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.
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 processes 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 such as 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, 2012 and 2011, we spent $1,046 and $10,850, respectively, on exploration activities.
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 6 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 2013. 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.
ITEM 2.
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 funded the expansion of the mill to process 350 tonnes per day and received a 35% 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 retains a 65% 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.
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 completed in 2012. The mill expansion cost approximately $3.2 million which was funded completely by UMS. The expansion project included 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. During 2012, a total of 8,470 dry tonnes of silver ore from the Crescent mine were processed at the New Jersey mill.
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 2012.
As of December 31, 2012, the Company had a net capital cost of $4,344,711 associated with the mineral processing plant and a capitalized development plus investment cost of $604,792 associated with the mine.
Exploration Plans
At the Coleman underground mine, future plans are to conduct further drilling to locate higher grade reserves.
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 $47.86/gram ($1,488.34/troy ounce). Proven and probable reserves are combined as they cannot be readily separated.
GOLDEN CHEST
Location
The Golden Chest mine is an underground mine located in Reeder Gulch about 2.4 kilometers east of Murray, Idaho along Forest Highway 9. The property consists of 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. As of December 31, 2012, GC had paid $1,125,000, and has agreed to pay the sellers $2,375,000over the next four 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 were completed from the surface during this period. These holes were targeted to extend the Idaho vein below the No. 3 and were successful. In 2011, the GC 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. In 2012, a total of 7,000 meters of drilling amongst 42 holes was completed at the Golden Chest. Additionally, an exploration drift was completed on the Popcorn vein revealing a strike length of 40 meters of vein that averaged 23 gpt gold across a true thickness of 0.5 meter. The exploration work completed in 2012 resulted in the second Canadian National Instrument 43-101 resource report for the property.
Exploration and Development Plans
The Company is considering alternative plans for development of the Golden Chest mine, but currently the mine is on a care and maintenance basis, but with a short term plan to process some stockpiled low grade ore and possibly some high grade ore from certain areas in the mine.
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
Currently, there are no mineral reserves, as recognized by the SEC, at the Golden Chest.
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 2012, the Company terminated an exploration agreement and option to purchase mining claims for the Niagara project with Desert Copper USA Corporation (DUSA), a wholly-owned subsidiary of Desert Copper Corporation, a Canadian corporation. The Company retains a 100% interest in the Niagara project subject to a mining lease with Revett Metals Associates (RMA). The mining lease requires that the NJMC pay a 3% Net Smelter Royalty of 3% on any production from the property, and calls for an annual minimum advance royalty payment of $18,000.
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. The historic 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 2012.
Exploration and Development Plans
The Company is currently seeking joint venture partners to fund the exploration and development of the Niagara deposit.
As of December 31, 2012, the Company had an investment cost of $47,000 associated with the Niagara project.
Geology
The Niagara deposit occurs in a section of mineralized upper Revett Formation near the axis of a north-south striking syncline. The western limb of the syncline has been truncated by the north-south striking Murray Peak fault, a steep, west dipping reverse fault. Other faults offset the mineralized zone slightly. In the Niagara deposit, the mineralization occurs in the upper Revett Formation, which here is a light gray, massive quartzite with thin siltite interbeds. The mineralized horizon crops out along the East Fork Eagle Creek and is approximately 30 meters below the contact with the overlying St. Regis Formation. Copper minerals include bornite, chalcopyrite, chalcocite, native copper, and some copper oxide minerals. Silver minerals include stomeyerite and jalpaite. Pyrite and galena also occur in trace amounts
TOBOGGAN PROJECT
Location
The Toboggan project is an exploration property without known ore reserves. The project consists of 106 unpatented lode claims covering an area of approximately 2,100 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, Little Baldy, 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 106 unpatented mining claims wholly owned by the Company of which 39 claims related to the Little Baldy prospect are leased to Hecla Silver Valley. The lease has a 20-year term and calls for annual payments to NJMC of $24,000 then escalating to $36,000 after three years and $48,000 after six years. A work commitment of $200,000 by the third year is required of Hecla with increasing work commitments thereafter. Should gold production be realized from the leased claims, a 2% net smelter return royalty is due NJMC.
