UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10/A

Amendment No. 2


GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934



NEW JERSEY MINING COMPANY

(Exact name of registrant as specified in its charter)



Idaho

82-0490295

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)



201 N. Third Street, Coeur d’Alene, ID

83814

(Address of principal executive offices)

(zip code)



Securities to be registered pursuant to Section 12(b) of the Act: None

 

None

N/A

Title of each class to be registered

Name of each exchange on which each class is to be registered

 

 

Securities to be registered pursuant to Section 12(g) of the Act:

 

 

Common Stock; No Par Value

N/A

Title of each class to be registered

Name of each exchange on which each class is to be registered



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x
















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TABLE OF CONTENTS


GLOSSARY

3

Item 1.  Business.

5

Item 1A.  Risk Factors.

10

Item 2.  Financial Information.

10

Item 3.  Properties.

18

Item 4.  Security Ownership of Certain Beneficial Owners and Management.

28

Item 5.  Directors and Executive Officers

30

Item 6.  Executive Compensation

34

Item 7.  Certain Relationships and Related Transactions, and Director Independence.

36

Item 8.  Legal Proceedings.

37

Item 9.  Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

37

Item 10.  Recent Sales of Unregistered Securities.

38

Item 11.  Description of Registrant’s Securities to be Registered.

39

Item 12.  Indemnification of Directors and Officers.

41

Item 13.  Financial Statements and Supplementary Data.

42

Item 14.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

42

Item 15.  Financial Statements and Exhibits.

42

SIGNATURES

64







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GLOSSARY


Ag- Silver


Au- Gold


Alluvial- Adjectivally used to identify minerals deposited over time by moving water.


Argillites- Metamorphic rock containing clay minerals.


Arsenopyrite- An iron-arsenic sulfide. Common constituent of gold mineralization.


Ball Mill- A large rotating cylinder usually filled to about 45% of its total volume with steel grinding balls. The mill rotates and crushed rock is fed into one end and discharged through the other. The rock is pulverized into small particles by the cascading and grinding action of the balls.


Bedrock- Solid rock underlying overburden.


Cu- Copper


CIL- A standard gold recovery process involving the leaching with cyanide in agitated tanks with activated carbon. CIL means “carbon-in-leach”.


Crosscut- A nominally horizontal tunnel, generally driven at right angles to the strike of a vein.


Dip- Angle made by an inclined surface with the horizontal, measured perpendicular to strike.


Deposit- A mineral deposit is a mineralized body which has been intersected by sufficient closely-spaced drill holes or underground sampling to support sufficient tonnage and average grade(s) of metal(s) to warrant further exploration or development activities.


Development Stage- As defined by the SEC- includes all issuers engaged in the preparation of an established commercially mineable deposit (reserves) for its extraction which are not in the production stage.

 

Drift- A horizontal mine opening driven on the vein. Driving is a term used to describe the excavation of a tunnel.


Exploration Stage- As defined by the SEC –includes all issuers engaged in the search for mineral deposits (reserves) which are not in either the development or production stage.


Fault- A fracture in the earth’s crust accompanied by a displacement of one side of the fracture with respect to the other and in a direction parallel to the fracture.


Flotation- A physiochemical process for the separation of finely divided solids from one another. Separation of these (dissimilar) discrete solids from each other is affected by the selective attachment of the particle surface to gas bubbles.


GPT- Grams per metric tonne.


Galena- A lead sulfide mineral. The most important lead mineral in the Coeur d’Alene Mining District.

 

Grade- A term used to assign the concentration of metals per unit weight of ore. An example- ounces of gold per short ton of ore (opt). One troy ounce per short ton is 34.28 parts per million or 34.28 grams per metric tonne.


Junior Mining Sector – A term used to describe the market for smaller scale mining companies.


Mill- A general term used to denote a mineral processing plant.


Mineralization- The presence of minerals in a specific area or geologic formation.



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Net Smelter Royalty- A royalty, usually paid to a mineral claim owner that is a percentage of the proceeds from the sale of metal-bearing concentrate or metal to a smelter or refinery. Also known as an NSR, the cost of smelting, refining, and transport to the smelter is deducted before the royalty is applied. However, the cost of mining and milling is not deducted. Typical net smelter royalty rates are from 1% to 5%.


Ore- A mineral or aggregate of minerals which can be mined and treated as a profit. A large quantity of ore which is surrounded by waste or sub-ore material is called an orebody.


Patented Claim- A mineral claim where the title has been obtained from the U.S. federal government through the patent process of the 1872 Mining Law. The owner of the patented claim is granted title to the surface and mineral rights.

Pillar – An area of ore left to support the overlying strata or hanging-wall in a mine.

Production Stage- As defined by the SEC- includes all issuers engaged in the exploitation of a mineral deposit (reserve).


Pyrite- An iron sulfide. A common mineral associated with gold mineralization.


Quartz- Crystalline silica (SiO 2 ). An important rock-forming and gangue material in gold veins.


Quartzites- Metamorphic rock containing quartz.


Raise- An underground opening driven upward, generally on the vein.


Ramp- An underground opening usually driven downward, but not always, to provide access to an orebody for rubber-tired equipment such as loaders and trucks. Typically ramps are inclined at about a 15% grade.


Reserves- That part of a mineral deposit which could be economically and legally extracted or produced as the time of the reserve determination. Reserves are subcategorized as either proven (measured) reserves, for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling, and measurement are spaced so closely and geologic character is so well defined that size, shape, depth and mineral content are well-established; or probable (indicated) reserves, for which quantity and grade and/or quality are computed from information similar to that use for proven (measured) reserves, yet the sites for inspection, sampling and measurement are farther apart.

 

Shoot – A body of ore, usually of elongated form, extending downward or upward in a vein.


Stope- An underground void created by the mining of ore.


Strike- The bearing or azimuth of the line created by the intersection of a horizontal plane with an inclined rock strata, vein or body.


Tellurium- Relatively rare chemical element found with gold and silver with can form minerals known as tellurides.


Tetrahedrite- Sulfosalt mineral containing copper, antimony, and silver.


Tonne- metric ton which equals 1,000 kilograms or 1.1023 U.S. short tons.


Vein- A zone or body of mineralized rock lying within boundaries separating it from neighboring wall rock. A mineralized zone having a more or less regular development in length, width and depth to give it a tabular form and commonly inclined at a considerable angle to the horizontal.


Unpatented Claim- A mineral claim staked on United States Public Domain (USPD) that is open for mineral entry. Unpatented lode claims can be no more than 1,500 feet long by 600 feet wide. The claimant owns the mineral rights, but does not own the surface which is USPD. An exploration or mining on the claim must first be submitted in a plan of operations (POO) for approval to the appropriate federal land management entity.


Wallrock- Usually barren rock surrounding a vein.





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“Forward Looking” Statements

This Form 10 contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are intended to be covered by the safe harbor created by such sections. These "forward-looking statements involve risks and uncertainties, principally in the sections entitled “Business,” “Financial Information” and “Properties.” All statements other than statements of historical fact contained in this Form 10, including statements regarding future events, our future financial performance, business strategy, and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors in this Registration Statement, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. New risks emerge from time to time and it is not possible for us to predict all risks, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.


You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Registration Statement. You should be aware that the occurrence of the events described in this Registration Statement could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Registration Statement to conform our statements to actual results or changed expectations.


Item 1.  Business.

BUSINESS DEVELOPMENT


Form and year of organization


New Jersey Mining Company (“the Company” or “NJMC”) was incorporated under the laws of the State of Idaho on July 18, 1996 (Ex. 3.0). The Company completed its organization on December 31, 1996, when all of the assets and liabilities of the New Jersey Joint Venture a partnership, were acquired by the Company in a share exchange transaction. The New Jersey Joint Venture had been formed in 1994 for the purpose of developing the New Jersey mine. The mine is located east of Kellogg, Idaho in the Coeur d’Alene Mining District.


Any bankruptcy, receivership or similar proceeding


There has not been any bankruptcy, receivership, or similar proceeding.


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


Business Description


The Company was incorporated in Idaho in 1996 and the assets of the New Jersey Joint Venture (NJJV) were acquired by New Jersey Mining Company (the “Company”).  New Jersey Mining Co. is a mining and milling company, focused primarily on providing contract milling services to mines in need of milling of their ore at our New Jersey mill facility. In addition, the Company is exploring and evaluating its own properties for small-scale production. During 2013 the Company’s exploration activities were confined to the Golden Chest mine where it mined an exploratory raise on the Popcorn vein producing 200 tonnes of material. Additionally, the Company drilled two surface exploration core holes for a total of 488 meters on the northern part of the Golden Chest property, and Juniper Resources, LLC of Boise, Idaho drilled 20 holes for a total of 2,564 meters at the Golden Chest to further define the Skookum Shoot. No exploration activity took place in 2013 at the remaining properties held by the Company. Also, the Company processed 865 tonnes in



5





the fourth quarter of 2013 on a custom-milling basis for a customer with a mine located in central Idaho about 280 miles from the New Jersey mill.

Recent Business Development

On May 16, 2013 the Company filed a Form 15 with the U.S. Securities & Exchange Commission terminating its registration and reporting requirements. The Company first registered its securities in January 2000 and maintained its registration and reporting status until filing the Form 15. In September 2013 the Company underwent a change in management. The new management team decided to re-register the Company’s common stock.

