UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 001-41320
IDAHO STRATEGIC RESOURCES, INC
(Name of small business issuer in its charter)
Idaho
82-0490295
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification No.)
201 N. Third Street, Coeur d’Alene, ID 83814
(Address of principal executive offices) (zip code)
(208) 625-9001
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.00 par value
IDR
NYSE American
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Small Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
At July 1, 2024, 12,958,574 shares of the registrant’s common stock were outstanding.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2024
TABLE OF CONTENTS
PART I -FINANCIAL INFORMATION
3
ITEM 1.
ITEM 2.
15
ITEM 3.
18
ITEM 4.
PART II OTHER INFORMATION
19
ITEM 5.
ITEM 6.
20
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Idaho Strategic Resources, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
June 30,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
Short term investments
Gold sales receivable
Inventories
Joint venture receivable
Investment in equity securities
Other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation
Mineral properties, net of accumulated amortization
Investment in Buckskin Gold and Silver, Inc
Investment in joint venture
Reclamation bond
Deposits
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
Accrued payroll and related payroll expenses
Notes payable, current portion
Total current liabilities
Asset retirement obligations
Notes payable, long term
Total long-term liabilities
Total liabilities
Commitments Notes 5 and 9
Stockholders’ equity:
Preferred stock, no par value, 1,000,000 shares authorized; no shares issued or outstanding
Common stock, no par value, 200,000,000 shares authorized; June 30, 2024-12,958,574 and December 31, 2023- 12,397,615 shares issued and outstanding
Accumulated deficit
Total Idaho Strategic Resources, Inc stockholders’ equity
Non-controlling interest
Total stockholders' equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Operations (Unaudited)
For the Three and Six-Month Periods Ended June 30, 2024 and 2023
June 30, 2024
June 30, 2023
Three Months
Six Months
Revenue:
Sales of products
Total revenue
Costs of Sales:
Cost of sales and other direct production costs
Depreciation and amortization
Total costs of sales
Gross profit
Other operating expenses:
Exploration
Management
Professional services
General and administrative
(Gain) loss on disposal of equipment
Total other operating expenses
Operating income
Other (income) expense:
Equity (income) loss on investment in Buckskin Gold and Silver, Inc
Timber revenue net of costs
Loss on investment in equity securities
Gain on short term investments
Interest income
Interest expense
Total other (income) expense
Net income
Net loss attributable to non-controlling interest
Net income attributable to Idaho Strategic Resources, Inc.
Net income per common share-basic
Weighted average common share outstanding-basic
Net income per common share-diluted
Weighted average common shares outstanding- diluted
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
Common Stock Shares
Common Stock Amount
Accumulated Deficit Attributable to Idaho Strategic Resources, Inc
Non-Controlling Interest
Stockholders’ Equity
Balance January 1, 2023
Contribution from non-controlling interest in New Jersey Mill Joint Venture
Issuance of common stock for cash, net of offering costs
Net income (loss)
Balance March 31, 2023
Balance June 30, 2023
Balance January 1, 2024
Issuance of common stock for warrants exercised
Issuance of common stock for stock options exercise
Issuance of common stock for cashless stock options exercise
Balance March 31, 2024
Balance June 30, 2024
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Six-Month Periods Ended June 30, 2024 and 2023
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of equipment
Accretion of asset retirement obligation
Equity income on investment in Buckskin Gold and Silver, Inc
Change in operating assets and liabilities:
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant, and equipment
Deposits on equipment
Proceeds from sale of equipment
Additions to mineral property
Purchase of reclamation bond
Purchase of short term investments
-
Proceeds from sale of investment in equity securities
Net cash used by investing activities
Cash flows from financing activities:
Proceeds from sale of common stock, net of issuance cost
Proceeds from issuance of common stock for warrants exercised
Proceeds from issuance of common stock for stock options exercised
Principal payments on notes payable
Principal payments on notes payable, related parties
Contributions from non-controlling interest
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Non-cash investing and financing activities:
Deposit on equipment applied to purchase
Notes payable for equipment
Notes payable for mineral property purchase
Idaho Strategic Resources, Inc
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. The Company and Significant Accounting Policies
These unaudited interim condensed consolidated financial statements have been prepared by the management of Idaho Strategic Resources, Inc. (“IDR”, “Idaho Strategic” or the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair statement of the interim condensed consolidated financial statements have been included.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's consolidated financial position and results of operations. Operating results for the three and six-month periods ended June 30, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024.
