interest. The strategy includes finding and developing ore reserves of significant quality and quantity to justify investment in mining and mineral processing facilities.
The new strategy is less reliant on private placements of common stock with qualified investors, though the Company’s exploration and development progress is still dependant on securing financing in one form or another.
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. Recently,
the Company has been successful in completing two joint ventures, one at the
Golden Chest mine and the other to expand the throughput capacity of its New
Jersey mill.
We also compete with other mining companies for exploration properties especially for gold properties in the Coeur d’Alene mining district.
The Company also competes for skilled labor within the mining industry.
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 deposits, and also by acquiring properties we believe have the geologic and technical merits to host economic mineralization. Another significant risk is the price of metals such as 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
Our business is subject to extensive federal,
state and local laws and regulations governing development, production, labor
standards, occupational health, waste disposal, the use of toxic substances,
environmental regulations, mine safety and other matters. The Company is subject
to potential risks and liabilities occurring as a result of mineral exploration
and production. Insurance against environmental risk (including potential
liability for pollution or other hazards as a result of the disposal of waste
products occurring from exploration and production) is not generally available
to the Company (or to other companies in the minerals industry) at a reasonable
price. To the extent that the Company becomes subject to environmental
liabilities, the satisfaction of any such liabilities would reduce funds
otherwise available to the Company and could have a material adverse effect on
the Company. Laws and regulations intended to ensure the protection of the
environment are constantly changing, and are generally becoming more
restrictive.
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 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. 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. Recently, the EPA has proposed a new cleanup plan that greatly increases the number of historic mine sites to be reclaimed, however, the plan has not been approved. 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 ended December 31, 2011 and 2010,
we spent $10,850 and $158,223, respectively, on exploration activities.
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Costs and Effects of Compliance with Environmental Laws
(Federal, State and Local)
No major Federal permits are
required for the Golden Chest and New Jersey mines because the operations are on
private land and there are no process discharges to surface waters. However, 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 on public land can be delayed for significant periods of
time (one to two years) because of the slow 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 all mining projects.
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 and Golden Chest operations. When an underground 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 is 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 $21,000.
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 $5,000. If a plan requires road building, the bond amount can increase significantly. Upon completion of site 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 18
including President Fred Brackebusch and Vice President Grant Brackebusch.
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 2012. The annual report will contain audited financial statements. The Company may also rely on the Internet 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 10K reports, quarterly 10-Q reports, and 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.
Mill Joint Venture Agreement
On
January 7, 2011, the Company signed a joint venture agreement with United Mine
Services (UMS), a wholly-owned subsidiary of United Silver Corporation, to
increase the capacity of the New Jersey mill. UMS is funding the expansion of
the mill to process 350 tonnes per day and will receive a 33% interest in joint
venture assets plus the right to process 7,000 tonnes of their ore per month.
NJMC is the manager of the joint venture and will retain a 67% interest in the
joint venture assets plus the right to process 3,000 tonnes per month of its own
ores. The property covered by the joint venture agreement includes the crushing
circuit, grinding circuit, flotation circuit, concentrate leach plant, patented
and unpatented claims (excluding mineral rights), and buildings.
7
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, 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. The lessor may terminate the lease upon the Company's failure to
perform under the terms of the lease. A 3% net smelter return (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
The construction of an expanded mill capable of
processing 350 tonnes per day of sulfide ore to produce a single flotation
concentrate was started in 2011. The mill expansion is budgeted to cost
approximately $2.5 million which is funded completely by UMS. The expansion
project includes the installation of a new cone crusher, a new fine ore bin, new
conveyors, a new 2.4m by 4.0m ball mill, additional flotation cells, a new paste
thickener, associated pumps, and a new building. The Concentrate Leach Plant
(CLP) has not been renovated.
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. 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. No exploration or development work was completed by the Company in 2009. In 2010, a raise was driven upward on the 740 level to explore a narrow high-grade vein that crosscut the main Coleman vein at nearly a right angle. This raise was driven about 12 meters vertically and produced 367 dry tonnes for the New Jersey mill that assayed 2.68 gpt gold. No exploration work was completed on the Coleman vein or other prospects at the New Jersey mine in 2011.
As of December 31, 2011, the Company had a net capital cost of $3,377,947 associated with the mineral processing plant and a capitalized development plus investment cost of $604,792 associated with the mine.
Exploration Plans
There are currently
no plans for exploration or mining at the New Jersey mine property.
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 during the 2008 and 2010 exploration campaigns.
Underground Mine (Proven & Probable)
| Ore Block | Metric Tonnes | Gold Grade (grams per tonne) |
Ounces (gold) |
| Total | 51,604 | 3.20 | 5,310 |
The reserve tonnages are 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 $40.39/gram ($1,256.13/troy ounce). Proven and probable reserves are combined as they cannot be readily separated.
8
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 24 patented mining claims
and 70 unpatented claims covering approximately 515 hectares (1,270 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. A
second pole building 36 ft by 70 ft was erected on the site in 2011 and is used
for core logging and office space. Single phase electrical power supplied by
Avista Utilities has been installed to the portal site in Reeder Gulch and the
new core building.
Property Ownership
Beginning in December 2010,
the Golden Chest is owned by Golden Chest LLC (GC), which is owned 50% by the
Company (NJMC) and 50% by Marathon Gold Corporation through its wholly-owned US
subsidiary, Marathon Gold USA Corp. (MUSA). GC purchased the mine from Metaline
Contact Mines and J.W. Beasley Interests for $3,750,000 and paid $500,000 on the
closing date of December 16, 2010, made a second payment of $500,000 in December
2011, and has agreed to pay the sellers $500,000 each year for the next five
years with a final payment of $250,000 on the seventh anniversary. The sellers
have a first mortgage on the mine as security for future payment owing. There
are no production royalties underlying the Golden Chest property.
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.
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 were targeted to extend the Idaho vein below the No. 3 and were successful. In 2011, the joint venture partners completed the most aggressive exploration project in the history of the mine which included 11,300 meters of surface core drilling. A total of 102 NQ-2 size drill holes were completed. Other surface work completed included the construction of a new core shed, construction of new roads, surface geologic work, surface and underground surveying, and the reestablishment of patented claim corners. Work completed underground included the rehabilitation of No. 3 level and an exploration crosscut on the Intermediate level. The exploration work culminated in the completion of a Canadian National Instrument 43-101 resource estimate report by an independent, third party consultant. The exploration program as well as the property payments were funded by Marathon Gold Corporation’s initial contribution of $4 million.
As of December 31, 2011, the Company had a capitalized development plus investment cost of $553,205 associated with the Golden Chest mine.
Exploration and Development Plans
Approximately 20,000 meters of core drilling, both surface and
underground, is planned for 2012. A reconnaissance surface exploration program
and the underground rehabilitation of the No. 3 drift are also planned for 2012.
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 stated herein did not use the drilling information gathered
in 2011.
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 $40.39/gram ($1,256.13/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.
9
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 33 unpatented claims that cover about 650 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
In October of 2011,
the Company signed an exploration agreement and option to purchase mining claims
with Desert Copper USA Corporation (DUSA), a wholly-owned subsidiary of Desert
Copper Corporation, a Canadian corporation. The agreement covers the Niagara
project and the Copper Camp project. The agreement gives DUSA the exclusive
right to purchase the properties from the Company at any time for a term of five
years for the sum of $250,000 plus 3,500,000 shares of Desert Copper
Corporation. At closing, DUSA made an initial payment of $42,800 to NJMC and the
agreement calls for an annual payment of $20,000 on each anniversary of the
agreement during the option period. A minimum work expenditure of $250,000 is
also called for by the agreement. DUSA is also required to maintain, in good
standing, our underlying mining agreement with Revett Metals Associates (RMA).
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. No work
was completed at the Niagara in 2011.
Exploration and Development Plans
Desert Copper is planning to complete the environmental permitting
necessary for a core drilling program with an eventual goal of completing a
Canadian National Instrument 43-101 report.
As of December 31, 2011, the Company had an investment cost of $42,500 associated with the Niagara project.
Geology
The Niagara deposit occurs in
a section of mineralized upper Revett Formation near the axis of a north-south
striking syncline. The western limb of the syncline has been truncated by the
north-south striking Murray Peak fault, a steep, west dipping reverse fault.