During 2013, the Company's exploration activity was very limited due to the lack of available financing for junior mining companies. The remaining ore from a Crescent mine stockpile of 2,968 tonnes was milled. A stockpile from the Golden Chest mine was milled along with about 200 tonnes from an exploration raise on the Popcorn vein. The total tonnage milled from the Golden Chest was 1,682 tonnes at an average grade of 2.46 gpt Au and gold recovery in the floatation circuit was 91% as indicated by sampling. On September 3, 2013 a Mining Lease (Ex. 10.2) was executed with Juniper Resources, LLC of Boise, Idaho for a portion of the Golden Chest mine known as the Skookum Shoot which covers about 400 meters of strike-length along the Idaho fault. Juniper completed 2,564 meters of drilling in 20 holes with the goal of defining the Skookum Shoot.

In September 2013, the Company’s management changed as Fred Brackebusch resigned as President, Treasurer and Director of the Company. Additionally, Ivan Linscott, Katherine Sims, and William Rust resigned as Directors of the Company. Tina Brackebusch resigned as corporate Secretary as well. The newly appointed management team consisted of Delbert Steiner as Chief Executive Officer and Chairman of the Board, John Swallow as President and member of the Board and Grant Brackebusch as Vice President and member of the Board. In the fall 2013, the Company completed a private placement selling 22,000,000 units, each unit comprised of one share common stock and one half warrant, for a total of $1,100,000 being raised before paying a 10% brokerage fee to Pennaluna & Co, a FINRA licensed brokerage firm.

The year ended with the Company acquiring Idaho Champion Resources, LLC (“ICR”) in a share exchange transaction (Ex. 10.3) . Idaho Champion Resources holds the Rupp mining lease which is a long term mining lease on a sizeable tract of land between Lucille and Riggins, Idaho. ICR also holds a 12-month option to purchase the McKinley mine (Ex. 10.6) near Lucille, Idaho which consists of four patented mining claims covering approximately 62 acres. The Company exchanged 5,000,000 shares of common stock at a valuation of $.05/share for 100% of the membership units of ICR, valuing the transaction at $250,000.

Additionally, the Company terminated its agreement with Revett Metals Associates related to the Niagara project and gave notice of withdrawal and terminated its agreement with Revett Metals Associates on the Copper Camp Project in November, 2013.

Principal products or services and their markets


New Jersey Mining Co. is a mining and milling company, focused primarily on providing contract milling services to regional mines within a radius of about 150 air-miles that are in need of milling of their ore at our New Jersey mill facility. The New Jersey mill is a 360 tonne per day single-circuit flotation plant with a permitted concentrate leaching circuit. In addition, the Company is exploring and evaluating its own properties for small-scale production. As a contract milling service provider, our principal product is the milling or concentrating service provided by our mill. We generally produce a precious metal-bearing concentrate for sale to a smelter or refiner for the customer’s benefit and invoice the customer for a unit price per tonne of ore milled.

We also plan to seek out joint venture partners to finance mineral exploration and ore production on our portfolio of mineral properties

 The Company’s portfolio of mineral properties includes the New Jersey mine, the Golden Chest mine, the McKinley mine, the Toboggan project, the Giant Ledge project, and the Silver Button project.

Exploration and development activities in 2014 are expected to be limited to the Golden Chest and McKinley mines. No exploration activity took place in 2013 at the following properties held by the Company: the New Jersey mine, the McKinley mine, the Toboggan project, the Giant Ledge project, and the Silver Button project.



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We are seeking joint venture partners for the following projects: the Toboggan, the Giant Ledge and the Silver Button. Presently, there are no exploration activities on these properties.

Distribution methods of the products or services


The Company modified its business strategy in 2013. The new strategy focuses on taking advantage of excess capacity at the New Jersey Mill and generating cash flow by processing ore. We will focus on obtaining ore from small scale, high-grade, near-production properties in the region surrounding the mill, not necessarily the Coeur d’Alene mining district but within a 150 air-mile radius of the New Jersey Mill. Custom milling agreements may vary, but typically the party that is producing the ore is responsible for the cost of shipping the ore to the New Jersey mill. We plan to use our milling capacity to earn an interest in some of these properties or perform custom milling services for a fee.

The base of the Company and the focus of management is centered on the New Jersey Mill. The New Jersey Mill was expanded with planned mill feed coming from the nearby Crescent Silver Mine, owned by United Silver. United Silver had challenges with the economic viability of the Crescent over the last couple of years, which lead to reduced cash flow. Additionally, United Silver recently filed for receivership and the mine has since been on care and maintenance. It is now owned by Crescent Silver LLC, an entity controlled by the main creditor of United Silver. The Company does not anticipate the Crescent Mine will be providing ore to the New Jersey Mill in the foreseeable future.


Typically a mill is associated with a nearby mine and constructed to mainly process ore from that mine, with some overage or excess capacity available for smaller amounts of ore sometimes available to outside mines. Companies that are focused exclusively on exploration typically do not have the means to produce and/or mill ore–whether for their own account or for others.

New Jersey Mining Co. is a mining and milling company, focused primarily on providing contract milling services to mines in need of milling of their ore. In addition, the Company is evaluating its own properties for small-scale production, as ownership of a mill greatly enhances the potential return on properties under our control.

Status of any publicly announced new product or service


Not applicable


Competitive business conditions and competitive position in the industry and methods of competition


The Company competes on several different fronts within the mining industry both from a milling perspective and an exploration/production perspective. The Company competes with other junior mining companies for the capital necessary to sustain its exploration and development programs, however control of the New Jersey Mill sets the Company apart from other companies strictly focused on exploration and raising capital. The cash flow potential of the New Jersey Mill provides a base for the Company and is the main focus of management.

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 (Ex. 10.1). The Company also competes with other mining companies for exploration properties such as for gold and silver properties in the Coeur d’Alene mining district, however the New Jersey Mill does allow the Company a competitive advantage in the evaluation of potential projects.

A large number of companies within our industry do not have direct use of a mill and must evaluate potential properties from a different economic viewpoint. Our position differs from those that would need to build a mill to process their ore, or would likely have to contract with the Company for processing their ore at the mill. For instance, late in 2013, a small exploration company shipped 865 tonnes of ore to the New Jersey Mill to help with the evaluation of their property. This client hauled ore about 280 miles from their property to our mill. In addition to this customer, there are other potential customers located within a 150 air-mile radius of our mill that have indicated interest in our contract milling services.

The Company anticipates the mill running at full capacity by late fall 2014 with ore being shipped by our joint venture partner developing the Skookum portion of the Golden Chest Mine. It was anticipated that the development work at the Golden Chest would have been commenced earlier in 2014, however this has been delayed. The Company has been informed that development at the Golden Chest will begin in June, 2014, with ore shipped to the mill in October, 2014. Given the uncertainty of timing, the Company did not actively seek long-term customers for the mill, as our joint venture partner is anticipating 12-18 months of production, at full capacity.



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In more general terms, we are also subject to the risks inherent to the mining industry. The primary risk of mineral exploration is the low probability of finding an economically viable deposit of ore. We will attempt to mitigate this risk by focusing our efforts in areas already known to host deposits, and also by acquiring properties we believe will 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 capital.

Sources and availability of raw materials and the names of principal suppliers


The Company has a portfolio of mineral properties including: the Golden Chest mine, the New Jersey mine and several other exploration prospects capable of providing raw materials to the mill, However, the Golden Chest is expected to provide most of the raw material for the mill for the next 18 months (see Properties ).


Dependence on one or a few major customers


The Company is the manager of the New Jersey Mill Joint Venture which processes both silver and gold ores through a 360 tonne per day flotation plant. The Company also provides custom milling and engineering services to third party customers as well as its joint venture partners.


The Companies current customer base is limited to bulk testing of about 1,000 tonne bulk samples that can be processed in a short time frame. No additional customers will be sought at this time. This limitation is based on the lease of the Golden Chest property and the Lessees intent to put the Skookum Shoot, an ore shoot on the property, into production with underground work starting in the summer of 2014. The project will utilize 100% of the Company's mill capacity for at least 18 months. The company will not have excess milling capacity prior to the second quarter of 2016 consequently no other near term customers will be required. The ongoing capacity utilization at the mill will be revisited in a timely fashion to maximize the mill use in the future.


Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration


The Company has a number of royalty provisions in place with regard to mineral leases.

There is a royalty provision associated with our Toboggan project's 39 unpatented Little Baldy claims leased to Hecla Silver Valley, Inc. The lease began on September 12, 2012 and has a 20-year term requiring 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 is required of Hecla on or before September 12, 2015 with increasing work commitments of $300,000 on or before September 12, 2018 and $400,000 on or before September 12, 2021 and $400,000 due on each consecutive three year periods in which the agreement remains effective or until commercial production commences. Once gold production begins from the leased claims, a 2% net smelter return royalty will be due and payable to NJMC.


Need for any government approval of principal products or services.


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).



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Effect of existing or probable government regulations on the business


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 properties. 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. We are not aware of any 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 during each of the last two fiscal years on research and development


During the years ended December 31, 2013 and 2012, the Company spent $173,794 and $1,046, 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 Plan of Operation (“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 does have an approved POO by the USFS for the Toboggan Project, however the Company must post an $82,000 bond for it to become effective and the Company has not posted the bond to date.