For further information refer to the financial statements and footnotes thereto in the Company’s audited consolidated financial statements for the year ended December 31, 2023, in the Company’s Form 10-K as filed with the Securities and Exchange Commission on March 25, 2024.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, the New Jersey Mill Joint Venture (“NJMJV”). Intercompany accounts and transactions are eliminated. The portion of entities owned by other investors is presented as non-controlling interests on the consolidated balance sheets and statements of operations.
Revenue Recognition
Gold Revenue Recognition and Receivables-Sales of gold sold directly to customers are recorded as revenues and receivables upon completion of the performance obligations and transfer of control of the product to the customer. For concentrate sales, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment at estimated forward prices for the anticipated month of settlement. Due to the time elapsed from shipment to the customer and the final settlement with the customer, prices at which sales of concentrates will be settled are estimated. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. For sales of doré and metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner.
Sales and accounts receivable for concentrate shipments are recorded net of charges by the customer for treatment, refining, smelting losses, and other charges negotiated with the customers. Charges are estimated upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from estimates. Costs charged by customers include fixed costs per ton of concentrate and price escalators. Refining, selling, and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred. See Note 4 for more information on our sales of products.
Other Revenue Recognition-Revenue from harvest of raw timber is recognized when the performance obligation under a contract and transfer of the timber have both been completed. Sales of timber found on the Company’s mineral properties are not a part of normal operations.
Inventories are stated at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, and milling costs including applicable overhead, depreciation, depletion, and amortization relating to the operations. Costs are allocated based on the stage at which the ore is in the production process. Supplies inventory is stated at the lower of cost or estimated net realizable value.
Mine Exploration and Development Costs
The Company expenses exploration costs as such in the period they occur. The mine development stage begins once the Company identifies ore reserves which is based on a determination whether an ore body can be economically developed. Expenditures incurred during the development stage are capitalized as deferred development costs and include such costs for drift, ramps, raises, and related infrastructure. Costs to improve, alter, or rehabilitate primary development assets which appreciably extend the life, increase capacity, or improve the efficiency or safety of such assets are also capitalized. The development stage ends when the production stage of ore reserves begins. Amortization of deferred development costs is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
Fair Value Measurements
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period that are included in earnings are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. At December 31, 2023, the Company had equity securities measured at fair value using level 1 quoted prices and no liabilities required measurement at fair value. At June 30, 2024, the Company had short term investments in treasury securities that were classified as Level 1 assets that required measurement at fair value and no liabilities that required measurement at fair value on a recurring basis.
1. The Company and Significant Accounting Policies (continued)
Accounting for Investments in Joint Ventures (“JV”) and Equity Method Investments
Investment in JVs-For JVs where the Company holds more than 50% of the voting interest and has significant influence, the JV is consolidated with the presentation of non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the venture’s management committee.
For JVs in which the Company does not have joint control or significant influence, the cost method is used. For those JVs 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 JVs and its investments therein are adjusted by a similar amount. The Company periodically assesses its investments in JVs for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.
Equity Method Investments-Investments in companies and joint ventures in which the Company has the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and representation on governing bodies. Under the equity method of accounting, our share of the net earnings or losses of the investee are included in net income (loss) in the consolidated statements of operations. We evaluate equity method investments whenever events or changes in circumstance indicate the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. At June 30, 2024, and December 31, 2023, the Company's 37% common stock holding of Buckskin Gold and Silver, Inc. (“Buckskin”) is accounted for using the equity method (Note 10).
At June 30, 2024 and December 31, 2023, the Company’s percentage ownership and method of accounting for each JV and equity method investment is as follows:
December 31, 2023
JV/Equity
% Ownership
Significant Influence?
Accounting Method
NJMJV
Yes
Consolidated
Butte Highlands JV, LLC
No
Cost
Buckskin
Equity
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2024 financial statement presentation. Reclassifications had no effect on net loss, stockholders’ equity, or cash flows as previously reported.
