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| NJMC.OB > SEC Filings for NJMC.OB > Form 10-K/A on 7-Apr-2009 | All Recent SEC Filings |
7-Apr-2009
Annual Report
Plan of Operation
The Company is executing its strategy to conduct exploration for gold, silver
and base metal deposits in the greater Coeur d'Alene Mining District of northern
Idaho while concurrently conducting mining and mineral processing operations on
higher grade ore reserves it has located on its exploration properties. The
financial strategy is to generate cash from these operations to pay for
corporate expenses and to provide additional funds for exploration, thus
reducing the need to raise funds through financing activities including sale of
common stock. The strategy includes finding and developing ore reserves in order
to increase production of gold, silver, and base metals. In addition, the sale
or joint venture of mineral properties is used as a source of funds and to
reduce exploration costs.
The 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 5 holes in 2008 which expanded the resource. Results of the 2008 drilling also indicate that gold would be a significant byproduct. The Company will continue in-fill drilling on the known resource and is planning to drill to intercept a deeper stratabound target in the Revett formation.
At the Golden Chest mine, during 2008, a ramp was being driven to access a block of reserves discovered by drilling from the surface. Near the end of the third quarter the ramp intersected the #3 level of the old workings thus increasing access to potential drilling targets and providing quicker potential for secondary and haulage access. The ramp development work was suspended near yearend in order to conserve cash, and small scale production from remnants was re-started. Permits are in place and development of infrastructure has been completed in order to be able to begin production of silver-gold ore at the Silver Strand mine in May 2009. At the Coleman underground mine, a drift was completed to the vicinity of a drill intercept which indicates the presence of higher grade gold-silver mineralization. Further work at the Coleman will not be done until drilling is conducted to locate the higher grade vein. The Giant Ledge is a new prospect which was staked in 2008. Geophysical and geological studies were conducted during the year. Gold, lead and copper mineralization is related to an intrusive stock.
The Company continued to conduct core drilling operations in 2008 with its own core drilling machine. Exploration drillholes were drilled near the Coleman mine, at the Niagara deposit, and at the Golden Chest mine. Also one drillhole was completed at the Toboggan Project. During the year, 12 drillholes were completed for a total drilling length of 1,916 meters.
The New Jersey mineral processing plant processed 1,400 tonnes during the year as it was operated only part of the available time. Improvements were made during the year by building a new ore feeder to facilitate cold weather operation, installing a new concentrate filter, and making improvements in the CLP. Near yearend the plant resumed operations on a regular schedule of 4 days per week, 10 hours per day, processing ore from 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 the year was $321,254,
and Figure 1 shows the corresponding balances for previous accounting periods.
The cash balance declined during the year from a highpoint of $1,384,884 in the second quarter to the lower balance at the end of 2008 due to exploration and development expenditures, lack of sales and financing activities. Investment in a marketable equity security held by the Company decreased from $391,872 to $16,328 during the year due to decline in the stock price of that security. Figure 1 shows that the yearend cash balance has been very similar for 2006 through 2008.
Results of Operations
Income Earned during the Development Stage (Revenue) for the year 2008 was
$50,559 as compared to $99,954 for 2007. Figure 2 shows losses in each quarter,
which total $1,423,829 in 2008 compared to an almost identical loss in 2007 of
$1,453,268.
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Gold production was 128 ounces in 2008 as compared to 108 ounces for 2007. Gold production in 2009 is expected to increase due to plans to mine more tonnage in 2009.
Ore mining operations at the Golden Chest mine are expected to be approximately 400 tonnes/month in the first half of 2009, probably declining after that. If financing can be obtained, ramp access will be extended to the Idaho vein reserves. Once the Idaho vein ramp development is completed there will be enough reserves for many years of mining at the rate of 4,000 tonnes/year.
Ore production is scheduled at the Silver Strand mine in the second quarter of 2009. Production could commence
No large capital expenditures are planned at the New Jersey mineral processing plant.
The amount of money to be spent on exploration at the Company's mines and prospects will depend upon the amount of gross profit generated by operations and the amount of money raised by financing activities. Basically, management expects to be able to continue the present operating scenario with its three active mines and mineral processing plant indefinitely, but expanded exploration or production activities depend upon the results of financing activities.
The Company has prepared a detailed POO assuming no funds are produced by financing efforts. This detailed plan covers the first four months of 2009. Actions taken under the plan include cutting management cash salaries by 50%, reducing wages and laying off three employees, and deferring expenditures that are not absolutely necessary to the plan. Production from remnant pillars and the newly-found Clagett vein at the Golden Chest is feeding the mineral processing plant at the rate of 400 tonnes/month. It is hoped to maintain a cash balance of $150,000 to $200,000. If no financing is achieved by April 30, 2009, the plan will be reviewed and a decision made to continue the plan or to enter into a "hibernation" plan by laying off most employees and cutting management costs further. Plans are being made for the Company to drill for Newmont at the Toboggan Project on a contract basis during the summer season, and a Service Contract has been signed. Newmont currently pays for all exploration activities on the Toboggan Project.
As shown in the accompanying financial statements, the Company has minimal revenue and incurred an accumulated deficit of $5,922,260 through December 31, 2008. 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 to Newmont on our joint venture (see note 8. Mining Venture Agreements-Newmont Venture Agreement).
For 2009, the Company has plans to reduce its discretionary exploration expenditures as well as its overhead expenses. With these reductions, the Company believes it will only need an estimated $500,000 to continue operations through the next twelve months.
Changes in Costs
Direct production costs, management costs, and exploration costs in 2008 tracked 2007 costs fairly closely. General and administrative costs increased significantly from 2007 due to employee related overhead costs which increased due to an increase in the number and tenure of employees. General and administrative costs also increased due to increased legal fees which were incurred relating to the new SEC format along with proxy preparation and for road access research relating to the Company's mining claims.
ITEM 7A.
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