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.
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. No exploration work was completed on the project in 2012.
Exploration and Development Plans
Joint venture partners will be sought to help 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.
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 10 wholly owned unpatented lode claims covering an area of 200 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 drill 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 2012.
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 August of 2012, the Company terminated an exploration agreement and option to purchase mining claims with Desert Copper USA Corporation (DUSA) which covered the Copper Camp project. The Copper Camp project is held by the Company through an exploration agreement (with an option to convert to a mining agreement) with Revett Metals Associates. The exploration agreement calls for annual payments of $3,000 plus 30,000 shares of NJMC. In late 2012, the Company extended the exploration agreement for another three years.
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.. The timing of drilling will be dependent on the Company’s ability to secure adequate funding. No work was completed on the Copper Camp prospect 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, 2012, the Company had an investment cost of $25,500 associated with this property.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
The Company was recently dismissed as a plaintiff in a lawsuit regarding a public right of way for the East Fork of Eagle Creek Road near Murray, Idaho. A ruling was made against the remaining plaintiff Shoshone County which the County plans to appeal.
ITEM 4.
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, 2012, the Company had four violations of mandatory health or safety standards that could significantly and substantially (S&S citations) contribute to the cause and affect a mine safety or health hazard under section 104 of the Federal Mine Safety and Health Act of 1977. Three of the citations were assessed a penalty of $100 with the assessment pending on the fourth. All four citations were cured through corrective action by the Company. 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.
PART II
ITEM 5.
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, 2012 High Bid Low Bid
First Quarter $0.24 $0.16
Second Quarter $0.18 $0.10
Third Quarter $0.16 $0.10
Fourth Quarter $0.14 $0.06
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
Shareholders
As of March 10, 2013 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 annually. In 2011 and 2012 these shares were valued at $5,000 and $1,625, respectively. 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
Equity compensation
plans not approved by
security holders
Total
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, 2012, the Company issued 210,000 shares of restricted common stock for director’s fees, and mining lease payments. A value of $15,750 (for an average value of $0.075 per share) was assigned to these fees. 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.
ITEM 6.
SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7
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 2012 decreased substantially compared to 2011. Exploration activity decreased because it was necessary to conserve cash. During 2012, about 7,000 meters of drilling was completed. The Company conducted core drilling operations at the Golden Chest for the venture with Marathon Gold. In the first quarter of 2013, a updated 43-101 resource estimate was completed by an independent engineering firm. The additional drilling data was incorporated into the new resource calculations,
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. During the third quarter of 2012 some of the unpatented claims that form part of the Toboggan Project were leased to a subsidiary of Hecla Mining Co.
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. [now Daycon Minerals Corp.] relating to the Niagara and Copper Camp properties. Daycon terminated the Option Agreement in August 2012 unencumbering the properties.
At the Coleman underground mine, future plans are to conduct further drilling to locate higher grade reserves.
The New Jersey mineral processing plant was expanded in order to process ore from the nearby Crescent silver mine. A definitive venture agreement was signed with United Silver Corp (USC), owner of the Crescent mine, in January 2011. The plant was expanded from a processing rate of 4 tonnes/hr to 15 tonnes/hr. USC paid the expansion cost which was $3.2 million. After completion of the expansion, the Company now owns about 65% of the venture and USC owns the remainder. The Company is the operator of the venture. USC has a minimum quota of ore of 7,000 tonnes per month and the Company has 3,000 tonnes per month. Each party will pay its processing costs and the Company will charge a management fee of $2.50/tonne. The plant was commissioned during 2012, but ore production from the Crescent mine was curtailed by USC for economic reasons so the plant became idle in September 2012 and remained idle until yearend. Currently, the plant is operating on a part time basis to clean up stockpile ore from the Crescent mine. Plans are to process some stockpiled low grade ore from the Golden Chest mine and possibly some high grade ore from certain areas in the Golden Chest mine.