Investments in Equity Securities
Investments in equity securities are generally measured at fair value. Unrealized gains and losses for equity securities resulting from changes in fair value are recognized in current earnings. If an equity security does not have a readily determinable fair value, we may elect to measure the security at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer. At the end of each reporting period, we reassess whether an equity investment security without a readily determinable fair value qualifies to be measured at cost less impairment, consider whether impairment indicators exist to evaluate if an equity investment security is impaired and, if so, record an impairment loss. At the end of each reporting period, unrealized gains and losses resulting from changes in fair value are recognized in current earnings. Upon sale of an equity security, the realized gain or loss is recognized in current earnings.
New Accounting Pronouncement
In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which clarifies the business combination accounting for joint venture formations. The amendments in the ASU seek to reduce diversity in practice that has resulted from a lack of authoritative guidance regarding the accounting for the formation of joint ventures in separate financial statements. The amendments also seek to clarify the initial measurement of joint venture net assets, including businesses contributed to a joint venture. The guidance is applicable to all entities involved in the formation of a joint venture. The amendments are effective for all joint venture formations with a formation date on or after January 1, 2025. Early adoption and retrospective application of the amendments are permitted. We do not expect adoption of the new guidance to have a material impact on our consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the disclosure enhancements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of this update on our consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. We are currently evaluating the impact of this update on our consolidated financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
2. Going Concern
The Company is currently producing profitably from underground mining at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its profitable production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
3. Inventories
At June 30, 2024 and December 31, 2023, the Company’s inventories consisted of the following:
Concentrate inventory
In process
Finished goods
Total concentrate inventory
Supplies inventory
Mine parts and supplies
Mill parts and supplies
Core drilling supplies and materials
Total supplies inventory
Total
4. Sales of Products
Our products consist of both gold flotation concentrates which we sell to a single broker (H&H Metals), and an unrefined gold-silver product known as doré which we sell to a precious metal refinery (Cascade Refining). At June 30, 2024, metals that had been sold but not finally settled included 6,358 ounces of which 2,666 ounces were sold at a predetermined price with the remaining 3,692 exposed to future price changes. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable. Sales of products by metal type for the three and six-month periods ended June 30, 2024 and 2023 were as follows:
Gold
Silver
Less: Smelter and refining charges
Sales by significant product type for the three and six-month periods ended June 30, 2024, and 2023 were as follows:
Concentrate sales to H&H Metal
Dore sales to refinery
At June 30, 2024 our gold sales receivable balance related to contracts with H&H Metals and Cascade Refining of $1,516,514. At December 31, 2023 our gold sales receivable balance of $1,038,867, consisted only of amounts due from H&H Metals. There is no allowance for doubtful accounts.
5. Related Party Transactions
At June 30, 2024 and December 31, 2023, there were no notes payable to related parties. On May 10, 2023, the Company paid the remaining amount due to Ophir Holdings, a company owned by two officers and one former officer of the Company.
The Company leases office space from certain related parties on a month-to-month basis. $2,000 per month is paid to NP Depot LLC, a company owned by the Company’s president, John Swallow and approximately $1,700 is paid quarterly to Mine Systems Design, Inc. which is partially owned by the Company’s vice president, Grant Brackebusch. Payments under these short-term lease arrangements are included in general and administrative expenses on the Consolidated Statement of Operations and for the three and six-month periods ended June 30, 2024 and 2023 are as follows:
7,688
6. JV Arrangements
NJMJV Agreement
The Company owns 65% of the NJMJV and has significant influence in its operations. Thus, the JV is included in the consolidated financial statements along with presentation of the non-controlling interest. At June 30, 2024 and December 31, 2023, an account receivable existed with Crescent Silver, LLC (“Crescent”), the other JV participant, for $1,413 and $2,080, respectively, for shared operating costs as defined in the JV agreement.