Other faults offset the mineralized zone slightly. In the Niagara deposit, the
mineralization occurs in the upper Revett Formation, which here is a light gray,
massive quartzite with thin siltite interbeds. The mineralized horizon crops out
along the East Fork Eagle Creek and is approximately 30 meters below the contact
with the overlying St. Regis Formation. Copper minerals include bornite,
chalcopyrite, chalcocite, native copper, and some copper oxide minerals. Silver
minerals include stomeyerite and jalpaite. Pyrite and galena also occur in trace
amounts
TOBOGGAN PROJECT
Location
The Toboggan project is an
exploration property without known ore reserves. The project consists of 284
unpatented lode claims covering an area of approximately 5,275 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,
Snowslide, CA, Lost Eagle, 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
The Toboggan project
is comprised of 284 unpatented mining claims wholly owned by the Company.
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.
10
For the period from March 2008 through March 2011, the Toboggan project was an exploration joint venture between Newmont Mining Corporation and the Company. Newmont completed three seasons of exploration work spending approximately $2,000,000, and then dropped the project. Newmont quitclaimed all the mining claims back to the Company, and also returned the data generated from three seasons of exploration.
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. During 2010, Newmont completed
both core and reverse-circulation (RC) drilling at the Toboggan project. A total
of eight core holes totaling 914.2 meters and seven RC holes totaling 941 meters
were drilled. Six of the core holes were drilled at Gold Butte and intercepted
a fault with anomalous gold mineralization. The remaining two core holes were
drilled at Mineral Ridge and both holes were terminated before hitting the target
due to difficult ground conditions. The seven RC holes were drilled at various
prospects near Toboggan Creek and RC-7 was the most promising with 100 meters
of 100 ppb gold at the Golden Reward prospect. Newmont obtained the USFS permit
necessary to drill their best targets after the conclusion of the 2010 exploration
season. NJMC successfully obtained the extension of this permit until April
2012 at which time a reclamation bond of $82,000 is due to be posted. No exploration
work was completed on the project in 2011.
Exploration and Development Plans
The
Company intends to ask the USFS for an extension of one year for the required
bonding of Newmont’s drill permit. Joint venture partners will be sought to
advance the project.
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 2011.
Exploration and Development Plans
If sufficient
funds are available, the Company will perform a ground-based geophysical survey
utilizing induced polarization (IP).
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 project is comprised of 9
unpatented mining claims covering about 180 acres. In October of 2011, the
Company signed an exploration agreement and option to purchase mining claims
with Desert Copper USA Corporation (DUSA), a wholly-owned subsidiary of Desert
Copper Corporation, a Canadian corporation. The agreement covers the Niagara
project and the Copper Camp project. The agreement gives DUSA the exclusive
right to purchase the properties from the Company at any time for a term of five
years for the sum of $250,000 plus 3,500,000 shares of Desert Copper
Corporation. At closing, DUSA made an initial payment of $42,800 to NJMC and the
agreement calls for an annual payment of $20,000 on each anniversary of the
agreement during the option period. A minimum work expenditure of $250,000 is
also called for by the agreement. DUSA is also required to maintain,
in good standing, our underlying exploration agreement with Revett Metals
Associates (RMA) 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 2011. 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 2011.
11
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
2012.
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.
No additional exploration is planned at this time. As of December 31, 2011, 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. A hearing for Partial Summary Judgment was held by the federal court in Coeur d’Alene, Idaho in September of 2011. The hearing also included a walking tour of the East Fork of Eagle Creek right-of-way. The Company is currently waiting for the judge’s decision regarding the Partial Summary Judgment.
ITEM 4.
MINE SAFETY DISCLOSURES
Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the fiscal year ended December 31, 2011, the Company had three violations of mandatory health or safety standards that could significantly and substantially (S&S citations) contribute to the cause and effect a mine safety or health hazard under section 104 of the Federal Mine Safety and Health Act of 1977. These three S&S citations resulted in $1,146 of penalties being remitted to the Mine Safety and Health Administration. There were no legal actions, mining-related fatalities, or similar events in relation to the Company’s United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.
12
PART II
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's
Common Stock currently trades on the OTCQB tier of the OTC Market under the
symbol "NJMC". The following table sets forth the range of high and low bid
prices as reported by the OTCQB 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, 2011 | High Bid | Low Bid |
| First Quarter | $0.32 | $0.24 |
| Second Quarter | $0.32 | $0.19 |
| Third Quarter | $0.23 | $0.18 |
| Fourth Quarter | $0.23 | $0.16 |
| Year Ending December 31, 2010 | High Bid | Low Bid |
| First Quarter | $0. 29 | $0. 19 |
| Second Quarter | $0. 28 | $0. 20 |
| Third Quarter | $0. 26 | $0. 18 |
| Fourth Quarter | $0. 35 | $0. 18 |
Shareholders
As of March 10, 2012
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. The Company has in the past issued 2,000 shares as a safety award
to each employee, excluding management and directors, three times per year after
one year of service has been achieved. 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 2010 and 2011 these shares were valued at $5,000, annually. No
additional fees are paid for attendance at Board of Directors’ meetings,
committee membership or committee chairmanship Equity Compensation Plan
Information
| Plan Category |
Number of securities to be
issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for
future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| (a) | (b) | (c) | |
| Equity compensation plans approved by security holders | 0 | 0 | 0 |
| Equity compensation plans not approved by security holders | 0 | 0 | 0 |
| Total | 0 | 0 | 0 |
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 Market.
Recent Sales of Unregistered Securities
For the year ended December 31, 2011, the Company issued 288,000 shares
of restricted common stock for cash management and director’s fees, equipment,
services, exploration, accounts payable, and mining lease payments. A value of
$58,040 (for an average value of $0.20 per share) was assigned to these fees,
services, and equipment. See the statement of shareholders' equity (Item 8
Financial Statements) 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.
13
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," "NJMC," "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
conducting gold exploration in the Gold Belt of the Coeur d’Alene Mining
District of northern Idaho and it operates a mineral processing plant near
Kellogg, Idaho. The financial strategy involves forming joint ventures with
partners who contribute cash to earn their equity interest. The strategy
includes finding and developing ore reserves of significant quality and quantity
to justify investment in mining and mineral processing facilities. The Company’s
primarily focus is on gold with silver and base metals of secondary emphasis.
The Company receives revenue for providing core drilling and engineering
services from its joint venture partners, as well as management fees.
All exploration is now being done at the Golden Chest mine. Other exploration properties include the Toboggan, Niagara/Copper Camp, the Coleman, and the Giant Ledge.
Exploration activities at the Golden Chest during 2011 increased substantially compared to prior periods. Exploration activity increased because of the venture agreement with Marathon Gold USA (MUSA) that was signed in December 2010. MUSA contributed $4,000,000 by the end of 2011 for a 50% ownership of the venture. MUSA has the right to contribute an additional $3.5 million by November 30, 2012 to take its ownership interest to 60% of the venture. MUSA also has the option to accelerate any of these contributions. During 2011, 11,500 meters of drilling was completed. The Company conducted core drilling operations at the Golden Chest for the venture under a JV with Marathon Gold. In the first quarter of 2012, a 43-101 resource estimate was completed by an independent engineering firm.
The Toboggan Project is a group of prospects in the Murray, Idaho District that contain gold and silver telluride minerals. The Toboggan Project was being explored by Newmont North America Exploration Limited under a joint venture agreement. Newmont did not complete their earn-in by March 20, 2011 and the joint venture agreement was terminated. Newmont returned all the unpatented claims held by the venture to the Company. The Company is now actively searching for a new joint venture partner to continue exploration of the favorable gold prospects examined by Newmont.
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. Early in the fourth quarter of 2011, an option agreement was signed with Desert Copper USA Corp. relating to the Niagara and Copper Camp properties. The terms of the agreement with Desert Copper include an option to purchase the properties from NJMC for $250,000 and 3.5 million shares of Desert Copper Corporation (the parent of Desert Copper USA Corp.). The option period is five years and Desert Copper is required to make annual payments of $20,000 to the Company as well as pay all costs associated with the properties. As a result of the option agreement with Desert Copper, the Company exercised its option with Revett Metals Associates to enter a mining agreement for the Niagara property.
The Silver Strand mine was sold in the fourth quarter of 2011 to Shoshone Silver/Gold Mines, Inc. for $1 million with $120,000 paid at closing and the remainder to be paid from a 20% share of net profits when the property is put into production.
14
At the Coleman underground mine, future plans are to conduct further drilling to locate higher grade reserves.