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 deemed by MSHA as not significant or substantial is about $200.

The New Jersey mine has two important State of Idaho permits. We have an Idaho Cyanidation Permit and a reclamation plan for surface mining operations. No permit is required for the current flotation process because there is no discharge of process 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 believes that it is in compliance with local building codes and ordinances.



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Number of total employees and number of full –time employees


The Company's total number of full-time employees is five, of which four are full-time employees. Full-time employees include Chief Executive Officer, Delbert Steiner, President John Swallow and Vice President, Grant Brackebusch and Art Glover, the chief geologist.

Item 1A.  Risk Factors.

The Company is a Smaller Reporting Company and is not required to provide the information required by this item.

Item 2.  Financial Information.

Management's Discussion and Analysis of Financial Condition and Results of Operations

When we use the terms "New Jersey Mining Company," the "Company," "we," "us," or "our," we are referring to New Jersey Mining Company (the Company) and its subsidiaries, unless the context otherwise requires.

Cautionary Statement about Forward-Looking Statements

This Registration Statement 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 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:

a)

The amount and nature of future capital, development and exploration expenditures;

b)

The timing of exploration activities; and

c)

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 Registration Statement. You should not place undue reliance on these forward-looking statements.

Plan of Operation

The Company is conducting mineral exploration in the region surrounding the Coeur d’Alene Mining District of northern Idaho and it operates a mineral processing plant near Kellogg, Idaho. The Company’s strategy is to generate cash flow from our available capacity at the New Jersey mill by focusing on small scale, high-grade, near-production properties in the region surrounding the mill within an approximate 150 air mile radius. We plan to use our milling capacity to earn an interest in some of these properties or perform custom milling services for a fee. The Company’s primarily focus is on gold with silver and base metals of secondary emphasis. The Company receives revenue for providing mineral processing from t hird party customers and its joint venture partners. The Company also receives management fees from its joint venture partners.



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During 2013 the Company’s exploration activities were confined to the Golden Chest mine where it mined an exploratory raise on the Popcorn vein producing 200 tonnes of material. Additionally, the Company drilled two surface exploration core holes for a total of 488 meters on the northern part of the Golden Chest property, and Juniper Resources, LLC of Boise, Idaho drilled 20 holes for a total of 2,564 meters at the Golden Chest to further define the Skookum Shoot. No exploration activity took place in 2013 at the remaining properties held by the Company including the New Jersey mine, the McKinley mine, the Toboggan project, the Giant Ledge project, and the Silver Button project.

Exploration activity is planned only for the McKinley project in 2014. It is estimated that about $75,000 of exploration will be completed at the McKinley in 2014. The planned exploration for this year at the McKinley will include small-diameter core drilling, geologic mapping, channel sampling, and underground surveying. No exploration is planned in 2014 for the New Jersey mine, Golden Chest mine, Toboggan, Giant Ledge, and Silver Button properties. The New Jersey mine, Toboggan, Giant Ledge, and Silver Button properties are considered to be under care and maintenance. However, mine development is planned at the Golden Chest by the lessee of the Skookum shoot, Juniper Resources LLC (“Juniper”). Juniper is planning to start a new portal in the summer of 2014 to access gold mineralized material contained within the Skookum shoot of the Idaho vein, complete a secondary escapeway, and begin stoping of the Skookum shoot. NJMC is planning to process Skookum shoot material at its New Jersey Mill facility beginning in the autumn of 2014.

The Golden Chest project is a joint venture with Marathon Gold USA (MUSA), and the Company is the Operator. The Company’s ownership of the Golden Chest joint venture was reduced to 47.78% NJMC and Marathon Gold USA Corporation’s ownership was increased to 52.22% by Marathon Gold USA Corporation. The relative ownership has changed because Golden Chest LLC initiated cash calls to its two members and Marathon Gold contributed more cash.


The New Jersey mineral processing plant was expanded in order to process ore from the nearby Crescent silver mine. A definitive agreement to form a joint venture with United Mine Services, Inc., (a wholly owned subsidiary of United Silver Corp. “USC”) was reached in January 2011 (Ex. 10.1). The plant has been expanded from a processing rate of 4 tonnes per hour to 15 tonnes per hour USC has paid the expansion cost which was about $3.2 million. The Company owns 65% of the venture and USC owns 35%. 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 pays its processing costs and the Company charges a management fee of $2.50/tonne. The plant was commissioned in the second quarter of 2012 and continued to process USC ore in the third quarter, processing about 9,000 tonnes. Late in the third quarter of 2012 USC encountered marketing and mining problems which resulted in idling the mill. During the first quarter of 2013 a stockpile of Crescent mine ore was processed, and Golden Chest material was processed in the second quarter of 2013.

During the fourth quarter of 2013 the Company terminated its agreement with Revett Metals on the Niagara and Copper Camp projects, because the Company did not believe further exploration would be profitable.

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 fourth quarter of 2013 was $636,127. The cash balance increased during the quarter, from $308,296 the previous quarter.


Critical Accounting Policies and Estimates

See Note 2 to our consolidated financial statements contained in Item 15 of this Form 10 for a complete summary of the significant accounting policies used in the presentation of our financial statements. As described in Note 2, we are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue and expenses. We believe that our most critical accounting estimates are related to asset impairments and asset retirement obligations.


Our critical accounting policies and estimates are as follows:


Asset Impairments

Significant property acquisition payments for active exploration properties are capitalized. The evaluation of our mineral properties for impairment is based on market conditions for minerals, underlying mineralized material associated with the properties, and future costs that may be required for ultimate realization through mining operations or by sale. If no mineable orebody is discovered, or market conditions for minerals deteriorate, there is the potential for a material adjustment to the value assigned to mineral properties. We review the carrying value of long lived assets for impairment



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whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the asset is used, and the effects of obsolescence, demand, competition, and other economic factors.


Asset Retirement Obligations


We have an obligation to reclaim our properties after the surface has been disturbed by exploration methods at the site. As a result we have recorded a liability for the fair value of the reclamation costs we expects to incur in association with our Coleman Property. We estimate applicable inflation and credit-adjusted risk-free rates as well as expected reclamation time frames. To the extent that the estimated reclamation costs change, such changes will impact future reclamation expense recorded. A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation) in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to the related long-lived asset. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation.


Results of Operations

Revenues


Revenue for the period ending December 31, 2013 was $113,701 as compared to $902,032 for the comparable period of 2012. Revenue was less in 2013 due to decreased contracting services. The net loss for the period ending December 31, 2013 was $798,977 compared to a loss of $735,866 for the comparable period of 2012. The difference in net loss for 2013 compared to the loss for the corresponding period in 2012 was due to reduction in consulting income.



The New Jersey mineral processing plant is expected to begin milling ore for the Golden Chest mine late in the third quarter of 2014. The ore will be mined from the Skookum Shoot at the Golden Chest and the mill is planned to increase its production rate gradually to 9,000 tonnes per month by the end of the fourth quarter of 2014.


The amount of money to be spent on exploration at the Company’s mines and prospects depends primarily on contributions of our joint venture partners, particularly at the Golden Chest. If new joint venture partners are engaged at the Toboggan Project, exploration activities would increase.

On November 30, 2013 the Golden Chest LLC (GC) signed a lease agreement (Ex. 10.2) with Juniper Resources, LLC (Juniper) of Boise, Idaho for a defined portion of the Golden Chest mine property, (a 400 meter strike length along the Idaho vein below the No. 3 Level). The lease with Juniper calls for an initial payment of $50,000 to GC, which was paid, and a work requirement of 1,500 to 3,000 meters of core drilling which has also been completed. Juniper signed the lease and made a payment of $200,000 to Golden Chest LLC at the end of November 2013. Juniper is required to make land payments of $125,000 per quarter to J.W. Beasley Interest, LLC on behalf of Golden Chest LLC. Additionally, Juniper will pay a 2% net smelter royalty to Golden Chest LLC on all gold production from the leased area with the $250,000 initial payments treated as an advance on this royalty. The lease has a term of 39 months.

Liquidity and Capital Resources

Liquidity increased during the period ended December 31, 2013 due to financing in the form of an equity issuance of common shares through a Regulation D offering. Future sources of liquidity will include both internal and external sources. Plans call for the Company to provide custom milling services at its New Jersey mill as a source of internal liquidity, and sources of external liquidity such as equity offerings may be pursued as well. The Company’s commitment for capital expenditures decreased during the period ended December 31, 2013 as it rented under-utilized equipment, such as a drilling rig, and dropped mineral properties that no do not meet management’s criteria for near-term production potential.



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Contractual obligation including lease and note principal payments as of December 31, 2013 are as follows:


2014

 

83,229

2015

 

45,592

2016

 

44,704

2017

 

2,207

2018

 

2,462

Thereafter

 

98,915

Total

 

$ 249,543


March 31, 2013 the following reflect the Company’s cash balance and capital commitments.


Cash and cash equivalents

$

733,091

Joint venture receivables

 

92,574

Other current assets

 

45,900

Accounts payable

 

56,965

Accrued payroll and related payroll expenses

 

28,667

Note payable related party, current

 

44,977

Obligations under capital lease, current

 

17,813

Notes payable, current

 

52,077

Asset retirement obligation

 

11,237

Note payable related party, non-current

 

171,007

Notes payable, non-current

 

181,310



Changes in Assets and Liabilities


Changes in Cash and Cash Equivalents

Cash and Cash Equivalents increased to $636,127 from $9,950 in the period ended December 31, 2013 compared to December 31, 2012, an increase of $626,177, most significantly because of fund raising activities from the private placement which raised $1,100,000 in the third and fourth quarters of 2013.