On January 29, 2016, the Company purchased a 50% interest in Butte Highlands JV, LLC (“BHJV”) for a total consideration of $435,000. Highland Mining, LLC (“Highland”) is the other 50% owner and manager of the JV. Under the agreement, Highland will fund all future project exploration and mine development costs. The agreement stipulates that Highland is manager of BHJV and will manage BHJV until such time as all mine development costs, less $2 million are distributed to Highland out of the proceeds from future mine production. The Company has determined that because it does not currently have significant influence over the JV’s activities, it accounts for its investment on a cost basis.
7. Earnings per Share
Net income (loss) per share is computed by dividing the net amount excluding net income (loss) attributable to a non-controlling interest by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. Such common stock equivalents are included or excluded from the calculation of diluted net income (loss) per share for each period as follows:
Incremental shares included in diluted net income (loss) per share
Stock options
Stock purchase warrants
Potentially dilutive shares excluded from diluted net income per share as inclusion would have an antidilutive effect:
8. Property, Plant, and Equipment
Property, plant and equipment at June 30, 2024 and December 31, 2023 consisted of the following:
Mill
Land
Building
Equipment
Less accumulated depreciation
Total mill
Building and equipment
Buildings
Total building and equipment
Bear Creek
BOW
Gillig
Highwater
Salmon property
Total land
9. Mineral Properties
Mineral properties at June 30, 2024 and December 31, 2023 consisted of the following:
Golden Chest
Mineral Property
Infrastructure
Total Golden Chest
New Jersey
McKinley-Monarch
Butte Gulch
Potosi
Park Copper/Gold
Eastern Star
Less accumulated amortization
In February 2024 the Company purchased the surface rights and subsequently cancelled the NSR from the previous agreement with the seller for a 169-acre parcel known as Butte Gulch adjacent to the Golden Chest. The Company had already owned the mineral rights to this property. The purchase price was $1,001,000 of which $351,000 was paid in cash and the remaining $650,000 is payable to the seller (monthly interest only payments of $2,750 at 5% interest, for three years with a balloon payment of $650,000 at the end of the term).
For the three and six-month periods ended June 30, 2024 and 2023, interest expense was capitalized in association with the ramp access project at the Golden Chest Mine as follows.
23,797
10. Notes Payable
At June 30, 2024 and December 31, 2023, notes payable are as follows:
Building in Salmon, Idaho, 60-month note payable, 7.00% interest payable monthly through June 2027, monthly payments of $2,500 with a balloon payment of $260,886 in July 2027
Butte Gulch vacant mineral property, 5.00% interest payable monthly through January 2027, monthly interest only payments of $2,750 with a balloon payment of $650,000 in February 2027
Resemin Muki Bolter, 36-month note payable, 7.00% interest payable monthly through January 2025, monthly payments of $14,821, Paid off early
Paus 2 yd LHD, 60-month note payable, 4.78% interest rate payable through September 2024, monthly payments of $5,181
Paus 2 yd LHD, 60-month note payable, 3.45% interest rate payable through July 2024, monthly payments of $4,847
CarryAll transport, 36-month note payable, 4.5% interest rate payable monthly through February 2024, monthly payments of $303
CarryAll transport, 36-month note payable, 4.5% interest rate payable monthly through June 2024, monthly payments of $627
Two CarryAll transports, 36-month note payable, 6.3% interest rate payable monthly through May 2025, monthly payments of $1,515
CarryAll transport, 36-month note payable, 6.3% interest rate payable monthly through June 2025, monthly payments of $866
Two CarryAll transports, 48-month note payable, 5.9% interest rate payable monthly through June 2027, monthly payments of $1,174
CarryAll transport, 48-month note payable, 5.9% interest rate payable monthly through April 2028, monthly payments of $576
Sandvik LH203 LHD, 36-month note payable, 4.5% interest payable monthly through May 2024, monthly payments of $10,352
Sandvik LH202 LHD, 36-month note payable, 6.9% interest payable monthly through August 2025, monthly payments of $4,933