The New Jersey mineral processing plant is being expanded in order to process ore from the nearby Crescent silver mine. A letter of intent to form a joint venture with United Mine Services, Inc. (now United Silver Corp. who owns the Crescent silver mine) was signed in September 2010 and a definitive venture agreement was reached in January 2011. The plant is being expanded from a processing rate of 4 tonnes/hr to 15 tonnes/hr. USC is paying the expansion cost estimated to be $2.7 million. After completion of the expansion, the Company will own 2/3 of the venture and USC will own 1/3. The Company is the operator of the venture. USC will have a minimum quota of ore of 7,000 tonnes per month and the Company will have 3,000 tonnes per month. Each party will pay its processing costs and the Company will charge a management fee of $2.50/tonne. Currently, the plant construction is about 90% complete and commissioning will start in the first quarter of 2012 and be completed in the second quarter of 2012.
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 2011 was $612,989, and
Figure 1 shows the corresponding balances for previous accounting periods.
The cash balance increased during the year, from $357,317 to $612,989, primarily due to income from core drilling operations.
Results of Operations
Income Earned
during the development stage (revenue) for 2011 was $1,453,176 as compared to
$204,737 for 2010. Revenue was higher in 2011 due to drilling and exploration
contracting services. Figure 2 depicts net income (loss) attributable to the
Company by quarter which adds to $77,310 for 2011 compared to a loss of $540,828
for 2010. The net income for 2011 was higher than 2010 because of higher
revenue.
15
There was no gold production in 2011 compared to only 26 ounces in 2010. There are no plans for gold production in 2012 because only exploration activities are planned for the Golden Chest mine.
Plans at the Golden Chest mine include only exploration in 2012 in order to increase resources and reserves before making a production decision.
The New Jersey mineral processing plant will be commissioned in 2012. Development ore from the Crescent mine, owned by United Silver Corp., will be processed during the year.
The amount of money to be spent on exploration at the Company’s mines and prospects depends primarily on contributions of our joint venture partners, particularly at the Golden Chest. If new joint venture partners are engaged at the Toboggan Project, exploration activities would increase. Also, Desert Copper may conduct a drilling program under its option agreement at the Niagara and Copper Camp projects.
The Company provides surface drilling services at the Golden Chest and receives payment from Golden Chest LLC. Currently, Golden Chest LLC is funded 50% by Marathon Gold and 50% by the Company. The Company also receives a management fee as Manager of the venture. The Company receives payment for engineering services from United Mine Services for the mill expansion project. After completion of the mill expansion the Company will receive a management fee for processing ore for United Silver Corp. Additional financing activities may be necessary in 2012 if Marathon Gold does not exercise its option to increase its ownership of Golden Chest LLC to 60% by paying $3.5 million.
Changes in Joint Venture Receivables
Joint Venture receivables increased in 2011 compared to 2010 as a result
of increased activity with the Company's joint ventures.
Changes in Other Current Assets
Other
current assets increased in 2011 compared to 2010 because of an increase in
prepaid claim fees related to the Niagara property; previously claim fees were
paid by Newmont Exploration as part of an exploration agreement that is now
expired.
Deposits
Deposits increased in 2011
compared to 2010 because of a deposit on land for the mill that was recorded at
the end of 2011.
Changes in Property, Plant, and Equipment, net of
accumulated depreciation
Property, Plant and Equipment
increased in 2011 compared to 2010 because of increased investment in the New
Jersey Mill Joint Venture by our joint venture partner.
Reclamation Bonds
Reclamation bonds
decreased in 2011 compared to 2010 because the Silver Strand property they were
associated with was sold by the Company.
Accounts Payable and Accounts Payable United Mine
Services
Accounts payable increased in 2011 compared to 2010
because of activity related to the New Jersey Mill Joint Venture expansion.
Accrued Payroll and Related Payroll Expenses
Accrued payroll and related payroll expenses increased in 2011 compared
to 2010 because of increased activity related to the GC LLC and the Golden Chest
Mine.
Notes Payable
Notes payable increased
in 2011 compared to 2010 because of new notes that were incurred by the company
in 2011; most notably was a note for $204,000 for a new core drilling machine
that is being utilized on a contract basis by the Company at the Golden Chest
Mine to the GC LLC.
Asset Retirement Obligations
Asset
retirement obligations decreased in 2011 compared to 2010 because of the Silver
Strand sale and relief from its related obligation.
Noncontrolling interest in New Jersey Mill Joint
Venture
Noncontrolling interest in New Jersey Mill Joint
Venture increased in 2011 compared to 2010 because of investment in the New
Jersey Mill Joint Venture by the Company's joint venture partner United Mine
Services.
Drilling and Exploration Income
Drilling and exploration income increased for 2011 compared to 2010
because of drilling activity that was conducted at the Golden Chest under the
recently formed Joint Venture with Marathon Gold.
Joint Venture Management Fees
Joint
venture management fees are an income item related to the operation of the
recently formed Golden Chest joint venture.
Engineering Services Income
Engineering services income is received from UMS for engineering
services provided to them for the expansion of the mill.
16
Changes in Direct Production Costs
Direct
production costs decreased for 2011 compared to 2010 because efforts have been
redirected towards exploration.
Drilling and Exploration Contract Expense
Drilling and exploration contract expense has increased for 2011
compared to 2010 because of increased drilling activity at the Golden Chest.
Changes in Management Costs
Management
expenses decreased for 2011 compared to 2010 because some of the costs have been
absorbed by the joint ventures.
Changes in Exploration Costs
Exploration
expenses decreased for 2011 compared to 2010 because most employees have been
redirected to the Golden Chest or drilling activities.
(Gain) Loss on Sale of Equipment
Gain
on sale of equipment decreased in 2011 compared to 2010 because of the sale of
several pieces of equipment in the third quarter of 2010.
Gain on Sale of Mineral Property
Gain
on sale of mineral property decreased in 2011 compared to 2010 because in 2010
the default on a sale of property by a proposed joint venture partner was
recorded as a gain and in 2011 the sale of the Silver Strand resulted in a
current net loss on that particular transaction. If the buyers follow through
with production gains will be recognized as they are earned.
Depreciation
Depreciation increased in
2011 compared to 2010 most notably because of the new core drill which was
placed in service in June 2011.
General and Administrative
General and
administrative expenses have increased in 2011 compared to 2010 because of
increased activities involving two new joint ventures.
Interest
Interest expense has
decreased in 2011 compared to 2010 because 2011's interest expense was
capitalized as part of the mill expansion.
Sales of Common Stock and Exercise of Stock Purchase
Warrants
Sales of common stock and exercise of stock purchase
warrants have decreased in 2011 compared to 2010 because funding for operations
and exploration has been received from drilling and joint venture sources in
2011.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
17
ITEM 8.
FINANCIAL STATEMENTS
18
New Jersey Mining Company
(A Development Stage
Company)
Table of Contents
19
New Jersey Mining Company
(A Development Stage
Company)
Consolidated Balance Sheets
December 31, 2011 and 2010
| ASSETS | ||||||
| 2011 | 2010 | |||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 612,989 | $ | 357,317 | ||
| Investment in marketable equity security at market (cost-$3,868) | 19,344 | 19,344 | ||||
| Joint venture receivables | 131,718 | 11,913 | ||||
| Other current assets | 55,442 | 15,392 | ||||
| Deposits | 44,280 | |||||
| Inventory | 18,410 | 16,381 | ||||
| Total current assets | 882,183 | 420,347 | ||||
| Property, plant and equipment, net of accumulated depreciation | 3,967,467 | 1,323,330 | ||||
| Mineral properties, net of accumulated amortization | 699,575 | 871,374 | ||||
| Investment in Golden Chest LLC | 553,205 | 553,205 | ||||
| Reclamation bonds | 121,133 | |||||
| Total assets | $ | 6,102,430 | $ | 3,289,389 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 122,060 | $ | 42,958 | ||
| Accrued payroll and related payroll expenses | 54,367 | 15,986 | ||||
| Account payable related party | 1,500 | |||||
| Obligations under capital lease, current | 30,153 | 13,246 | ||||
| Notes payable, current | 102,151 | 54,661 | ||||
| Total current liabilities | 310,231 | 126,851 | ||||
| Asset retirement obligation | 8,645 | 29,385 | ||||
| Obligations under capital lease-non-current | 58,376 | 1,403 | ||||
| Notes payable, non-current | 308,362 | 64,720 | ||||
| Total non-current liabilities | 375,383 | 95,508 | ||||
| Total liabilities | 685,614 | 222,359 | ||||
| Commitments (Note 5 and 7) | ||||||
| Stockholders’ equity: | ||||||
| Preferred stock, no par value,
1,000,000 shares authorized; no shares issued or outstanding Common stock, no par value, 2011-200,000,000 2010-50,000,000 shares authorized; 2011-45,305,862 and 2010-45,017,862 shares issued and outstanding |
10,423,469 | 10,365,429 | ||||
| Deficit accumulated during the development stage | (7,233,754 | ) | (7,313,874 | ) | ||
| Accumulated other comprehensive income: | ||||||
| Unrealized gain on marketable equity security | 15,475 | 15,475 | ||||
| Total New Jersey Mining Company stockholders’ equity | 3,205,190 | 3,067,030 | ||||
| Non-controlling interest in New Jersey Mill Joint Venture | 2,211,626 | |||||
| Total stockholders' equity | 5,416,816 | 3,067,030 | ||||
| Total liabilities and stockholders’ equity | $ | 6,102,430 | $ | 3,289,389 | ||
The accompanying notes are an integral part of these consolidated financial statements.