Changes in Joint Venture Receivables

Joint venture receivables increased to $61,143 from $12,525 as of December 31, 2013, compared to December 31, 2012, an increase of $48,618 because of renewed activity with joint venture partners at year end 2013 which resulted in a higher amount due to the company for payroll paid by the company on behalf of the joint ventures. Additionally, the receivable from UMS is significantly bigger because of a failure to make timely payments during their receivership process.


Changes in Other Current Assets

Other Current Assets increased to $45,970 from $13,160 as of December 31, 2013, compared to December 31, 2012, an increase of $32,810 because of a receivable on Custom Milling due from Tara Minerals.


Changes in Inventory

Inventory decreased to $0 from $19,466 as of December 31, 2013 compared to December 31, 2012 because the remaining inventory from operations was sold.


Changes in Property, Plant, and Equipment, net of accumulated depreciation

Property, Plant and Equipment decreased to $4,908,724 from $5,035,276 as of December 31, 2013, compared to December 31, 2012, a decrease of $126,552, because of disposal of equipment including a pick-up truck, drill, and excavator and accumulated depreciation recorded.


Changes in Mineral Property net of accumulated depreciation

Mineral Property decreased to $540,433 from $710,075 as of December 31, 2013, compared to December 31, 2012, a decrease of $169,642, because of a write-down of the Coleman property capitalized amount to reflect a lower current gold price and write off of Niagara and Copper Camp properties, The McKinley property was added in December for $250,000.




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Accrued Payroll and Related Payroll Expenses

Accrued Payroll and Related Payroll expenses increased to $22,016 from $6,805 as of December 31, 2013, compared to December 31, 2012, an increase of $15,211, because of an increase in the Company's operating activity and resulting increased payroll at the end of 2013.


Account Payable Marathon Gold

Account Payable Marathon Gold decreased to $0 from $62,500 as of December 31, 2013 compared to December 31, 2012 because the short term payable from Marathon to the Company was paid during 2013.


Changes in Notes Payable, current

Notes Payable current decreased to $55,663 from $148,834 as of December 31, 2013 compared to December 31, 2012, a decrease of $93,171. In addition to normal note payments this decrease was in part because of a $47,053 reclassification of short to long term payable from refinancing.


Changes in Notes Payable, non-current

Notes Payable non-current increased to $193,880 from $166,839 As of December 31, 2013 compared to December 31, 2012, an increase of $27,041. This increase was due to a of a $47,053 reclassification of short to long term payable from refinancing.


Changes in Revenues, Cost, and Expenses


Sales of Gold

Sales of Gold increased to $21,049 from $0 in 2013 compared to 2012 because the remaining inventory from operations was sold.


Drilling and Exploration Contract Income

Drilling and Exploration Contract income decreased from $769,084 to $0 in 2013 compared to 2012 because no drilling activity occurred in 2013 at the Golden Chest under the Joint Venture agreement.


Joint Venture Management Fee Income

Joint Venture Management income decreased from $45,341 to $8,890 in 2013 compared to 2012, a decrease of $36,451, because no drilling activity occurred in 2013 at the Golden Chest under the Joint Venture agreement. The management fees that were earned were for basic maintenance activities which occurred under the joint venture agreement.


Contract Milling Income

Contract milling income increased from $21,174 to $83,762 in 2013 compared to 2012, an increase of $62,588 because of increased custom milling activity by the Company at the Mill Joint Venture in 2013.


Engineering Services Income and Expense

Engineering services income decreased from $68,700 to $0 in 2013 compared to 2012 because engineering services provided to USC were completed at the time the mill was commissioned and are no longer being received.


Contract Milling Costs

Contract Milling costs increased from $15,499 to $82,544 in 2013 compared to 2012, an increase of $67,045, because of increased custom milling activity by the Company at the Mill Joint Venture in 2013.


Drilling and Exploration Contract Expense

Drilling and Exploration Contract expense decreased from $348,391 to $154 for period ended December 31, 2013, compared to the comparable period last year, a difference of $348,237, because no drilling activity occurred in 2013 at the Golden Chest under the Joint Venture agreement.


Exploration

Exploration expense increased to $173,794 from $1,046 in 2013 compared to 2012, an increase of $172,748 because of renewed exploration activity including core drilling at the Golden Chest by the Company as a result of funding availability.



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Net loss (gain) on Sale of or Abandonment of Mineral Property

Net loss (gain) on Sale of or Abandonment of Mineral Property increased to $109,000 from $0 in 2013 compared to 2012 because of the write off of the Niagara and Copper Camp Properties.


Write down of Mineral Property

Write down of Mineral Property increased to $324,142 from $0 in 2013 compared to 2012 because of a write-down of the Coleman property capitalized amount to reflect a lower current gold price.


(Gain) Loss on Sale of Equipment

Gain on Sale of Equipment increased to $108,208 from $9,900 in 2013 compared to 2012, a difference of $98,308 because equipment that was sold in 2013 resulted in a higher gain than the equipment sold in 2012. Most notably a core drill sold in 2013 resulted in a $95,000 gain.


Depreciation

Depreciation decreased to $98,208 from $144,393 in the period ending December 31, 2013, a decrease of $46,185, compared to the comparable period last year, most notably because of one of the core drills was depreciated and sold resulting in less depreciation expense in 2013.


General and Administrative Expense

General and Administrative expense decreased to $184,805 from $241,765 in the period ending December 31, 2013, compared to the comparable period last year, a decrease of $56,960, because of decreased company activity for the majority of the year. In 2012 activity was normal for approximately 6 months with reduced activity for the last 6 months because of a lack of funding. In 2013 that reduced activity level remained through the first three quarters with normal activity resuming in the fourth quarter following successful financing.


Distribution from Golden Chest LLC

Distribution from Golden Chest LLC increased to $119,450 from $0 in the period ending December 31, 2013 compared to the comparable period last year because of advanced royalty payments received on the Golden Chest Joint venture from Juniper Resources.


Interest Expense

Interest expense increased to $55,621 from $21,968 in 2013 compared to 2012, an increase of $33,653 because no capital projects were undertaken in 2013 for which interest could be capitalized as was the case in 2012 with the mill expansion.


Equity in Loss of Golden Chest LLC

Equity in loss of Golden Chest LLC decreased from $822,500 to $99,500 in 2013 compared to 2012, a decrease of $723,000 because of decreased funding by the Company of the Joint Venture and also reverting to the cost method of accounting for the venture with the loss of control. Expenditures are now recognized as exploration expenses rather than Equity in loss of Golden Chest LLC.


Changes in Cash Flow


Depreciation

Depreciation decreased to $98,208 from $144,393 in the period ending December 31, 2013, a decrease of $46,185, compared to the comparable period last year, most notably because of one of the core drills was depreciated and sold resulting in less depreciation expense in 2013.


(Gain) Loss on Sale of Equipment

Gain on Sale of Equipment increased to $108,208 from $9,900 in 2013 compared to 2012, a difference of $98,308 because equipment that was sold in 2013 resulted in a higher gain than the equipment sold in 2012. Most notably a core drill sold in 2013 resulted in a $95,000 gain.


Write down of Goodwill, Investment, and Mineral Property

Write down of Goodwill, Investment, and Mineral Property increased to $433,142 from $0 in 2013 compared to 2012 because of the write off of the Niagara and Copper Camp Properties and a write-down of the Coleman property capitalized amount to reflect a lower current gold price.




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Equity in Loss of Golden Chest LLC

Equity in loss of Golden Chest LLC decreased from $822,500 to $99,500 in 2013 compared to 2012, a decrease of $723,000 because of decreased funding by the Company of the Joint Venture and also reverting to the cost method of accounting for the venture with the loss of control, expenditures are now recognized as exploration expenses rather than Equity in loss of Golden Chest LLC.


Common Stock issued for Exploration Expense

Common Stock issued for Exploration Expense increased from $0 to $50,000 in 2013 compared to 2012 because drilling at the Golden Chest in 2013 was paid in the Company’s stock.


Deposits

Deposits decreased from $44,280 to $0 in 2013 compared to 2012 because of a deposit on land that existed in 2011 that had a positive effect on cash flows in 2012 when it was resolved.


Changes in Joint Venture Receivables

The changes in Joint Venture Receivables had a negative effect on cash flows of $48,619 in 2013, and in 2012 the effect on cash flows was a positive $119,192. This variance in change was a result of decreased company activity during the year ending December 31, 2012 and a resumption of activity in 2013 which resulted in a higher amount due to the company for payroll paid by the company on behalf of the joint ventures. Additionally, the receivable from UMS is significantly higher at December 31, 2013 because of a failure to make timely payments during their receivership process.


Changes in Other Current Assets

Changes in Other current assets had a negative effect on cash flow of $32,810 in 2013 compared to a positive change of $42,283 during the year ended December 31, 2012. Reduced activity during the latter part of 2012 resulted in a small accounts receivable balance and resumed activity in 2013 including a receivable from Tara Minerals at year end resulted in a higher balance due.