Doosan Compressor, 36-month note payable, 6.99% interest payable monthly through July 2024, monthly payments of $602
Komatsu WX04 LHD, 24-month note payable, 8.24% interest rate payable monthly through April 2026, monthly payments of $16,642
Caterpillar 306 excavator, 48-month note payable, 4.6% interest payable monthly through November 2024, monthly payments of $1,512
Caterpillar R1600 LHD, 48-month note payable, 4.5% interest rate payable through January 2025, monthly payments of $17,125, Paid off early
Caterpillar R1600 LHD bucket, 24-month note payable, 2.06% interest rate payable monthly through April 2026, monthly payments of $4,572
Caterpillar AD30 underground truck, 40-month note payable, 8.01% interest rate payable through October 2026, monthly payments of $29,656
Caterpillar 259D3 skid steer, 36-month note payable, 8.50% interest rate payable monthly through December 2026, monthly payments of $1,836
SBA Economic Injury Disaster (“EIDL”) Loan 30 year note payable, 3.75% interest payable monthly through December 2054, monthly payments of $731
2022 Dodge Ram, 75-month note payable, 5.99% interest rate payable monthly through June 2028, monthly payments of $1,152
2016 Dodge Ram, 75-month note payable, 5.99% interest rate payable monthly through June 2028, monthly payments of $1,190
2020 Ford Transit Van, 72-month note payable, 9.24% interest rate payable monthly through December 2028, monthly payments of $1,060
2024 Dodge Ram, 60-month note payable, 9.94% interest rate payable monthly through February 2029, monthly payments of $1,293
Total notes payable
Due within one year
Due after one year
All notes except the SBA EIDL loan are collateralized by the property or equipment purchased in connection with each note. Future principal payments of notes payable at June 30, 2024 are as follows:
12 months ended June 30,
2025
2026
2027
2028
2029
2030
Thereafter
11. Investment in Buckskin
The investment in Buckskin is being accounted for using the equity method and resulted in recognition of change of equity value on the investment of loss of $1,589 and income of $278 for the respective three and six-month periods ended June 30, 2024 and income of $1,007 and $1,357 for the respective three and six-month periods ended June 30, 2023. The Company makes an annual payment of $12,000 to Buckskin per a mineral lease covering 218 acres of patented mining claims. As of June 30, 2024, the Company holds 37% of Buckskin’s outstanding shares.
12. Stockholders’ Equity
Stock Issuance Activity
In the first six months of 2024 the Company issued common stock as follows:
·
Stock Purchase Warrants Outstanding
The activity in stock purchase warrants is as follows:
Number of
Warrants
Exercise Prices
Balance December 31, 2022 and 2023
$5.60-7.00
Exercised
These warrants expire as follows:
Shares
Exercise Price
Expiration Date
October 15, 2024
November 12, 2024
13. Stock Options
There were no stock options granted during the six-months ended June 30, 2024 and 2023.
Activity in the Company’s stock options is as follows:
Options
Weighted Average Exercise Prices
Balance December 31, 2022
Forfeited
Balance December 31, 2023
Outstanding and exercisable at June 30, 2024
In the three and six-month periods ending June 30, 2024, 197,438 and 214,154 options were exchanged for 86,481 and 92,386 shares in a cashless exercise by employees. The intrinsic value of these options was $854,761 and $919,990 for the three and six-month periods ending June 30, 2024. At June 30, 2024, outstanding stock options have a weighted average remaining term of approximately 0.68 years and have an intrinsic value of $1,005,415.
14. Fair Value Measurements
The Company accounts for its financial instruments under ASC 820 Fair Value Measurement. During the six months ended June 30, 2024, there were no reclassifications in financial assets or liabilities between Level 1, 2 or 3 categories.
The following is a listing of the Company’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of June 30, 2024:
Level 1
Level 2
Level 3
Assets
Short-term investments
The following is a listing of the Company’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of December 31, 2023:
15. Subsequent Events
Subsequent to June 30, 2024, 50,000 shares of common stock have been issued for net proceeds of $520,506. Additionally, subsequent to June 30, 2024, 25,073 options were exchanged for 12,767 shares in a cashless exercise by employees.