20
New Jersey Mining Company
(A Development Stage
Company)
Consolidated Statements of Operations and Comprehensive
Income (Loss)
For the Years Ended December 31, 2011 and 2010,
And from Inception (July 18, 1996) through December 31, 2011
| From Inception | |||||||||
| (July 18, 1996) | |||||||||
| December 31, | Through | ||||||||
| December 31, 2011 | |||||||||
| 2011 | 2010 | (Unaudited) | |||||||
| Income earned during the development stage: | |||||||||
| Sales of gold | $ | $ | 11,410 | $ | 437,122 | ||||
| Sales of concentrate | 601,168 | ||||||||
| Drilling and exploration contract income | 1,242,345 | 161,305 | 1,602,260 | ||||||
| Joint venture management fee income | 79,031 | 79,031 | |||||||
| Engineering services income | 131,800 | 32,022 | 163,823 | ||||||
| Total income earned during the development stage | 1,453,176 | 204,737 | 2,883,404 | ||||||
| Costs and expenses: | |||||||||
| Direct production costs | 14,237 | 51,770 | 1,333,208 | ||||||
| Drilling and exploration contract expense | 642,478 | 118,381 | 849,545 | ||||||
| Engineering services expense | 39,000 | 13,090 | 52,091 | ||||||
| Management | 86,912 | 133,596 | 1,916,539 | ||||||
| Exploration | 10,850 | 158,223 | 2,419,081 | ||||||
| Net loss (gain) on sale of or default on mineral property | 128,602 | (50,000 | ) | (281,398 | ) | ||||
| Net gain on sale of equipment | (12,895 | ) | (35,098 | ) | (47,993 | ) | |||
| Depreciation and amortization | 93,934 | 59,687 | 823,714 | ||||||
| General and administrative expenses | 391,293 | 302,165 | 3,085,016 | ||||||
| Total operating expenses | 1,394,411 | 751,814 | 10,149,803 | ||||||
| Other (income) expense: | |||||||||
| Timber sales | (54,699 | ) | |||||||
| Timber expense | 14,554 | ||||||||
| Royalties and other income | (17,624 | ) | (15,745 | ) | (105,445 | ) | |||
| Royalties expense | 44,089 | ||||||||
| Gain on sale of marketable equity security | (92,269 | ) | |||||||
| Interest income | (921 | ) | (887 | ) | (48,902 | ) | |||
| Interest expense | 10,383 | 91,887 | |||||||
| Write-off of Goodwill and investment | 120,950 | ||||||||
| Total other (income) expense | (18,545 | ) | (6,249 | ) | (29,835 | ) | |||
| Net income (loss) | 77,310 | (540,828 | ) | (7,236,564 | ) | ||||
| Net loss attributable to non-controlling interest | 2,810 | 2,810 | |||||||
| Net income (loss) attributable to The Company | 80,120 | (540,828 | ) | (7,233,754 | ) | ||||
| Income tax (provision) benefit | |||||||||
| Other comprehensive income (loss): | |||||||||
| Unrealized gain (loss) on marketable equity security | (2,321 | ) | 15,475 | ||||||
| Comprehensive income (loss) | $ | 80,120 | $ | (543,149 | ) | $ | (7,218,279 | ) | |
| Net loss per common share-basic and diluted | $ | Nil | $ | (0.01 | ) | $ | (0.31 | ) | |
| Weighted average common shares outstanding-basic and diluted | 45,039,830 | 42,434,985 | 23,315,216 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
21
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes
in Stockholders' Equity
For the Years Ended
December 31, 2011, and 2010 (audited), and for the
Period
From Inception (July 18, 1996) Through December
31, 2011 (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 consolidated financial statements.
22
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes
in Stockholders' Equity, continued:
For the Years Ended December 31, 2011, and 2010
(audited), and for the Period
From Inception (July 18, 1996) Through December
31, 2011 (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 consolidated financial statements.
23
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes
in Stockholders' Equity, continued:
For the Years Ended December 31, 2011, and 2010
(audited), and for the Period
From Inception (July 18, 1996) Through December
31, 2011 (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 consolidated financial statements.
24
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes
in Stockholders' Equity, continued:
For the Years Ended December 31, 2011, and 2010
(audited), and for the Period
From Inception (July 18, 1996) Through December
31, 2011 (unaudited)
| Accum. Other | Total | |||||||||||||||||
| Common Stock | Accumulated | Comprehensive | Non-Controlling | Stockholders' | ||||||||||||||
| Shares | Amount | Deficit | Income | Interest | Equity | |||||||||||||
| Balance, December 31, 2009 | 38,685,232 | $ | 9,285,383 | $ | (6,773,046 | ) | $ | 17,796 | $ | $ | 2,530,133 | |||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 5,820,530 | 980,160 | 980,160 | |||||||||||||||
| Exercise of warrants | 206,500 | 33,936 | 33,936 | |||||||||||||||
| Management and director's fees | 150,000 | 30,000 | 30,000 | |||||||||||||||
| Services | 81,000 | 17,425 | 17,425 | |||||||||||||||
| Mineral property agreement | 72,000 | 18,000 | 18,000 | |||||||||||||||
| Accounts payable | 2,600 | 525 | 525 | |||||||||||||||
| Unrealized gain (loss) in marketable equity security | (2,321 | ) | (2,321 | ) | ||||||||||||||
| Net loss | (540,828 | ) | (540,828 | ) | ||||||||||||||
| Balance, December 31, 2010 | 45,017,862 | 10,365,429 | (7,313,874 | ) | 15,475 | 3,067,030 | ||||||||||||
| Contributions from non-controlling equity interest in Mill Joint Venture |
2,214,436 | 2,214,436 | ||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||
| Cash | 22,800 | 5,000 | 5,000 | |||||||||||||||
| Management and director's fees | 150,000 | 30,000 | 30,000 | |||||||||||||||
| Services | 80,200 | 16,040 | 16,040 | |||||||||||||||
| Exploration | 5,000 | 1,000 | 1,000 | |||||||||||||||
| Accounts payable | 30,000 | 6,000 | 6,000 | |||||||||||||||
| Net loss attributable to non-controlling interest | (2,810 | ) | (2,810 | ) | ||||||||||||||
| Net income attributable to The Company | 80,120 | 80,120 | ||||||||||||||||
| Balance, December 31, 2011 | 45,305,862 | $ | 10,423,469 | $ | (7,233,754 | ) | $ | 15,475 | $ | 2,211,626 | $ | 5,416,816 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
25
New Jersey Mining Company
(A Development Stage
Company)
Consolidated Statements of Cash Flows
For the
Years Ended December 31, 2011 and 2010,
And from Inception (July 18, 1996) through December 31, 2011
| From Inception | |||||||||
| Years Ended | (July 18, 1996) | ||||||||
| December 31, | through | ||||||||
| December 31, 2011 | |||||||||
| 2011 | 2010 | (Unaudited) | |||||||
| Cash flows from operating activities: | |||||||||
| Net income (loss) | $ | 77,310 | $ | (540,828 | ) | $ | (7,236,564 | ) | |
| Adjustments to reconcile net loss to net cash provided (used) by operating activities: | |||||||||
| Depreciation and amortization | 93,934 | 59,687 | 823,714 | ||||||
| (Gain) loss on sale of equipment | (12,895 | ) | (35,098 | ) | (36,722 | ) | |||
| Write-off of goodwill and investment | 120,950 | ||||||||
| Loss (gain) on sale of mineral property | 128,666 | (50,000 | ) | (281,334 | ) | ||||
| Gain on sale of marketable equity security | (92,269 | ) | |||||||
| Accretion of asset retirement obligation | 2,892 | 3,472 | 7,807 | ||||||
| Common stock issued for: | |||||||||
| Management and directors’ fees | 30,000 | 30,000 | 1,169,335 | ||||||
| Services and other | 16,040 | 17,426 | 255,874 | ||||||
| Exploration | 1,000 | 96,521 | |||||||
| Mineral property agreement | 15,000 | ||||||||
| Change in: | |||||||||
| Deposits | (44,280 | ) | (44,280 | ) | |||||
| Inventory | (2,029 | ) | (14,549 | ) | (18,411 | ) | |||
| Joint venture receivables | (119,803 | ) | (11,913 | ) | (131,716 | ) | |||
| Other current assets | (40,050 | ) | 4,410 | (55,442 | ) | ||||
| Other assets | (778 | ) | |||||||
| Accounts payable | 85,084 | (19,376 | ) | 137,806 | |||||
| Accrued payroll and related payroll expense | 38,381 | 8,827 | 54,367 | ||||||
| Accrued reclamation costs | (1,443 | ) | |||||||
| Net cash provided (used) by operating activities | 254,250 | (547,942 | ) | (5,217,585 | ) | ||||
| Cash flows from investing activities: | |||||||||
| Purchases of property, plant and equipment | (2,247,252 | ) | (21,043 | ) | (3,352,543 | ) | |||
| Purchase (sales) of mineral property | 20,000 | (3,000 | ) | (3,904 | ) | ||||
| Proceeds from sale of mineral property | 120,000 | 240,000 | |||||||
| Deposit received on sale of mineral property | 320,000 | ||||||||
| Proceeds from sale of equipment | 12,676 | 36,498 | 49,174 | ||||||
| Redemption (purchase) of reclamation bonds | 633 | (45 | ) | (120,500 | ) | ||||