Changes in Financial Condition
The Company maintains an adequate cash balance by increasing or decreasing its exploration expenditures as limited by availability of cash from operations or from financing activities. The cash balance at the end of 2012 was $9,950 compared to $612,989 at the end of 2011.
The cash balance decreased during the year, from $612,989 to $9,950, primarily due to less income from drilling services, management fees and engineering services. Also joint funding of the Golden Chest joint venture was required in 2012.
Results of Operations
Income Earned during the development stage (revenue) for 2012 was $904,299 as compared to $1,453,176 for 2011. Revenue was lower in 2012 due to less contracting services. The net loss attributable to the Company was $722,892 for 2012 compared to a loss of $473,085 for 2011. The net loss for 2012 was higher than 2011 because of lower revenue.
There was no gold production in 2012 nor in 2011. There are plans for limited gold production in 2013 because of the processing of stockpiled low grade ore at the Golden Chest and some mining planned for an exposed high grade vein called the Popcorn vein.
Plans at the Golden Chest mine include only minimal mining activity in 2013 in order to help defray holding costs and property payments.
The New Jersey mineral processing plant will be operated on a part time basis in 2013 to process stockpiles from both the Crescent mine and Golden Chest mine. Mill operations may expand if more development is done at the Crescent mine by USC and if high grade underground mining at the Golden Chest is expanded.
The amount of money to be spent on exploration at the Company’s mines and prospects depends primarily on raising capital from existing or new joint venture partners, particularly at the Golden Chest. If new joint venture partners are engaged at the Toboggan Project, exploration activities would increase.
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 a management fee for processing ore for United Silver Corp.
Changes in Joint Venture Receivables
Joint Venture receivables decreased in 2012 compared to 2011 as a result of decreased activity with the Company's joint ventures.
Changes in Other Current Assets
Other current assets decreased in 2012 compared to 2011 because of an decrease in prepaid claim fees and in 2011 an account receivable existed with Desert Copper.
Deposits
Deposits decreased in 2012 compared to 2011 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 2012 compared to 2011 because of increased investment in the New Jersey Mill Joint Venture by our joint venture partner.
Accounts Payable
Accounts payable decreased in 2012 compared to 2011 because minimal activity was occuring at the end of 2012.
Accrued Payroll and Related Payroll Expenses
Accrued payroll and related payroll expenses decreased in 2012 compared to 2011 because of decreased activity related to the GC LLC and the Golden Chest Mine.
Account Payable Related Party
Accounts payable related party increased in 2012 compared to 2011 because of a new note that was extended to the Company by MSD to purchase some property.
Account Payable Marathon Gold
Account payable Marathon Gold increased because Marathon extended the Company credit in December 2012.
Noncontrolling interest in New Jersey Mill Joint Venture
Noncontrolling interest in New Jersey Mill Joint Venture increased in 2012 compared to 2011 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 decreased for 2012 compared to 2011 because of decreased drilling activity at the Golden Chest
Joint Venture Management Fees
Joint venture management fee income decreased for 2012 compared to 2011 because of decreased activity at the Golden Chest.
Engineering Services Income
Engineering services income decreased in 2012 compared to 2011 because the Mill expansion project was completed midyear.
Drilling and Exploration Contract Expense
Drilling and exploration contract expense has decreased for 2012 compared to 2011 because of decreased drilling activity at the Golden Chest
Changes in Management Costs
Management expenses decreased for 2012 compared to 2011 because of decreased activity at the end of the year.
Changes in Exploration Costs
Exploration expenses decreased for 2012 compared to 2011 because of decreased activity
Gain on Sale of Mineral Property
Gain on sale of mineral property decreased in 2012 compared to 2011 because no mineral property was sold in 2012.