Forward-Looking Statements
Certain statements contained in this Form 10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk, are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our forward-looking statements include our current expectations and projections about future results, performance, results of litigation, prospects and opportunities, including reserves and other mineralization. We have tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “feel,” “plan,” “estimate,” “project,” “forecast” and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
These risks, uncertainties and other factors include, but are not limited to, those set forth under Part I, Item 1A.–Risk Factors in our 2023 Form 10-K and in Part II, Item 1.A.-Risk Factors in this Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Idaho Strategic or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
Idaho Strategic is a gold producer and critical minerals/rare earth element (“REE”) exploration company focused on a diversified asset base and cash flows from operations. Its portfolio of mineral properties are located in the historic producing silver and gold districts of the Coeur d’Alene Mining region of north Idaho and the Elk City region of north-central Idaho, as well as the historic REE-Thorium Belt located near the city of Salmon in central Idaho.
The Company’s plan of operation is to generate positive cash flow, increase its gold production and asset base over time while being mindful of corporate overhead. The Company’s management is focused on utilizing its in-house technical and operating skills to build a portfolio of producing mines and milling operations with a focus on gold production and exploration for REEs.
The Company’s gold properties include: the Golden Chest Mine (currently in production), and the New Jersey Mill (majority ownership interest), as well as the Eastern Star exploration property and other less advanced properties. The Company’s primary focus as it relates to its gold properties is to continue to grow production at the Golden Chest Mine and look to reinvest the cash flow into both the Golden Chest, the New Jersey Mill, and furthering its exploration efforts near the Golden Chest, as well as at its REE properties.
In addition to its gold properties, Idaho Strategic has three REE exploration properties in Idaho known as Lemhi Pass, Diamond Creek, and Mineral Hill. Following observation of industry dynamics and in early response to events impacting long-term domestic critical mineral supply and demand trends, the Company’s strategic expansion into REE’s also aids in diversifying its holdings. The Company believes the anticipated demand for these elements in the electrification of motorized vehicles, defense spending, and a renewed focus on the United States’ domestic critical minerals supply chain security may benefit domestic holders of such assets. The Company also believes it has a first-mover advantage with its addition of recognized REE land holdings in Idaho. To date, Idaho Strategic has conducted numerous exploration programs on its REE properties which include drilling, trenching, sampling, and mapping of certain areas within the Company’s 19,090-acre landholdings.
Idaho Strategic has been able to demonstrate and utilize its track record of operations and experience in mining, milling, and exploring at the Golden Chest to develop relationships with different state government agencies, universities, national labs, and other government and non-government entities to advance its REE exploration activities on multiple fronts. Idaho Strategic plans to continue to look for additional partnerships to find mutually beneficial solutions to advance the U.S.' domestic REE supply chain.
Critical Accounting Estimates
We have, besides our estimates of the amount of depreciation on our assets, two critical accounting estimates. The ounces of gold contained in our process and concentrate inventory is based on assays taken at the time the ore is processed and the ounces of gold contained in shipped concentrate which is based upon assays taken prior to shipment however subject to final assays at the refinery, these shipments are also subject to the fluctuation in gold prices between our shipment date and estimated and actual final settlement date. Also, the reclamation bond obligation on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations.
Our concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement. However, we can reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. It is unlikely a significant reversal of revenue for the concentrate receivable will occur upon final settlement of the lots. As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known. At June 30, 2024, metals that had been sold but not finally settled included 6,358 ounces of which 2,666 ounces were sold at a predetermined price with the remaining 3,692 exposed to future price changes. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable.
The asset retirement obligation and asset on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations. At June 30, 2024 we reviewed our December 31, 2023 estimate that the cost of the machine and man hours probable to be needed to put our properties in the condition required by our permits once we cease operations. The June 30, 2024 estimated costs would be $104,000 for the Golden Chest Mine property and $224,000 for the New Jersey Mine and Mill. For purposes of the estimate, we evaluated the expected life in years and costs that, initially, are comparable to rates that we would incur at the present. An expected present value technique is used to estimate the fair value of the liability. This includes inflating the estimated costs in today’s dollars using a reasonable inflation rate up to the date of expected retirement and discounting the inflated costs using a credit-adjusted risk-free rate. Upon initial recognition of the liability, the carrying amount of the related long-lived asset is increased by the same amount. The liability is accreted over time through periodic charges to earnings. In addition, the asset retirement cost is amortized over the life of the related asset. We are adding to the liability each year, and amortizing the asset over the estimated life, which decreases our net income in total each year. Changes resulting from revisions to the timing or amount of the original estimate of undiscounted cash flows are recognized as either an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset. Upward revisions of the amount of undiscounted estimated cash flows are discounted using the current credit-adjusted risk-free rate. Downward revisions in the amount of undiscounted estimated cash flows are discounted using the credit-adjusted risk-free rate that existed when the original liability was recognized. The Company reviews, on an annual basis, unless otherwise deemed necessary, the asset retirement obligations. Separately, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and able to be reasonably estimated.