| Purchase of marketable equity security | (7,500 | ) | |||||||
| Proceeds from sales of marketable equity securities | 95,901 | ||||||||
| Cash of acquired companies | 38,269 | ||||||||
| Deferral of development costs | (759,209 | ) | |||||||
| Net cash provided (used) by investing activities | (2,093,943 | ) | 12,410 | (3,500,312 | ) | ||||
| Cash flows from financing activities: | |||||||||
| Exercise of stock purchase warrants | 33,936 | 2,571,536 | |||||||
| Sales of common stock, net of issuance costs | 5,000 | 980,160 | 5,246,236 | ||||||
| Principal payments on capital lease | (17,745 | ) | (11,268 | ) | (212,510 | ) | |||
| Principal payments on notes payable | (107,825 | ) | (71,959 | ) | (490,311 | ) | |||
| Note and interest payable, related party, net | 1,500 | (72,107 | ) | 1,500 | |||||
| Contributions from noncontrolling equity interest in Mill JV | 2,214,435 | 2,214,435 | |||||||
| Net cash provided by financing activities | 2,095,365 | 858,762 | 9,330,886 | ||||||
| Net change in cash and cash equivalents | 255,672 | 323,230 | 612,989 | ||||||
| Cash and cash equivalents, beginning of period | 357,317 | 34,087 | 0 | ||||||
| Cash and cash equivalents, end of period | $ | 612,989 | $ | 357,317 | $ | 612,989 | |||
| Supplemental disclosure of cash flow information | |||||||||
| Interest paid in cash, net of amount capitalized | $ | $ | 10,383 | $ | 79,867 | ||||
| Non-cash investing and financing activities: | |||||||||
| Common stock issued for: | |||||||||
| Property, plant and equipment | $ | 50,365 | |||||||
| Mineral properties agreement | $ | 18,000 | $ | 351,600 | |||||
| Payment of accounts payable | $ | 6,000 | $ | 525 | $ | 18,730 | |||
| Acquisitions of companies, excluding cash | $ | 743,653 | |||||||
| Capital lease obligation incurred for equipment acquired | $ | 91,625 | $ | 5,625 | $ | 275,838 | |||
| Notes payable for property and equipment acquired | $ | 401,763 | $ | 884,397 | |||||
| Mineral property transferred to Golden Chest LLC | $ | 553,205 | $ | 553,205 | |||||
| Debt relieved from sale of truck | $ | 2,785 | $ | 2,785 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
26
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
1. Description of Business
New Jersey Mining Company (“the Company”) was incorporated as an Idaho corporation on July 18, 1996. The Company's primary business is exploring for 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 independent registered auditing firm resulting in the unaudited classification.
Accounting for Investments in Joint Ventures
For joint ventures where the Company holds more than 50% of the voting
interest and has significant influence, the joint venture is consolidated with
the presentation of noncontrolling interest. In determining whether significant
influence exists, the Company considers its participation in policy-making
decisions and its representation on the venture’s management committee.
For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. Under the cost method, these investments are carried at the lower of cost or fair value. For those joint ventures in which there is joint control between the parties, the equity method is utilized whereby the Company’s share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount.
At December 31, 2011 and December 31, 2010, the Company’s percentage ownership and method of accounting for each joint venture is as follows:
| December 31, 2011 | December 31, 2010 | |||||
| Joint Venture |
% Ownership |
Significant Influence? |
Accounting Method |
% Ownership |
Significant Influence? |
Accounting Method |
| New Jersey Mill Joint Venture | 71% | Yes | Consolidated | -- | -- | -- |
| Golden Chest LLC | 50% | No | Cost | 88% | No | Cost |
Principles of Consolidation
The
consolidated financial statements include the accounts of the company and its
partially-owned Mill Joint Venture after elimination of the intercompany
accounts and transactions. The minority interest in the joint venture held by
United Mine Services is represented as non-controlling interest.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes for
items such as depreciation lives and methods, potential impairment of long-lived
assets, estimation of asset retirement obligations and reclamation liabilities.
Actual results could differ from those estimates.
Revenue Recognition
As a development
stage company, the Company's 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.
27
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies, continued:
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 collection of payment is deemed probable. These services are not a
part of normal operations.
Joint Venture Management Fee Income
Income received as the operator of the Company's joint ventures is
recognized in the months during which those operations occur.
Engineering Services Income
Revenue
received from engineering services provided is recognized when services are
rendered and collection of 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, 2011 and 2010, 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 assets or liabilities accounted for at fair
value at December 31, 2011 or 2010.
| Balance at December 31, 2011 |
Balance at December 31, 2010 |
Hierarchy Level | |
| Investments in marketable equity securities | $19,344 | $19,344 | Level 1 |
The carrying amounts of financial instruments including cash and cash equivalents, reclamation bonds, note payable to related party, obligations under capital lease and notes payable approximate their fair values.
Investment in Marketable Equity Securities
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 Income (Loss) Per Share
Net income
(loss) per share is computed by dividing the net amount by the weighted average
number of common shares outstanding during the year. Diluted net income (loss)
per share reflects the potential dilution that could occur from common shares
issuable through stock options, warrants, and other convertible securities. For
the years ended December 31, 2011 and 2010, the effect of the Company’s
potential issuance of shares from the exercise of the remaining 6,099,550
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 2011 financial statement
presentation. These reclassifications had no effect on net loss or stockholders'
equity as previously reported.
Cash and Cash Equivalents
The Company
considers cash in banks and other deposits with an original maturity of three
months or less when purchased to be cash and cash equivalents.
28
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies, continued:
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 2 and
10 years. When assets are retired or sold, the costs and related allowances for
depreciation and amortization are eliminated from the accounts and any resulting
gain or loss is reflected in operations.
Mineral Properties
Significant
payments related to the acquisition of mineral properties, mineral rights, and
mineral leases are capitalized.
If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on 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 expenses 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 a mine's 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
The Company
evaluates the carrying amounts of its mineral properties, including deferred
development costs, for impairment whenever events and circumstances indicate the
carrying value may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. Estimated undiscounted
future net cash flows from each mineral property are calculated using estimated
future production, three year average metals prices, operating capital and
costs, and reclamations costs. An impairment loss is recognized when the
estimated 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.
Asset Retirement Obligations and Remediation
Costs
Mineral properties are subject to standards for mine reclamation that have
been established by various governmental agencies. Asset retirement obligations
are related to the retirement of the mine, 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 balance at December 31, 2010, represents an investment in U.S. government
agency bonds. The bonds are restricted to ensure that reclamation is performed
at certain properties where the Company is conducting mining and exploration
activities. In the fourth quarter of 2011 the reclamation bond was transferred
to Shoshone Silver in conjunction with the Silver Strand sale.