Depreciation
Depreciation increased in 2012 compared to 2011 most notably because of the new core drill which was placed in service in June 2011.
General and Administrative
General and administrative expenses have decreased in 2012 compared to 2011 because of decreased activity.
Interest
Interest expense has increased in 2012 compared to 2011 because 2011's interest expense was capitalized as part of the mill expansion.
Equity in Loss of Golden Chest LLC
Equity in loss of Golden Chest LLC increased in 2012 compared to 2011 because the Company began funding 50 percent of the Golden Chest LLC's activities.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8.
ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS
New Jersey Mining Company
(A Development Stage Company)
New Jersey Mining Company
(A Development Stage Company)
Consolidated Balance Sheets
December 31, 2012 and 2011
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Years Ended December 31, 2012 and 2011,
And from Inception (July 18, 1996) through December 31,
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 2012, and 2011 (audited), and for the Period
From Inception (July 18, 1996) Through December 31,
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity, continued:
For the Years Ended December 31, 2012, and 2011 (audited), and for the Period
From Inception (July 18, 1996) Through December 31,
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity, continued:
For the Years Ended December 31, 2012, and 2011 (audited), and for the Period
From Inception (July 18, 1996) Through December 31,
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity, continued:
For the Years Ended December 31, 2012, and 2011 (audited), and for the Period
From Inception (July 18, 1996) Through December 31,
The accompanying notes are an integral part of these consolidated financial statements.
New Jersey Mining Company
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2012 and 2011,
And from Inception (July 18, 1996) through December 31,
The accompanying notes are an integral part of these consolidated financial statements.
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 consolidated 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.
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, 2012 and December 31, 2011, the Company’s percentage ownership and method of accounting for each joint venture is as follows:
Noncontrolling Interests in Consolidated Financial Statements
The Company follows the changes issued by the ASC which establish accounting and reporting standards pertaining to (i) ownership interests in subsidiaries held by parties other than the parent, (ii) the amount of net income attributable to the parent and to the noncontrolling interest, (iii) changes in a parent’s ownership interest, and (iv) the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. For presentation and disclosure purposes, the guidance requires noncontrolling interests to be classified as a separate component of equity.
Principles of Consolidation
The consolidated financial statements include the accounts of the company and its partially-owned New Jersey 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. 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
New Jersey Mining Company
(A Development Stage Company)
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies, continued:
Revenue Recognition, continued:
properties are not a part of normal operations. 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. Income received as the operator of the Company's joint ventures is recognized in the months during which those operations occur. 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.
Inventory
Dore' and process inventories are stated at the lower of average cost incurred or net realizable value.
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
Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC prioritizes the inputs into three levels that may be used to measure fair value:
Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The table below sets forth our financial assets that were accounted for at fair value at December 31, 2012 and 2011, and their respective hierarchy level. We had no other assets or liabilities accounted for at fair value at December 31, 2012 or 2011.
Balance at
December 31,
Balance at
December 31,
Hierarchy
Level
Investments in marketable
equity securities
$20,261
$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, 2012 and 2011, the effect of the Company’s potential issuance of shares from the exercise of the remaining 5,961,550 and 6,099,550 warrants, respectively, would have been anti-dilutive. Accordingly, only basic net loss per share has been presented. Outstanding warrants are discussed in detail in Note 10 of the financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2012 financial statement presentation. 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.
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. There is currently no balance being carried for any reclamation bonds
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.
3. Going Concern
As shown in the accompanying financial statements, the Company has minimal revenue and incurred an accumulated deficit of $8,509,851 through December 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management intends to seek additional capital from new equity securities offerings and joint venture agreements that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Should the Company be unable to raise capital through future private placements and/or joint venture agreements or achieve significant revenues from its operations, its business, and, as a result, its financial position, results of operations and cash flow will likely be materially adversely impacted. We expect to receive cash flow from the gold sales and by providing drilling services at the Golden Chest LLC if additional funding can be arranged.