Changes in Inventory

Changes in Inventory had a positive effect on cash flow of $19,464 in 2013 with a change from ($1,053) to $19,464 as of December 31, 2013 compared to December 31, 2012 because the remaining inventory from operations in 2010 was sold.


Changes in Accounts Payable

The changes in Accounts payable had a negative effect on cash flow of $7,336 from as of December 31, 2013 which was relatively consistent, for the year ended December 31, 2012. A decrease in accounts payable of $74,511 was a result of decreased activity at year end.


Accrued Payroll and Related Payroll Expenses

Changes in Accrued Payroll and Related Payroll expenses had a positive effect on cash flow of $15,209 in 2013 and a negative effect on cash flow of $47,563 in 2012. In 2012 this was a result of decreased activity and payroll at year end and the opposite effect with an increase in payroll at the yearend 2013.


Account Payable Marathon Gold

Account payable Marathon Gold decreased to $0 from $62,500 as of December 31, 2013 compared to December 31, 2012 because the short term payable from Marathon to the Company was paid during 2013.


Purchases of Property, Plant and Equipment

Purchases of property, plant and equipment had a net negative effect on cash flow of $10,084 in 2013 as a result of the purchase of a pick-up whereas in 2012 the decrease in cash was $1,086,034 due to investment in the mill by our joint venture partner UMS.


Proceeds from Sale of Mineral Property

Proceeds from Sale of Mineral Property had a positive effect on Cash flow in 2013 because of the receipt of funds from an exploration agreement on the Little Baldy property.




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Contributions to Golden Chest LLC

Contributions to Golden Chest LLC decreased from $822,500 to $99,500 in 2013 compared to 2012, a decrease of $723,000 because of decreased funding by the Company of the Joint Venture and also reverting to the cost method of accounting for the venture with the loss of control. Expenditures are now recognized as exploration expenses rather than Equity in loss of Golden Chest LLC.


Proceeds from Sale of Equipment

Proceeds from Sale of Equipment increased to $112,000 from $9,900 in 2013 compared to 2012 because equipment that was sold in 2013 resulted in a higher gain than the equipment sold in 2012. Most notably a core drill sold in 2013 resulted in a $95,000 gain.


Sales of Common Stock and Warrants, net of issuance costs

Sales of Common Stock and Warrants, net of issuance costs resulted in an increase in cash of $1,000,000 as a result of a private placement in 2013, no stock sales for cash were completed in 2012.


Principal Payments on Notes Payable

Principal Payments on Notes Payable decreased from a negative effect of $94,841 to $55,492 in 2013 compared to 2012 because fewer payments were made on outstanding notes payable in 2013 as a result of fewer notes outstanding and refinancing.


Principal Payments on Note and Other Payables, Related Party, net

Principal Payments on Note and Other Payables, Related Party, net had a positive effect on cash flow in 2012 with an increase in notes payable for property purchased and remained relatively consistent throughout 2013 decreasing slightly as payments were made on the note.


Contributions from Non-Controlling Equity Interest in Mill JV

Contributions from Non-Controlling Equity Interest in Mill JV decreased to $32,009 in 2013 from $952,764 in 2012, a difference of $920,755. USC completed their buy-in to the Mill JV in 2012 with the exception of lease payments which continued into 2013 and will be completed in 2014.


Subsequent Events

During the first quarter of 2014, the Company offered and sold Unit securities through a Regulation D, Rule 506(b) private placement realizing net proceeds of $405,000. The offering was conducted by a licensed broker dealer and all the subscribers were “accredited investors.” Each unit consisted of two shares of the Company’s common stock and one purchase warrant. Each warrant is exercisable for one share of the Company’s common stock at $0.15 per share through March 4, 2017. The Company sold 3,000,000 Unit securities priced at $0.15 per Unit.




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Item 3.  Properties.


[NJMC10A2JUN414SEC001.JPG]

Figure 1 – Project Location Map


NEW JERSEY MINE

Overview

The New Jersey mine property is composed of underground and open-pit mineral resource prospects. The New Jersey mine properties include the New Jersey mill, the Coleman underground mine, the Coleman open pit , and the Scotch Thistle. These properties do not have any ore reserves. Our program has been exploratory in nature. Our exploration of these properties has produced gold-bearing mineralized material. We have mined this material and processed it at our New Jersey mill.

The New Jersey mine property includes a 360 tonne-per-day mill (mineral processing plant) that includes crushing, grinding and flotation circuits along with a concentrate leach plant that is capable of producing gold-silver dore’ bars. The mine property hosts the gold-bearing Coleman vein system, and another gold prospect known as the Scotch Thistle.



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In 2012, the Company , through a Venture Agreement with United Mine Services, Inc. completed the expansion of the New Jersey mill to a 360-tonne per day flotation plant (Ex. 10.1). The expansion included the construction of a new building, a new crushing plant, a new ball mill, and associated flotation equipment.

The mill has a permitted cyanide concentrate leach circuit which was designed to process gold sulfide ore concentrates from the Golden Chest to produce gold dore’ bars using the direct electro-winning process.

Location


The New Jersey mine is comprised of an open-pit, underground mine and mill complex located three miles east of Kellogg, Idaho, in the Coeur d'Alene Mining District commonly known as Idaho's Silver Valley. The mine is adjacent to U.S. Interstate Highway 90 and is easily accessed by local roads throughout the entire year.


Property Ownership


The Company owns 102 acres of private land with surface and mineral rights, 108 acres of private land with mineral rights only, 40 acres of private land with surface rights only, 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


In 2012, the Company terminated a mineral lease, known as the Miner's Slough and Teddy Parcel, with Mine Systems Design, Inc. which covered the mineral rights to 68 acres located north of the New Jersey mine area.


New Jersey Mill

On January 7, 2011, the Company entered into a joint venture agreement with United Mine Services, Inc. (UMS), a wholly-owned subsidiary of United Silver Corporation, to increase the ore processing capacity of the New Jersey mill (Ex. 10.1). UMS funded the expansion of the mill to process 360 tonnes per day and initially earned the right to receive a 33% interest in joint venture assets plus the right to process 7,000 tonnes of their ore per month. The Company is the manager of the joint venture. Initially, the agreement provided that the Company would retain a 67% interest in the joint venture assets plus the right to process 3,000 tonnes per month of its own ores. The property covered by the joint venture agreement includes the crushing circuit, grinding circuit, flotation circuit, concentrate leach plant, patented and unpatented claims (excluding mineral rights), and buildings. The mill joint venture owns 31 acres of private land plus 50 acres of unpatented mill site claims. The percentages of ownership have been modified by subsequent cash calls to the LLC members. Presently, the Company owns a 65% and UMS owns 35% as a result of UMS additional cash funding for the project

History of Operations


There are believed to be 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 to process the ores.


In 1996, the Company acquired the New Jersey mine and mill site properties as a part of the corporate organization process.

Present Condition and Work Completed on the Property


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. We discovered a broad zone of low grade (0.70 gpt gold) gold mineralization known as the Grenfell 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 2004, the Company added a flotation circuit at the New Jersey mill. The flotation circuit that was added to the New Jersey mill allowed for the processing of ore from the New Jersey mine, Golden Chest and Silver Strand properties adding a source of revenues.

In 2004, two exploration holes were drilled at Enterprise prospect and one at the Scotch Thistle.



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In 2005, ore production began at the New Jersey mill. We processed ore from the New Jersey and Golden Chest mines. Most of the ore was produced from the Golden Chest and a total of 2,300 tonnes were processed at an average grade of 9.90 gpt Au. A bulk sulfide concentrate was made and shipped to Barrick Goldstrike Mines, Inc. in Carlin, Nevada.

In 2006, the Company began construction of a concentration leach plant to the New Jersey mill and initiated an underground exploration drift on the Coleman vein. During the year, the Company’s buyer of gold concentrate stopped buying concentrates. This prompted the Company to build a leach plant.

In 2007, the Company completed construction on its concentration leach plant and completed exploration drifting on the Coleman vein at the New Jersey mine. A total of 800 tonnes of ore were mined from the underground exploration with a grade of 2.28 gpt Au. Open pit mining on the Coleman vein also provided 800 tonnes of ore at a grade of 3.25 gpt Au. All of the ore was processed at the New Jersey mill. The Company purchased a core drilling rig to reduce drilling costs and increase the flexibility of its exploration program. We drilled exploratory holes at the Enterprise mine and the Scotch Thistle.

In 2008, we drilled core holes at the Scotch Thistle and the New Jersey mine. 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. That year the Company completed an underground exploration program of drifting on the Coleman vein on the 740 level. A total of 84 meters of drifting was completed with 20 meters of the drifting on the vein before it was displaced by a fault.

In 2009, the Company experienced the effects of the financial crisis that hit the United States and exploration activity was significantly curtailed.

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.


On January 7, 2011, the Company entered into a joint venture agreement with United Mine Services, Inc. as indicated above.

In June 2012, the construction of an expanded New Jersey mill was completed. 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) was not renovated.

During 2012, a total of 8,470 dry tonnes of silver ore from the UMS-owned Crescent mine were processed at the New Jersey mill. Milling of the Crescent ore was suspended in September 2012 as the buyer of the concentrate became unable to process the concentrate because of metallurgical difficulties at their plant. In 2013, the New Jersey mill processed 2,968 dry tonnes of ore from the Crescent mine on behalf of UMS, and processed 1,682 tonnes of material from the Golden Chest mine.