Highlights during the second quarter of 2024 include:
REE Exploration
Golden Chest/Operations
An exploration program consisting of both underground and surface core drilling was started in the second quarter. Underground drilling was focused on exploring the Klondike area and the projected northerly strike of the H-vein. Surface drilling was started in Butte Gulch with plans to move to the northern area of the Golden Chest in the third quarter.
Results of Operations
Our financial performance during the quarter is summarized below:
16
Cash Costs and All In Sustaining Costs (“AISC”) Reconciliation to Generally Accepted Accounting Principles (“GAAP”)
Reconciliation of cost of sales and other direct production costs and depreciation, depletion, and amortization (GAAP) to cash cost per ounce and AISC per ounce (non-GAAP).
The table below presents reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion, and amortization to the non-GAAP measures of cash cost per ounce and all in sustaining costs per ounce for the Company’s gold production in the three and six-month periods ended June 30, 2024, and 2023.
Cash cost per ounce is an important operating measure that we utilize to measure operating performance. AISC per ounce is an important measure that we utilize to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital. Current GAAP measures used in the mining industry, such as cost of goods sold do not capture all of the expenditures incurred to discover, develop, and sustain gold production.
Cost of sales and other direct production costs and depreciation and amortization
Change in concentrate inventory
Cash Cost
Less REE exploration costs
Sustaining capital
Less stock-based compensation and other non-cash items
AISC
Divided by ounces produced
Cash cost per ounce
AISC per ounce
Financial Condition and Liquidity
For the Six-Months Ended June 30,
Net cash provided (used) by:
Operating activities
Investing activities
Financing activities
The Company is currently producing profitably from underground at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its profitable production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for small reporting companies.
ITEM 4: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At June 30, 2024, our Vice President who also serves as our Chief Accounting Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified by the Securities & Exchange Commission rules and forms.
Based upon that evaluation, it was concluded that our disclosure controls were effective as of June 30, 2024, to ensure timely reporting with the Securities and Exchange Commission. Specifically, the Company’s corporate governance and disclosure controls and procedures provided reasonable assurance that required reports were timely and accurately reported in our periodic reports filed with the Securities and Exchange Commission.
Changes in internal control over financial reporting
There was no material change in internal control over financial reporting in the quarter ended June 30, 2024.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Neither the constituent instruments defining the rights of the Company’s securities filers nor the rights evidenced by the Company’s outstanding common stock have been modified, limited or qualified.
During the second quarter of 2024, 29,763 shares of common stock were issued in exchange for outstanding warrants for net proceeds of $166,673. 21,429 shares of common stock were issued in exchange for outstanding stock options for net proceeds of $120,002 and 86,481 shares of common stock were issued for outstanding stock options via cashless exercise.
The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D Rule 506(b). The common shares are restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has no outstanding senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this report.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibits
3.1
Amended and Restated Articles of Incorporation, incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on October 27, 2021
3.2
Amended and Restated By-laws of Idaho Strategic Resources, Inc., incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on October 27, 2021
10.1
Purchase and Sale Agreement dated January 16th, 2024, Promissory Note, Mortgage, and Termination of Royalty Deed and Warranty Deed, dated February 7th, 2024, by and among the Registrant and Bell Run Properties, L.L.C., filed as Exhibit 10.1 to the Company’s Form 10-Q as filed with the Securities and Exchange Commission on May 6, 2024, and incorporated herein by reference.
31.1*
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
32.1*
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
95*
Mine safety information listed in Section 1503 of the Dodd-Frank Act.
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
By:
/s/ Grant Brackebusch
Grant Brackebusch,
its: Vice President and Chief Financial Officer
Date: July 30, 2024