New Jersey Mining Company
(A Development Stage Company)
Notes to Consolidated Financial Statements
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 2012 and 2011, consisted of the following:
During the years ended December 31, 2012 and 2011 $14,932 and $21,792 respectively in interest was capitalized in conjunction with the mill expansion project. See note 8 For years ended December 31, 2012 and 2011, milling and other equipment include assets under capital lease amounting to $91,625 and $97,250, respectively. The leases are being amortized over the terms of the respective lease. Accumulated amortization at December 31, 2012 and 2011 was $33,249 and $8,721, respectively. At December 31, 2012, the estimated future minimum lease payments under capital leases were as follows:
5. Notes Payable
Maturities of debt outstanding at December 31, 2012 are as follows:
148,834
56,713
4,565
1,978
2,207
Thereafter 101,376
$315,673
New Jersey Mining Company
(A Development Stage Company)
Notes to Consolidated Financial Statements
6. Mineral Properties
Mineral properties and deferred development costs are as follows:
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, 2012 and 2011 deferred development includes asset retirement costs of $6,341.
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. Early in the fourth quarter of 2011, an option agreement was signed with Desert Copper USA Corp. [now Daycon Minerals Corp.] relating to the Niagara and Copper Camp properties. Daycon terminated the Option Agreement in August 2012 unencumbering the properties..
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.
New Jersey Mining Company
(A Development Stage Company)
Notes to Consolidated Financial Statements
7. 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, 2012 and 2011 of the Company’s asset retirement obligations. The estimated reclamation costs were discounted using a credit adjusted, risk-free interest rate of 5.6% .
8. 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 contributed to GC all of 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 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. Funding for the exploration and drilling activities in 2011 was paid by Marathon's buy-in funds. Funding in 2012 and future funding for the venture is being paid by each partner at a percentage equal to their ownership which in 2012 was 50 percent per partner. During the year ended December 31, 2012 the Company began accounting for the GC Joint Venture using the equity method because significant influence was obtained during the year. In the prior year accounting for the Joint venture was done using the cost method. In applying the Equity method the Company recognized their share of the losses in the joint venture.. According to ASC 323-10-15-12 the Company should retroactively adjusted the investment and results of operations for current and prior periods presented as if the investment had been accounted for under the equity method. These changes were made to prior periods and resulted in recognizing a loss equal to the amount of the investment that the Company recognized in 2011, $553,205. This resulted in an increase in the retained earnings loss for the Company and a decrease in investment in GC LLC of $553,205. The Retroactive recognition resulted in the following changes to the Company's financial statements in 2011:
Accounts receivable are a part of normal operations which include operating costs, payroll, drilling costs, and drilling income. As of December 31, 2012, an account receivable existed with MUSA and GC for $5,608 and an account payable with MUSA existed for $62,500. In addition, income and expense items for the twelve month period ended December 31, 2012 related to MUSA and GC were as follows:
New Jersey Mill Venture Agreement
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 35 percent interest in the venture, UMS provided $3.2 million funding to expand the processing plant to 15 tonnes/hr. The Company is the operator of the venture and charges 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.
Engineering services income includes engineering services provided to UMS. Engineering services to UMS in the twelve month period ending December 31, 2012 and 2011 were $68,700 and $131,800 respectively and are included in consolidated revenues after the effects of consolidation of noncontrolling interest. As of December 31, 2012 and 2011, an account receivable existed with the Mill Joint Venture and UMS for $6,916 and $33,924 respectively.
New Jersey Mining Company
(A Development Stage Company)
Notes to Consolidated Financial Statements
9. Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended December 31, 2012 and 2011.
At December 31, 2012 and 2011, 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 been established at December 31, 2012 and December 31, 2011. The significant components of the deferred tax asset at December 31, 2012 and 2011 were as follows:
At December 31, 2012 and 2011 the Company had net operating loss carry forwards of approximately $7,870,000 and $7,583,000 respectively for both federal and the state of Idaho, which expire in the years 2017 through 2032.