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.
29
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
3. Property, Plant and Equipment
Property, plant and equipment at December 31, 2011 and 2010, consisted of the following:
| 2011 | 2010 | |||||
| Mill land | $ | 225,289 | ||||
| Mill building | 430,118 | $ | 128,566 | |||
| Milling equipment | 2,802,925 | 1,095,330 | ||||
| 3,458,332 | 1,223,896 | |||||
| Less accumulated depreciation | (80,385 | ) | (80,385 | ) | ||
| Total mill | 3,377,947 | 1,143,511 | ||||
| Building and equipment at cost | 771,419 | 479,720 | ||||
| Less accumulated depreciation | (441,308 | ) | (379,038 | ) | ||
| Total building and equipment | 330,111 | 100,682 | ||||
| Land | 259,409 | 79,137 | ||||
| Total | $ | 3,967,467 | $ | 1,323,330 |
During the year 2011 $21,792 in interest was capitalized in conjunction with the mill expansion project. See note 7
For years ended December 31, 2011 and 2010, milling and other equipment include assets under capital lease amounting to $97,250 and $49,763, respectively. The leases are being amortized over the terms of the respective lease. Accumulated amortization at December 31, 2011 and 2010 was $8,721 and $33,740, respectively. One new lease was obtained in 2011 and was personally guaranteed by President Fred Brackebusch and Vice president Grant Brackebusch. At December 31, 2011, the estimated future minimum lease payments under capital leases were as follows:
| Year ending December 31, | |||
| 2012 | $ | 38,242 | |
| 2013 | 36,753 | ||
| 2014 | 27,566 | ||
| Total | 102,561 | ||
| Less: Amounts representing interest costs | (14,032 | ) | |
| Net present values | 88,529 | ||
| Less: Capital lease obligations-current portion | (30,153 | ) | |
| Long-term capital lease obligations | $ | 58,376 |
4. Notes Payable
| At December 31, 2011 and 2010, notes payable are as follows: | 2011 | 2010 | ||||
|
2006 Dodge pickup 60 month note payable, 0.00% interest rate;
collateralized by pickup,
monthly payments of $557 |
$ | $ | 2,786 | |||
| 2011 Dodge
pickup 36 month note payable, 0.00% interest rate, collateralized by
pickup, monthly payments of $740 |
19,220 | |||||
| 2005 Dodge
Pickup 48 month note payable, 8.04% interest rate payable monthly,
collateralized by pickup, monthly payments of $420 |
15,602 | |||||
| Hagby Diamond Drill 48 month
note payable, 8.00% interest rate payable monthly,
collateralized by drill, monthly payments of $4,093 |
35,642 | |||||
| Hagby
Diamond Drill 36 month note payable, 6.9% interest rate payable monthly,
collateralized by drill and guaranteed by President Fred Brackebusch and Vice President Grant Brackebusch, monthly payments of $6,290 |
167,560 | |||||
| Caterpillar 305
Excavator 48 month note payable, 7.81% interest rate payable monthly,
collateralized by excavator, monthly payments of $956 |
4,685 | |||||
|
Property with shop 36 month note payable, 4.91% interest rate payable
monthly,
remaining principal of note due in one payment at end of term, monthly payments of $474 |
56,025 | 58,875 | ||||
| Property 39 month
note payable, 5.0% interest rate payable monthly, collateralized by
property, monthly payments of $1,000 |
28,221 | |||||
|
Property 120 month note payable, 11.0% interest rate payable monthly,
remaining principal
of note due in one payment at end of term, collateralized by property, monthly payments of $1,122 |
115,189 | |||||
| Bobcat 50 month
note payable, 0.00% interest rate collateralized by bobcat, monthly
payments of $725 |
8,696 | 17,393 | ||||
| Total notes payable | 410,513 | 119,381 | ||||
| Due within one year | 102,151 | 54,661 | ||||
| Due after one year | $ | 308,362 | $ | 64,720 |
30
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
4. Notes Payable, continued
Maturities of debt outstanding at December 31, 2011 are as follows:
| 2012 | $102,151 |
| 2013 | 149,151 |
| 2014 | 44.049 |
| 2015 | 3,957 |
| 2016 | 1.300 |
| Thereafter | 109,905 |
| $410,513 |
5. Mineral Properties
Mineral properties and deferred development costs are as follows:
| December 31, 2011 | |||||||||
| Deferred | |||||||||
| Properties | Development | Total | |||||||
| New Jersey Mine | |||||||||
| Grenfel/Coleman | $ | 365,000 | $ | 239,792 | $ | 604,792 | |||
| Roughwater | 25,500 | 25,500 | |||||||
| Lost Eagle | 5,000 | 5,000 | |||||||
| Revett Niagara | 42,500 | 42,500 | |||||||
| Copper Camp | 42,500 | 42,500 | |||||||
| Less Accumulated | |||||||||
| Amortization | (11,362 | ) | (9,355 | ) | (20,717 | ) | |||
| Total | $ | 469,138 | $ | 230,437 | $ | 699,575 | |||
| December 31, 2010 | |||||||||
| Deferred | |||||||||
| Properties | Development | Total | |||||||
| New Jersey Mine | |||||||||
| Grenfel/Coleman | $ | 365,000 | $ | 239,792 | $ | 604,792 | |||
| Silver Strand | 74,704 | 77,872 | 152,576 | ||||||
| Roughwater | 25,500 | 25,500 | |||||||
| Lost Eagle | 5,000 | 5,000 | |||||||
| Revett Niagara | 52,500 | 52,500 | |||||||
| Copper Camp | 52,500 | 52,500 | |||||||
| Less Accumulated | |||||||||
| Amortization | (11,743 | ) | (9,751 | ) | (21,494 | ) | |||
| Total | $ | 563,461 | $ | 307,913 | $ | 871,374 | |||
Grenfel/Coleman
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.
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, 2011 and 2010 deferred development includes asset retirement costs of $6,341.
Silver Strand
The Silver Strand mine
was sold in the fourth quarter of 2011 to Shoshone Silver/Gold Mines, Inc. for
$120,000 cash paid at closing and $880,000 to be paid as a 20% share of net
profits if and when they put the property in production. The Company recognized
a loss on sale of this property of $128,666 for the year ended December 31,
2011. The reclamation bond held by the company for that property has been
transferred to the purchaser.
31
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
5. Mineral Properties, continued:
Roughwater
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.
Revett Niagara/Copper Camp
The Company
has a mining agreement for Revett Niagara and an exploration agreement with the
option to convert to a mining agreement for Copper Camp with Revett Metals
Associates (RMA) for 18 unpatented claims. In October of 2011, the Company
signed an exploration agreement and option to purchase mining claims with Desert
Copper USA Corporation (DUSA), a wholly-owned subsidiary of Desert Copper
Corporation, a Canadian corporation. The agreement covers the Niagara project
and the Copper Camp project. The agreement gives DUSA the exclusive right to
purchase from NJMC the rights held by the Company to the properties at any time
for a term of five years for the sum of $250,000 plus 3,500,000 shares of Desert
Copper Corporation. At closing DUSA, made an initial payment of $42,800 and the
agreement calls for an annual payment of $20,000 on each anniversary of the
agreement during the option period. A minimum work expenditure of $250,000 is
also called for by the agreement. DUSA is also required to maintain, in good
standing, the underlying mining agreement with Revett Metals Associates (RMA).
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.
6. Asset Retirement Obligation
The Company has established asset retirement obligations associated with the ultimate closing of its properties. Below is a reconciliation as of December 31, 2011 and 2010 of the Company’s asset retirement obligations. The estimated reclamation costs were discounted using a credit adjusted, risk-free interest rate of 5.6% .
| 2011 | 2010 | |||||
| Balances at January 1 | $ | 29,385 | $ | 25,913 | ||
| Changes in obligations due to sale of Silver Strand | (23,632 | ) | ||||
| Accretion expense | 2,892 | 3,472 | ||||
| Balances at December 31 | $ | 8,645 | $ | 29,385 |
7. Mining and Milling Venture Agreements
Golden Chest LLC ("GC")
In December of
2010, a limited liability company (LLC) was formed between the Company and
Marathon Gold USA (MUSA). MUSA's contribution to GC is $4,000,000 paid in
installments ending on November 30, 2011. The Company's contribution to GC with
a carrying value of $553,205 includes all of the its interests in the Golden
Chest mine, including unpatented claims and some mining equipment. In connection
with this transaction, the 2005 mining leases with Metaline Contact Mines, J.W.