As of December 31, 2013, the Company had a net capital cost of $4,319,850 associated with the mineral processing plant and a capitalized development plus investment cost of $271,340 associated with the mine. In 2012 and 2013, no exploration work was completed on the Coleman vein or other prospects at the New Jersey mine.

Age, Modernization and Physical Condition of Plant and Equipment


The construction of an expanded mill capable of processing 360 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 United Mine Services under the terms of the joint venture agreement (Ex. 10.1). 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. Three phase electrical power is supplied to the New Jersey mill by Avista Utilities.

Geology and Mineralization


The Prichard Formation, which is up to 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. 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 cut the bedding in Prichard argillite and quartzite. Associated sulfide minerals are pyrite, arsenopyrite, chalcopyrite, galena, and sphalerite. A low silver variety of the sulfosalt mineral tennantite is also present.



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Two mineralized systems are found at the New Jersey, the Coleman vein, and the Scotch Thistle. The Coleman vein is a gold-bearing quartz vein which cuts bedding of the Prichard formation. Associated sulfide minerals are pyrite, arsenopyrite, tennantite, galena and sphalerite. Visible gold can be found in the Coleman vein and is usually associated with tennantite. Cumulative strike length of the Coleman vein and related branches has been measured to be approximately 460 meters.

Exploration Plans


At the Coleman vein, future plans are to conduct further drilling to locate higher grade ores once more funds become available for exploration. There are no plans for exploration in 2014. Presently, the New Jersey mine is on care and maintenance.


GOLDEN CHEST

Overview

The Golden Chest mine property is both an open-pit and underground gold-bearing mineral resource property. The property comprises 24 patented mining claims covering approximately 280 acres and 70 unpatented claims covering a total of approximately 1,000 acres.

Our program has been exploratory in nature. Our exploration of these properties has produced metal bearing materials. We have mined this material and processed it at our New Jersey mill. The Golden Chest is an exploration project without known ore reserves.

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, Shoshone County, Idaho. The property consists of 24 patented mining claims covering approximately 280 acres and 70 unpatented claims covering approximately 1,000 acres. The site is accessible by an improved dirt road.


Property Ownership


The Golden Chest mine property was acquired by Golden Chest LLC, an Idaho limited liability company on December 15, 2010. Golden Chest LLC originally acquired the property from Metaline Contact Mines, and J.W. Beasley Interests, LLC for $3,750,000 payable on a promissory note and subject to a mortgage. The purchase agreement was amended on October 15, 2013 and provides for a change in the payment schedule and default terms. Additionally, the mortgage associated with the note was released on October 9, 2013.


The Company, through Golden Chest LLC, a joint venture with Marathon Gold USA, Inc. owns 280 acres of patented mining claims and approximately 1,000 acres of unpatented mining claims. The unpatented claims are on federal land administered by the Bureau of Land Management and the U.S. Forest Service.


Prior to the purchase of the Golden Chest Mine by Golden Chest LLC, New Jersey Mining Company had acquired the mine interest by an exploration lease with a mining lease option in 2003.


On January 3, 2005, New Jersey Mines entered into a Mining Lease with Metaline Contact Mines and J.W. Beasley Interests, LLC for the Golden Chest Mine property.


Golden Chest LLC


The Golden Chest mine is owned by Golden Chest LLC (GC), a limited liability company organized by NJMC for the purpose of joint venturing the mine development with Marathon Gold USA Corp. GC was originally capitalized ownership at 50% NJMC and 50% Marathon Gold USA Corp.


In December 2010, Golden Chest LLC purchased the Golden Chest mine from Metaline Contact Mines and J.W. Beasley Interests for $3,750,000 on a 7-year installment purchase agreement. Prior to the purchase, NJMC operated under a mining lease.


As of December 31, 2013, Golden Chest LLC had paid $1,625,000, with the balance of $2,125,000 payable on the 15th of the last month of each quarter at $125,000 until March 15, 2018 when the unpaid balance will be due.




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Currently, Golden Chest LLC is owned 47.78% by the Company and 52.22% by Marathon Gold USA Corporation. The relative ownership has changed because Golden Chest LLC initiated cash calls to its two members and Marathon Gold contributed more cash. In November 2013, pursuant to an agreement to lease the Skookum Shoot, Juniper Resources, LLC agreed to make the payments under our purchase agreement.


History of Operations


The Golden Chest was the location of one of the first lode claims in the district and is the largest historic lode producer of gold in the district with production estimated at approximately 65,000 ounces mostly from shallow underground mining of the Katie and Dora high grade veins. Most of this historic mining took place in the late 1890's and 1900's.


Cominco-American and Golden Chest Inc. (GCI) conducted geologic and geophysical studies in the late-1970s and early-1980s, targeting gold and massive sulfides. Drill tests by GCI included four underground holes and one surface diamond drill hole totaling more than 2,000 feet. The surface hole intersected a 60-foot zone containing multiple low grade gold-bearing quartz veins.


Newmont Exploration Ltd. followed GCI’s discovery by evaluating the veins for bulk mineable potential from 1987 to 1990. It completed a geochemical survey of the project area which included 1,430 soil samples and 157 rock chip samples. Soil samples from the mine area were anomalous in both gold and arsenic, indicating a well-developed vein system. Newmont then drilled 35 shallow reverse-circulation and five core holes, establishing an historic resource most of which is related to a large quartz vein system, the Idaho vein, on the south end of the property.


The Company commenced operations in 2004 at the Golden Chest. It conducted small scale underground mining comprised of 8,400 tonnes grading 6.90 gpt. A ramp extending 500 meters and connecting with the No. 3 level was driven. NJMC also completed about 3,500 meters of core drilling on the property primarily focused on extending the Idaho vein at depth which was successful.


Present Condition and Work Completed on the Property


In 2004, the Company built an exploration portal and decline ramp at the New Jersey mine to a high grade drilling intercept on the Katie vein. Drifting was completed on the vein and the vein material was stockpiled. A total of seven exploration core holes were completed for a total of 1,431 meters. Four exploration holes were drilled at the Golden Chest mine.


In 2005, five exploratory core drill holes totaling 685 meters were drilled at the Golden Chest mine into the area of the deposit which came to be known as the Skookum Shoot.


In 2006, the Company commenced development of a decline ramp at the Golden Chest mine and drilled seven exploratory core holes at the Golden Chest mine totaling 1,125 meters. The Golden Chest mine produced 3,520 tonnes of ore at a grade of 6.0 gpt Au which was processed at the New Jersey mill before economic limits of the stope were reached. Management decided to concentrate mining efforts on a decline ramp to the Skookum Shoot.


In 2007, mining at the Golden Chest was focused solely on the driving of the decline ramp to the Skookum Shoot.


In 2008, we drilled one exploratory hole at the Golden Chest mine. Our development work at the Golden Chest revealed a new vein we named the Clagett. It was discovered when we were driving a 440 meter ramp connecting the surface to the historic No. 3 level. In late 2008, all development activity was suspended and we focused our efforts on ore production of the Clagett vein and pillars on the Katie vein.


In 2009, mining activity at the Golden Chest was suspended in May after 1,470 tonnes were mined and milled at the New Jersey mill. The average grade of the ore was 3.22 gpt Au. The mill experienced a temporary shutdown because the grade of the material was too low to be economic.


In 2010, a single core hole was completed at the Golden Chest. On December 2, 2010, the Company formed Golden Chest LLC, an Idaho limited liability company, effectively joint venturing the Golden Chest mine with Marathon Gold USA Corp., a Colorado corporation. The agreement called for Marathon to spend four million dollars in one year to earn a 50% interest in the project. Golden Chest LLC purchased the mine from Metaline Contact Mines and J.W. Beasley Interests (Sellers) for $3,750,000. As of December 31, 2013, Golden Chest had paid $1,625,000, and has agreed to pay the Sellers $2,125,000 over the next four years with a final payment of $250,000 on the seventh anniversary. There are no production royalties underlying the Golden Chest property. The original ownership of the Golden Chest LLC was 50% Company and 50% Marathon Gold. As of December 31, 2013, the ownership has changed due to capital calls. The Company owns 47.78% and Marathon owns 52.22% in the limited liability company.



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In 2011, the Golden Chest joint venture completed 11,300 meters of core drilling in 102 holes culminating in the first Canadian National Instrument 43-101 resource report for the property. The Company provided the drilling for the Golden Chest joint venture on a contract basis with two drilling rigs. 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, exploration continued at the Golden Chest mine until May when the lack of available financing in the junior mining market caused the suspension of all mining activities. Prior to the shutdown, a total of 7,000 meters of drilling in 42 holes were completed at the Golden Chest. Additionally, an exploration drift was completed on the Popcorn vein at the 940 level revealing a strike length of 40 meters of vein that averaged 23 gpt gold across a true thickness of 0.5 meter. Other work completed at the Golden Chest included rehabilitation of the No. 3 level and an exploration crosscut to explore the Popcorn vein. An updated National Instrument 43-101 resource estimate was completed on the Golden Chest mine February 2013.


During 2013, the Company processed vein material from the Golden Chest mine at its New Jersey mill for Golden Chest LLC. The total tonnage milled from the Golden Chest was 1,682 tonnes at an average grade of 2.46 gpt Au. This material was a combination of previously stockpiled material from exploratory raising and drifting activities along with about 200 tonnes from an exploratory raise on the Popcorn vein. Gold recovery in the floatation circuit was 91% as indicated by sampling.