The income tax benefit shown in the financial statements for the years ended December 31, 2012 and 2011 differs from the statutory rate as follows:
We have determined that we are open to examination of our income tax filings in the United States and state jurisdictions for the 2010 through 2012 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 2010 through 2012 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.
10. Equity
The Company has authorized 200,000,000 shares of no par common stock at December 31, 2012 and 2011. In addition, the Company has authorized 1,000,000 shares of no par preferred stock, none of which had been issued at December 31, 2021 or 2011.
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, 2012, are as follows:
New Jersey Mining Company
(A Development Stage Company)
Notes to Consolidated Financial Statements
10. Equity, continued:
Common Stock issued for Management and Directors Fees
During 2012 and 2011 the Company issued 150,000 shares each year of its restricted common stock for management and directors fees. The company recorded expense of $9,749 and $30,000, respectively, based upon the value of the shares issued.
Common Stock issued For Cash
During 2011 the Company issued 22,800 shares of its restricted common stock for $5,000 in cash. No shares were sold in 2012
Common Stock Issued for Property, Plant and Equipment
During 2012 the Company issued 60,000 shares of its restricted common stock for mineral properties. The Company recorded $6,000 based upon the fair value of the shares issued. No shares were issued for this purpose in 2011.
Common Stock Issued for Services and Exploration
During 2011 the Company issued 85,200 shares of its restricted common stock for exploration, and other services rendered the Company. The Company recorded $17,040 based upon fair value of the services rendered and the shares issued. No shares were issued for this purpose in 2012.
Common Stock Issued in Exchange for Accounts Payable
During 2011 the Company issued 30,000 shares of its restricted common stock in satisfaction of accounts payable. The Company recorded $6,000 based upon the fair value of the accounts payable and the shares issued. No shares were issued for this purpose in 2012.
11. Related Party Transactions
Fred Brackebusch is President, Treasurer, and a Director of the Company. Grant Brackebusch, Fred Brackebusch's son, is the Vice-President and a Director of the Company. Grant Brackebusch's wife, Tina Brackebusch, is the Company's Corporate Secretary. Fred Brackebusch and Grant Brackebusch own 89.6% and 10.4%, respectively of Mine Systems Design, Inc. ("MSD"), a firm that has various related party transactions with the Company.
The Company had the following transactions with related parties:
During 2012 and 2011, the Company issued 25,000 shares of its restricted stock valued at $1,625 and $5,000 respectively, to Tina Brackebusch for services as the Corporate Secretary.
During 2012 and 2011, 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 $8,125 and $25,000 respectively, based upon the fair value of the shares issued and services rendered. Fred and Grant Brackebusch each received 25,000 shares in 2012 and 2011, valued at $0.065 and $0.20 per share for $1,625 and $5,000 as Directors of the Company.
During 2012 and 2011, the Company paid $6,000 to MSD for office rent, of which $1,500 is recorded as an related account payable as of December 31, 2013
In August 2012 the Company was extended a 48 month note payable by MSD at 12% interest for $223,806 to purchase property which had a total purchase price of $230,449. As of December 31, 2013 $221,339 of this note remained with $36,399 payable within 1 year and the remaining $184,940 due after one year as follows: 2014-$62,532, 2015-70,463, 2016-$51,945. Monthly payments are $2,846 through May 2013 and $6,780 for the remaining 39 payments.
12. 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 2012 or 2011.
At December 31, 2012, the Company held 967,180 of these shares with a market value of $0.021 per share, for a total market value of $20,261. At December 31, 2012, the excess market value of $16,392 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.
ITEM 9
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At December 31, 2012, 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, 2012, 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, 2012. 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, 2012, 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, 2012 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, 2012.