Beasley Interests, LLC, and Prichard Creek Resource Partners, LLC (see Note 5)
were cancelled in December 2010. GC purchased the patented mining claims from
Metaline Contact Mines, J.W. Beasley Interests, LLC, and Prichard Creek Resource
Partners, LLC for $3.75 million with $500,000 paid at closing in December 2010
and the remainder due under a Promissory Note and Mortgage at the rate of
$500,000 per year with the $250,000 balance due in the seventh and final year.
The sellers have a first mortgage on the mine as security for future payments
owing. Marathon may exercise its option to increase ownership to 60% by paying
an additional 3.5 million before November 30, 2012. Funding for the exploration
and drilling activities in 2011 was paid by Marathon's buy-in funds and future
funding for the venture will be paid by each partner at a percentage equal to
their ownership.
Newmont Venture Agreement
In April of
2011 Newmont North American Exploration (Newmont) withdrew from the Toboggan
joint venture it held with the Company on claims held in the Murray, Idaho
District. Newmont quitclaimed the entire land package and transferred to the
Company all exploration data obtained during the three years of work that was
conducted on the project.
New Jersey Mill Venture Agreement
The
Company has one subsidiary. In January 2011, the New Jersey Mill Venture
agreement was signed by the Company and United Mine Services, Inc. (UMS)
relating to the New Jersey mineral processing plant. To earn a one third
interest in the venture, UMS provided funding to expand the processing plant to
15 tonnes/hr which is estimated to cost $2.5 million. The proposed expansion
budget included purchasing land held by the Company, known as the Zanetti Mining
Lease, which was cancelled by the purchase of the land. The Company is the
operator of the venture and will charge operating costs to UMS for milling its
ore up to 7,000 tonnes/month, retain a milling capacity of 3,000 tonnes/month,
and as the operator of the venture receive a fee of $2.50/tonne milled. UMS has
contributed $2,214,436 as of December 31, 2011.
32
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
8. Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended December 31, 2011 and 2010.
At December 31, 2011 and 2010, the Company had deferred tax assets principally arising from the net operating loss carry forwards for income tax purposes multiplied by an expected rate of 40%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to the deferred tax asset has be established at December 31, 2011 and December 31, 2010. The significant components of the deferred tax asset at December 31, 2011 and 2010 were as follows:
| December 31, | December 31, | |||||
| 2011 | 2010 | |||||
| Deferred tax asset | ||||||
| Net operating loss carry forward | $ | 2,985,000 | $ | 3,041,000 | ||
| Exploration costs | 107,000 | 99,000 | ||||
| Total deferred tax assets | 3,092,000 | 3,140,000 | ||||
| Valuation allowance | (2,661,000 | ) | (2,742,000 | ) | ||
| Net | 431,000 | 398,000 | ||||
| Deferred tax liabilities | ||||||
| Development | (29,000 | ) | (20,000 | ) | ||
| Property, plant, and equipment | (402,000 | ) | (378,000 | ) | ||
| Total deferred tax liabilities | (431,000 | ) | (398,000 | ) | ||
| Net deferred tax asset | $ | $ |
At December 31, 2011 and 2010 the Company had net operating loss carry forwards of approximately $7,462,000 and $7,602,000 respectively for both federal and the state of Idaho, which expire in the years 2016 through 2030.
The income tax benefit shown in the financial statements for the years ended December 31, 2011 and 2010 differs from the statutory rate as follows:
| December 31, | December 31, | |||||
| 2011 | 2010 | |||||
| Provision (benefit) at statutory rate | $ | 26,000 | $ | (184,000 | ) | |
| State taxes, net of federal taxes | 6,000 | (41,000 | ) | |||
| Permanent differences | 49,000 | - | ||||
| Increase (decrease) in valuation allowance | (81,000 | ) | 225,000 | |||
| Total provision (benefit) | $ | 0 | $ | 0 |
We have determined that we are open to examination of our income tax filings in the United States and state jurisdictions for the 2008 through 2010 tax years. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense. We have recognized that certain tax positions taken in the 2008 through 2010 tax years could result in minor adjustments to our exploration and development costs for tax purposes. However, these adjustments would not result in a tax provision, only revision to the net operating loss carry forward balance.
33
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
9. Equity
The Company has authorized 200,000,000 and 50,000,000 shares of no par common stock at December 31, 2011 and 2010 respectively. In addition, the Company has authorized 1,000,000 shares of no par preferred stock, none of which had been issued at December 31, 2011 or 2010.
Private Placements
During 2011, 22,800 shares of common stock were sold at $0.22 per share for $5,000 in cash. The following private placements occurred in 2010
In March of 2010 the Company completed a private placement which was initiated in September of 2009, each unit selling for $0.17 and consisting of one share of restricted 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. A total of 3,658,530 units were sold in the private placement and resulted in net proceeds of $563,670. Of those units, 138,000 were issued in 2009 for net proceeds of $34,500.
In August of 2010, the Company sold 300,000 units at $0.17 per unit, providing net proceeds of $51,000 to the Company. Each unit consists of one share of restricted 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.
In December of 2010, the Company sold 2,000,000 units at $0.20 per unit, providing net proceeds of $399,990 to the Company. Each unit consists of one share of restricted 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.
Exercise of Stock Purchase Warrants
No common stock purchase warrants were exercised in 2011. During 2010 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 2010, the Company issued 206,500
shares of its restricted common stock at $0.17 per share, generating net proceeds
of $33,936 pursuant to the exercise of these warrants.
Stock Purchase Warrants Outstanding
No
common stock purchase warrant activity occurred in 2011. Transactions in common
stock purchase warrants for the year ended December 31, 2010, are as follows:
| Number of | Exercise | |||||
| Warrants | Prices | |||||
| Balance, December 31, 2009 | 363,250 | $ | 0.40-0.60 | |||
| Issued in connection with private placement | 5,961,550 | 0.30 | ||||
| Exercised | (206,500 | ) | .17 | |||
| Expired | (18,750 | ) | 0.60 | |||
| Balance, December 31, 2010 and 2011 | 6,099,550 | 0.30-0.40 | ||||
| These warrants expire as follows: |
| Shares | Exercise Price | Expiration Date | ||
| 138,000 | $0.40 | October 19, 2012 | ||
| 5,961,550 | $0.30 | January 31, 2013 | ||
| 6,099,550 |
Common Stock issued For Cash
During
2011, the Company issued 22,800 shares of its restricted common stock for $5,000
in cash.
Common Stock Issued for Property, Plant and
Equipment
During 2010, the Company issued 72,000 shares of
its restricted common stock for mineral properties. The Company recorded $18,000
based upon the value of the shares issued.
Common Stock Issued for Services, and
Exploration
During 2011 and 2010, the Company issued 85,200
and 81,000 shares, respectively, of its restricted common stock for exploration,
and other services rendered the Company. The Company recorded $17,040 and
$17,425, respectively, based upon the value of the services rendered and the
shares issued.
Common Stock Issued in Exchange for Accounts
Payable
During 2011 and 2010, the Company issued 30,000 and
2,600 shares of its restricted common stock in satisfaction of accounts payable.
The Company recorded $6,000 and $525, respectively, based upon the fair value of
the accounts payable and the shares issued.
34
New Jersey Mining Company
(A Development Stage
Company)
Notes to Consolidated Financial Statements
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 Notes 5 and 7, the Company had the following transactions with related parties:
-
During 2011 and 2010, the Company issued 25,000 shares of its restricted stock valued at $5,000 each year, to Tina Brackebusch for services as the Corporate Secretary.
-
During 2011 and 2010, the Company issued 125,000 shares, of its restricted common stock to members of the Board of Directors for their services as directors. These stock awards were recorded as directors' fees of $25,000 each year, based upon the estimated value of the shares issued and services rendered. Fred and Grant Brackebusch each received 25,000 shares in 2011 and 2010, all valued at $0.20 per share for $5,000 each per year as Directors of the Company.
-
During 2011 and 2010, the Company paid $6,000 to MSD for office rent.