On September 3, 2013, Golden Chest LLC entered into a Mining Lease with Juniper Resources, LLC (Ex. 10.2). Golden Chest LLC granted Juniper the exclusive right to conduct exploration, feasibility work, development, mining and processing minerals on the leased premises. The leased premises are commonly described as the "Skookum Shoot". Juniper paid Golden Chest LLC $50,000 upon lease execution and $200,000 on November 30, 2013. Juniper is obligated to pay Golden Chest LLC a production royalty equal to 2% of the Net Smelter Returns for all products mined and removed from the Premises and sold and delivered. The lease has a term of 39 months, though, the term can be extended for certain force majeure conditions including a gold price of $900 or less.


Juniper has agreed to make Golden Chest LLC’s land payments to J.W. Beasley Interests, LLC. Effective November 20, 2013, Juniper will pay Beasley $125,000 quarterly. Juniper completed 2,545 meters of core drilling in the Skookum area in the autumn of 2013.


Proposed Program of Exploration and Development


Currently, Juniper Resources LLC is planning to drive a ramp at the Golden Chest mine to access the Skookum shoot. As part of this exercise, Juniper will also drive a secondary escape drift to allow mining of the Skookum shoot to proceed. Juniper plans to begin the portal in the late spring of 2014. It is planned to mill the material from the Skookum Shoot at the New Jersey mill in Kellogg.

The Juniper lease allows for Golden Chest LLC to perform exploration or mining outside of the Skookum area, though, there are no current plans for these activities. The Company is the minority owner in Golden Chest LLC so Marathon USA ultimately controls the direction of future programs at the Golden Chest, and there has been no indication from Marathon that it is interested in pursuing activities outside of the Skookum area in the near term.

Current State Of Exploration and Development of The Property


The Company is considering alternative plans for the Golden Chest mine outside of the Skookum area. Currently the mine is on a care and maintenance basis and awaiting the start of Juniper Resources, LLC mining activities planned to start in the summer o f 2014.


On September 3, 2013, the Golden Chest LLC entered into Mining Lease with Juniper Resources, LLC (Ex. 10.2). In the fourth quarter of 2013, Juniper Resources completed the drilling of 20 exploratory core holes that totaled 2,545 meters. Juniper also completed some site preparation and environmental permitting work to prepare for planned mine development activity.


Age, Modernization and Physical Condition of Plant and Equipment


A 30 ft by 20 ft steel-clad pole building built in 2005 is present near the ramp portal and is used as a shop and a dry storage. 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.



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Geology and Mineralization


Gold mineralization at the Golden Chest is related to a thrust fault known as the Idaho fault and the property is located on the west limb of the Trout Creek anticline, a major north-trending fold in the Prichard formation. The Idaho fault occurs at the contact of Prichard formation units G and H. Unit G, a quartzitic unit, is the host for most of the veins while the overlying Unit H is an argillite-siltite sequence of rocks.


The Golden Chest veins are flatly-dipping, banded quartz veins ranging in thickness from centimeters to 3 meters and are generally conformable with bedding of Prichard formation argillite. Sulfide minerals including pyrite, arsenopyrite and galena occur with free gold in the quartz veins. Veins are stacked, in certain areas, to form bulk mineable bodies. Gold mineralization also occurs as disseminations in quartzite units of the Prichard formation. 

Gold mineralization occurs within quartz sulfide veins associated with structural deformation of the Proterozoic Prichard Formation, and can be found along at least 1,500 meters of strike length along the Idaho fault on the property. The veins formed along planes of weakness and open spaces resulting from flexure folding and shearing on the west limb of the Trout Creek Anticline. The open spaces and planes of weakness are generally conformable to bedding and tend to form between beds of different competency. Two types of mineralized veins are present. The banded quartz sulfide veins are primarily associated with less competent siltite and argillite and contain pyrite, arsenopyrite, galena, sphalerite and occasional visible gold along fine grained dark bands. The more massive quartz sulfide veins are primarily associated with more competent quartzite and contain clots of pyrite, sphalerite, galena, chalcopyrite, scheelite and rare specs of visible gold. The gold mineralization is likely associated with nearby intrusive rocks of the Cretaceous Period.

McKINLEY PROJECT

Overview

The McKinley project was acquired by the Company in December 2013 with the acquisition of Idaho Champion Resources (ICR) and includes the historic McKinley gold mine and various gold prospects located north of Riggins, Idaho.

Location

The project consists of the McKinley mine which is located on 62 acres of patented mining claims 2.5 kilometers east of Lucile, Idaho. Additionally, the project consists of a mineral lease and unpatented mining claims covering approximately 2,500 acres extending northerly from Riggins, Idaho to Lucile over a distance of nearly 13 kilometers. Access to the site is made via a series of public and private dirt roads connected to U.S. Highway 95.

Property Ownership

The 62 acres of patented mining claims that make up the McKinley mine are held under an option to purchase from a trust for a price of $285,000 until November 18, 2014 (Ex. 10.6). The Company can perform certain due diligence including exploration drilling prior to the exercise date. The terms of the purchase will require 10% to be paid on or before November 18, 2014 with the remaining balance amortized over 15 years at a 5% interest rate with quarterly payments for 5 years, and then a balloon payment for the remaining balance. A previous lessee of the McKinley mine (Ex. 10.5) is due a 1.0% to 2.0% NSR sliding scale royalty based on the price of gold which is capped at a total of $500,000. Another 2,500 acres of land is held through a lease (Rupp Lease) that requires an annual rental payment of $6100, and should production be achieved a 1% NSR royalty would be due after recoupment of capital costs and an ore reserve of 250,000 ounces is achieved. About 780 acres of the mineral rights subject to the Rupp Lease royalty are held through unpatented claims which also require an annual claim fee payment to the U.S. BLM.

History of Operations

The McKinley mine has four levels and approximately 3,900 feet of underground workings that remain in good condition. The area was first worked in 1891 with intermittent activity over the following decades by unknown operators. The property was explored by Hunt Energy in the late-1970s and 1980s, and Kennecott Exploration evaluated the property in the early-1990s. In the 1990s a lessee built a small mill but processed a very small quantity, and the mill site burned in a 2012 forest fire that came through the area. Another historic mine within the project area includes the Big Easy mine which contains 1,200 feet of underground workings.



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Present Condition and Work Completed on the Property

The McKinley project is an exploration project without known ore reserves. A total of 3,900 feet of underground workings are present at the McKinley and most the workings are accessible. There are two main levels separated by 300 feet with two intermediate sublevels all of which are connected by a series of sub-vertical raises. The Company and its recent predecessor, ICR, have completed underground sampling programs which included chip and channel sampling of mineralized areas. Recent results from the channel sampling program include a 9.0-meter continuous channel (consisting of 6 separate samples) that returned a weighted average grade of 17.47 gpt gold, including a 1.5-meter sample that returned 79.3 gpt gold. Other highlights included a 2.1-meter channel that returned 15.5 gpt gold, and a 1.1-meter channel that returned 17.25 gpt gold. The weighted average grade of the continuous zones is based on the sample weights as reported by ALS Chemex. The channel lengths reported above are not true widths across the vein system.

Surface exploration work completed has included a ground magnetic survey, approximately 2.4 kilometers wide and 5.6 kilometers long, across the McKinley property. The survey appears to represent the mineralization at the McKinley mine while indicating several potential target areas along the known trend, which includes several historic mines and prospects, including the Big Easy mine.

The Company has budget of about $75,000 for exploration at the McKinley project in 2014. Exploration work planned includes small-diameter core drilling, geologic mapping, channel sampling, and underground surveying.

Age, Modernization and Physical Condition of Plant and Equipment

There is no usable plant or associated equipment at the site, though, some junk equipment has been left at the site by a previous operator. There is no electrical energy available at the site.

Geology and Mineralization


The McKinley project is located within the rocks of the Riggins and Seven Devils Groups of the Blue Mountains Island-Arc Complex. Rocks of the accreted Riggins Group and Seven Devils Terrane are widely considered to be the source of coarse gold found in the extensive historic placer operations near Lucile. The McKinley project covers an extensive area of alteration/mineralization that can be classified as an orogenic gold model also known as quartz, carbonate vein type deposits.


TOBOGGAN PROJECT

Overview

In 2007, the Company conducted regional prospecting in the area around Murray, Idaho. This led to the staking of 106 claims covering eight different prospects. We named this group of claims the 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.

Property Ownership


The Toboggan project is comprised of 106 unpatented mining claims owned by the Company of which 39 claims related to the Little Baldy prospect are leased to Hecla Silver Valley, Inc. 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 of Operations


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 may have been 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



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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.

In 2007, the Company drilled an exploratory core hole at the Snowslide gold prospect.

For the period from March 2008 through March 2011, the Toboggan project was an exploration joint venture between Newmont Mining Corporation and the Company.