ITEM 9B
ITEM 9B
OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE;
Name & Address Age Position Date First Elected
Fred W. Brackebusch
P.O. Box 1019
Kellogg, Idaho
President, Director & Treasurer
7/18/1996
Grant A. Brackebusch
P.O. Box 131
Silverton, ID
Vice President & Director
7/18/1996
Ivan R. Linscott
7150 Burke Road
Wallace, ID 83873
Director
9/21/2004
William C. Rust (1)
P.O. Box 648
Wallace, ID 83873
Director
9/21/2004
M. Kathleen Sims (1)
2745 Seltice Way
Coeur d’Alene, ID 83814
Director
9/25/2003
Tina C. Brackebusch
P.O. Box 131
Silverton, ID
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.
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, 2012, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with:
Code of Ethics
The Company adopted a Code of Ethics at a Board of Directors meeting on December 9, 2003, that applies to the Company's executive officers. It can be found at the Company’s website www.newjerseymining.com. The Company also adopted a Code of Ethics for all employees at the Board of Directors meeting on February 18, 2008.
Board Committee
At a Board of Directors meeting on September 21, 2004, the Directors approved an audit committee comprised of William C. Rust and M. Kathleen Sims. Each member of the audit committee is deemed to be an independent director as that term is defined in Rule 4200(a)(14) of the NASD’s listing standards. M. Kathleen Sims is the Audit Committee Financial Expert as defined by Section 407 of the Sarbanes-Oxley Act. The Board adopted an audit committee pre-approval policy. The audit committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.
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.
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
(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
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, 2012.
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
(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 2012 and 2011 these shares were valued at $1,625 and $5,000 respectively. 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.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of March 1, 2013 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
Kellogg, Idaho 83837 7,900,077 indirect (a)
1,857,861 direct
21.44%
Common
Constance Meisel
105 East Atlantic Avenue
Delray Beach, FL 33444
3,158,607
6.94%
Common
William Ritger
750 Ocean Royale Way
Juno Beach, FL 33408 3,157,425
6.94%
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)
1,857,861 direct
21.44%
Common
Grant A. Brackebusch
89 Appleberg Road
Kellogg, Idaho 83837 916,973 indirect (b)
775,920 direct
3.72%
Common
Ivan R. Linscott, Director
7150 Burke Road
Wallace, Idaho 83873
210,500
0.46%
Common
William C. Rust, Director
P.O. Box 648
Wallace, Idaho 83873
170,000
0.37%
Common
M. Kathleen Sims, Director
2745 Seltice Way
Coeur d’Alene, Idaho 83814
183,000
0.40%
Common
All Directors and Executive
Officers as a group (5 individuals) 12,014,331
26.40%
(1) Based upon 45,515,862 outstanding shares of common stock at March 1, 2013.
(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.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
During each of the years ended December 31, 2012 and 2011, 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 $8,125 in 2012 and $25,000 in 2011 for directors and $1,625 in 2012 and $5,000 in 2011, 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 2012 and 2011 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.
ITEM 14.
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, 2012 and December 31, 2011 and the review for the financial statements included in the Company’s quarterly reports on Form 10-Q during those fiscal years, were $41,118 and $32,114 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 year ended December 31, 2011 for professional services rendered by the Company’s principal accountant for tax compliance, tax advice and tax planning. $2,508 was paid to the company's principal account for tax compliance, tax advice, and tax planning services in 2012
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.
ITEM 15.
EXHIBITS
*as filed herewith
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
New Jersey Mining Company
Date: March 29, 2013 By /s/ FRED W. BRACKEBUSCH
Fred W. Brackebusch, President, Treasurer & Director
Date: March 29, 2013 By /s/ GRANT A. BRACKEBUSCH
Grant A. Brackebusch, Vice President & Director
Date: March 29, 2013 By /s/ IVAN R. LINSCOTT
Ivan R. Linscott, Director
Date: March 29, 2013 By /s/ WILLIAM C. RUST
William C. Rust, Director
Date: March 29, 2013 By /s/ M. KATHLEEN SIMS
M. Kathleen Sims, Director