The Company jointly owns GC with Marathon Gold USA (MUSA) and acts as the operator of the property. Accounts receivable are a part of normal operations which include operating costs, payroll, drilling costs, and drilling income. As of December 31, 2011, a related party account receivable existed with MUSA and GC for $97,794. In addition, income and expense items for the twelve month period ended December 31, 2011 related to MUSA and GC were as follows:
| • | Drilling and exploration contract income | $ 1,242,345 | ||
| • | Joint Venture Management fees income | $ 79,031 | ||
| • | Drilling and exploration contract expense | $ 642,478 |
Engineering services income includes engineering services provided to UMS. UMS holds the noncontrolling interest in the Company's New Jersey Mill Joint Venture. Engineering services to UMS in the twelve month period ending December 31, 2011 were $131,800 and are included in consolidated revenues after the effects of consolidation of noncontrolling interest. As of December 31, 2011, a related party account receivable existed with the Mill Joint Venture and UMS for $33,924.
11. Investment in Marketable Security
In 2006, the Company purchased 1,875,000 common shares of Gold Crest Mines Inc for $7,500. No shares were sold in 2011 or 2010.
At December 31, 2011, the Company held 967,180 of these shares with a market value of $0.02 per share, for a total market value of $19,344. At December 31, 2011, the excess market value of $15,475 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.
35
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At December 31, 2011, 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, 2011, 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, 2011. 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, 2011, the Company’s internal control over financial reporting is effective.
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.
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 our registered public accounting firm subject to Section 404(c) of the Sarbanes-Oxley Act, as amended, which permit us as an issuer that is neither a “large accelerated filer” or an “accelerated filer” to provide only management’s report in this Annual Report on Form 10-K.
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, 2011 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, 2011.
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 |
67 |
President, Director & Treasurer |
7/18/1996 |
| Grant A. Brackebusch P.O. Box 131 Silverton, ID 83867 |
42 |
Vice President & Director |
7/18/1996 |
| Ivan R. Linscott 7150 Burke Road Wallace, ID 83873 |
69 |
Director |
9/21/2004 |
| William C. Rust (1) P.O. Box 648 Wallace, ID 83873 |
65 |
Director |
9/21/2004 |
| M. Kathleen Sims (1) 2745 Seltice Way Coeur d’Alene, ID 83814 |
67 |
Director |
9/25/2003 |
| Tina C. Brackebusch P.O. Box 131 Silverton, ID 83867 |
42 |
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. Currently he supervises the daily operations of the exploration program at the Golden Chest, but also has experience with NJMC in mill operations, engineering, and 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 by performing geophysical surveys on the Company’s properties with the innovative use of experimental 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 2003. She is a successful businesswoman who is majority owner of a Honda car dealership in Coeur d’Alene, Idaho. She is currently a Congresswoman and formerly a 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 Wallace 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 our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2011, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with, except for the following:
| NAME & NATURE OF AFFILIATION
|
LATE REPORTS |
REPORTS NOT FILED |
| Fred W. Brackebusch, Chairman of the Board, President, Chief Executive Officer & Treasurer |
Form 4 (one) |
N/A |
| Grant A. Brackebusch, Vice-President & Director | Form 4 (one) | N/A |
| Ivan R. Linscott, Director | Form 4 (one) | N/A |
| William C. Rust, Director | Form 4 (one) | N/A |
| M. Kathleen Sims, Director | Form 4 (one) | N/A |
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.
Board Nomination Procedures
There have
been no material changes to the procedures by which security holders may
recommend nominees to the registrant's board of directors.
ITEM 11.
EXECUTIVE COMPENSATION
Compensation of Officers
A summary of
cash and other compensation for 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 Summary 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 ($) |
| Fred Brackebusch President |
2011 2010 |
65,000 30,000 |
0 0 |
5,000 5,000 |
0 0 |
0 0 |
0 0 |
0 0 |
70,000 35,000 |
| Grant Brackebusch Vice Pres. |
2011 2010 |
114,800 67,708 |
0 0 |
5,000 5,000 |
0 0 |
0 0 |
0 0 |
0 0 |
119,800 72,708 |
(1) Stock Awards include fees earned as Directors. The Company has valued all Stock Awards granted at fair value as computed in accordance with FASB Accounting Standards Codification Topic 718
38
The compensation of the Named Executive Officers has been set by disinterested members of the Board of Directors to a level competitive with other mining companies of similar size with similar types of operations. The executive stock compensation is for services as directors. The Company does not have a retirement plan for its executive officers and there is no agreement, plan or arrangement that provides for payments to executive officers in connection with resignation, retirement, termination or a change in control of the Company.
Outstanding Equity Awards at Fiscal Year-end
The Company does not currently award the Named Executive Officers
options to purchase the Company’s shares, and there were no outstanding equity
awards as of December 31, 2011.
Director Compensation
A summary of
compensation for the Company’s non-employee Directors, including Ivan R.
Linscott, William C. Rust and M. Kathleen Sims for the two most recent years is
as follows:
Director Compensation Table
Name 1 |
Year |
Fees Earned or Paid in Cash ($) |
Stock Awards 2 ($) |
Option Awards ($) |
Nonequity Incentive Plan Compensa- tion ($) |
Nonqualified Deferred Compensa- tion Earnings ($) |
All Other Compensa- tion ($) |
Total ($) |
| Ivan R. Linscott | 2011 | 0 | 5,000 | 0 | 0 | 0 | 0 | 5,000 |
| 2010 | 0 | 5,000 | 0 | 0 | 0 | 0 | 5,000 | |
| William C. Rust | 2011 | 0 | 5,000 | 0 | 0 | 0 | 0 | 5,000 |
| 2010 | 0 | 5,000 | 0 | 0 | 0 | 0 | 5,000 | |
| M. Kathleen Sims | 2011 | 0 | 5,000 | 0 | 0 | 0 | 0 | 5,000 |
| 2010 | 0 | 5,000 | 0 | 0 | 0 | 0 | 5,000 |
| (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. |
| (2) |
As discussed below, the Directors are each awarded 25,000 common shares of restricted stock as annual compensation. The Company valued the awards granted at fair value as computed in accordance with FASB Accounting Standards Codification Topic 718. |
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 2010 and 2011 these shares were valued at $5,000, annually. 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 1, 2012 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 Class(1) |
| Common |
Fred W. Brackebusch P.O. Box 1019 Kellogg, Idaho 83837 |
7,900,077 indirect (a)
1,832,861 direct |
21.48% |
| Common |
Constance Meisel 105 East Atlantic Avenue Delray Beach, FL 33444 |
3,158,607 | 6.97% |
| Common |
William Ritger 750 Ocean Royale Way Juno Beach, FL 33408 |
3,161,425 | 6.98% |
39
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)
1,832,861 direct |
21.48% |
| Common |
Grant A. Brackebusch 89 Appleberg Road Kellogg, Idaho 83837 |
916,973 indirect (b)
750,920 direct |
3.68% |
| Common |
Ivan R. Linscott, Director 7150 Burke Road Wallace, Idaho 83873 |
185,500 | 0.41% |
| Common |
William C. Rust, Director P.O. Box 648 Wallace, Idaho 83873 |
145,000 | 0.32% |
| Common |
M. Kathleen Sims, Director 2745 Seltice Way Coeur d’Alene, Idaho 83814 |
158,000 | 0.35% |
| Common |
All Directors and Executive Officers as a group (5 individuals) |
11,889,331 | 26.24% |
(1) Based upon 45,305,862 outstanding shares of common stock at March 1, 2012.
(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. The Company occasionally pays for
goods or services with unregistered Common Stock and uses the average bid price
of the stock, as quoted on the OTCQB, at the time to determine the number of
shares to be issued.
Changes in Control
None.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
During each of the years ended December 31, 2011 and 2010, the Company
issued 150,000 shares 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 $ $25,000, annually, for directors and $5,000, annually,
for management based upon the estimated value of the shares issued and services
rendered. Fred, Grant, and Tina Brackebusch each received 25,000 shares in 2011
and 2010 as Directors or Officers in each respective year.
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.
40
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, 2011 and December 31, 2010
and the review for the financial statements included in the Company’s quarterly
reports on Form 10-Q during those fiscal years, were $32,114 and $23,948
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.
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. |
| (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. |
41
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 26, 2012 | By /s/ FRED W. BRACKEBUSCH |
| Fred W. Brackebusch, President, Treasurer & Director | |
| Date: March 26, 2012 | By /s/ GRANT A. BRACKEBUSCH |
| Grant A. Brackebusch, Vice President & Director | |
| Date: March 26, 2012 | By /s/ IVAN R. LINSCOTT |
| Ivan R. Linscott, Director | |
| Date: March 26, 2012 | By /s/ WILLIAM C. RUST |
| William C. Rust, Director | |
| Date: March 26, 2012 | By /s/ M. KATHLEEN SIMS |
| M. Kathleen Sims, Director |
42