In 2009, Newmont drilled six core holes for a total of 1,359 meters at the Toboggan Project. We drilled two holes drilled at each of the following prospects: Mineral Ridge, Golden Reward and Gold Butte. The purpose of the year’s drilling program was to investigate geochemical soil anomalies, geophysical anomalies and also to gain a better understanding of the geology. This drilling was completed on a contract basis by the Company. The drilling confirmed widespread areas of gold mineralization associated with tellurium. Additionally, the continuity of the mineralized structure at the Gold Butte was extended below the surface. Information gained from this exploration program which also included soil sampling, surface rock sampling, and geologic mapping was used to target potential areas of high grade gold mineralization commonly found in gold-telluride systems. Drill core was logged, cut, and sampled by Newmont personnel in a secure facility. Newmont’s geologists observed a quality control program which utilized known sample standards and duplicate samples. Assaying was completed by ALS Chemex of Reno, Nevada. The Company filed a lawsuit was filed in federal district court against the United States Forest Service and a private party seeking to re-open the East Fork of Eagle Creek road which is a much better access route to the Toboggan Project.

In 2010, the Company continued contract drilling for Newmont on the Toboggan Project. A total of 914 meters in eight holes of core drilling were completed and 941 meters in seven holes of reverse-circulation drilling were completed by Newmont. The results from the Newmont drilling included wide intersections of anomalous intervals of gold mineralization, but no ore grade intercepts.

Newmont completed three seasons of exploration work spending approximately $2,000,000, and then dropped the project in 2011, All of the exploration data was turned over to the Company, and Newmont quit claimed all of the mining claims back to the Company.

In 2012, the Company’s lawsuit against the United States Forest Service to reopen the East Fork of Eagle Road was unsuccessful. Shoshone County planned to appeal the decision.


In September, 2012, the Company leased 39 unpatented lode claims to Hecla Silver Valley, Inc. Hecla owns adjoining patented claims. This lease is a part of the gold-telluride prospect known as Little Baldy. The Little Baldy prospect was discovered by soil sampling completed during Newmont’s three year exploration program in the area. A gold-in-soil anomaly of approximately 700 meters by 300 meters was discovered by Newmont which is centered on Hecla’s claims but overlaps onto the Company's Little Baldy claims which are now leased to Hecla. Surface sampling by Newmont of mineralized rocks showed extremely high gold values with the highest grade sample assaying 2,130 grams per tonne (gpt) gold. The gold mineralization at Little Baldy exhibits the typical association with tellurium found elsewhere in the Toboggan Project as the high grade sample assayed greater than 500 parts per million (ppm) tellurium.


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 encountered 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 2013.

Joint venture partners will be sought to help advance the project.



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Age, Modernization and Physical Condition of Plant and Equipment

No electrical energy is available at the site.

Geology and Mineralization


Gold mineralization tends to occur in structurally controlled zones within the Prichard Formation which may be associated with large 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 may be associated with yet unobserved alkaline intrusions.

GIANT LEDGE

Location


The Giant Ledge prospect is an exploration project without known ore reserves. Our program is exploratory. It lies about 4 miles southeast of Murray, Idaho, in the Granite Creek drainage, and is accessed by an historic road that has been washed out in areas.


Property Ownership


The Company’s land position consists of 10 unpatented lode claims covering an area of 200 acres. The claims were staked in 2008 by the Company.


History of Operations


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


No work was completed at the Giant Ledge property in 2013.


The Company was able to procure the drill core from Sunshine Mining Company'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.

Age, Modernization and Physical Condition of Plant and Equipment

No electrical power is present at the site.

Geology and Mineralization


The property hosts polymetallic lead, copper and gold mineralization in and along the contact of an igneous intrusive. The main rock types found at the property are argillites and siltites of the Proterozoic Prichard Formation and monzonite associated with the Gem Stocks. The east contact between the Prichard and the intrusive is the French Gulch Fault which is a steeply dipping reverse fault, with the down dropped side on the west.

Exploration and Development Plans

If sufficient funds are available, the Company will perform a ground-based geophysical survey utilizing induced polarization (IP).



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SILVER BUTTON/ROUGHWATER PROSPECT

Location


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 60 miles north of Kellogg, Idaho. Access to the site is via foot trail.


Property Ownership


The property was staked by the Company in 2004 and is located in the Lightning Creek drainage.


History of Operations


There is no previous operating history.


Present Condition and Work Completed on the Property


Only preliminary field sampling and claim staking have taken place at the prospect. No additional exploration is planned at this time.


Age, Modernization and Physical Condition of Plant and Equipment

No electrical power is available at the site.

Geology and Mineralization


Float collected from over a 100 meter length of a vein subcrop on a talus slope contained silver minerals as identified by microscopic and chemical analyses. Silver mineralization consists of black sooty coatings of argentite, a silver sulfide on quartz veining. The host rock is Prichard formation and an igneous intrusion is located nearby.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth information as of May 1, 2014 provided by the Company’s stock transfer agent regarding any person who is known to the Company to be the beneficial owner of more than five percent (5%) of any class of the Company’s voting securities. 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

(1) Title of Class

(2) Name and Address of Beneficial Owner

(3) Amount and Nature of Beneficial Ownership

(4) Percent of Class

Common

John A. Swallow

201 North 3 rd Street

Coeur d’Alene, Idaho 83814

6,333,334 direct

4,000,000 indirect (a)

12.96%

Common

Fred W. Brackebusch 1

P.O. Box 1019

Kellogg, Idaho 83837

2,503,917 indirect (b)

1,882,861 direct

5.50%


(a)

These shares are held in NFS/FMTC Roth IRA FBO John A. Swallow.


(b)

Fred W. Brackebusch owns 89.6% of Mine Systems Design, Inc. (MSD) which is a corporation that owns 2,794,500 common shares of the Company. Neither MSD nor Fred W. Brackebusch has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights. Mr. Brackebusch has voting and dispositive control of MSD.


1 At a meeting of the Board of Directors of the Company on August 29, 2013, Fred W. Brackebusch resigned as President, Director and Treasurer of the Company.



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The following table sets forth information as of May 1, 2014 provided by the Company’s stock transfer agent regarding each director’s qualifying shares, beneficially owned by all directors and nominees and each named executive


Security Ownership of Management

(1) Title of Class

(2) Name of Beneficial Owner

(3) Amount and Nature of Beneficial Ownership

(4) Percent of Class

Common

John A. Swallow

201 North 3 rd Street

Coeur d’Alene, Idaho 83814

6,333,334

4,000,000 (a)

12.96%

Common

Delbert Steiner

201 North 3 rd Street

Coeur d’Alene, Idaho 83814

1,000,000

1.25%

Common

Grant A. Brackebusch

 89 Appleberg Road

 Kellogg, Idaho 83837

290,633 indirect (b)


727,860 direct

0.36%

Common

Fred W. Brackebusch 1

P.O. Box 1019

Kellogg, Idaho 83837

2,503,917 indirect (c)

1,882,861 direct

5.50%

Common

Ivan R. Linscott 2

7150 Burke Road

Wallace, Idaho 83873

235,500

0.30%

Common

William C. Rust 3

P.O. Box 648

Wallace, Idaho 83873

195,000

0.24%

Common

M. Kathleen Sims 4

2745 Seltice Way

Coeur d’Alene, Idaho 83814

208,000

0.26%

Common

All Directors and Executive

Officers as a group (3 individuals)

11,623,967

14.57%


(a)

These shares are held in NFS/FMTC Roth IRA FBO John A. Swallow. The shares were purchased as part of the Company’s Regulation D Rule 506(b) equity offering completed on October 31, 2013. Each unit purchased in the offering consisted of one (1) share of the Company’s common stock and One Half (½) purchase warrant, each full warrant exercisable for one (1) share of the Company’s stock at $0.15 through May 31, 2015. By virtue of the purchase John A. Swallow holds 2,000,000 warrants.


(b)

Grant Brackebusch owns 10.4% of Mine Systems Design, Inc. (MSD) which is a corporation that owns 2,794,550 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.


(c)

Fred W. Brackebusch owns 89.6% of Mine Systems Design, Inc. (MSD) which is a corporation that owns 2,794,500 common shares of the Company. Neither MSD nor Fred W. Brackebusch has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.


(d)

No other Director or Officer has the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights. No shares are pledged as security.


1 At a meeting of the Board of Directors of the Company on August 29, 2013, Fred W. Brackebusch resigned as President, Director and Treasurer of the Company.

2 At a meeting of the Board of Directors of the Company on August 29, 2013, Ivan R. Linscott resigned as a member of the Board of Directors of the Company.

3 At a meeting of the Board of Directors of the Company on August 29, 2013, William C. Rust resigned as a member of the Board of Directors of the Company.

4 At a meeting of the Board of Directors of the Company on August 29, 2013, M. Kathleen Sims resigned as a member of the Board of Directors of the Company.



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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 OTC Markets, at the time to determine current fair market value and subsequently the number of shares to be issued.

Changes in Control

The Company is not aware of any arrangements, the operation of which may at a subsequent date result in a change of control.

Item 5. Directors and Executive Officers


Name

Age

Position

Term

Fred W. Brackebusch

69

President, Director & Treasurer

7/18/1996 – 8/29/2013 1

Ivan R. Linscott

70

Director

9/21/2004 – 8/29/2013 2

William C. Rust

67

Director

9/21/2004 – 8/29/2013 3

M. Kathleen Sims

69

Director

9/25/2003 – 8/29/2013 4

Tina C. Brackebusch

44

Secretary

1/1//1997 – 8/29/2013 5

Delbert W. Steiner

69

Chief Executive Officer, Board Chairman

8/29/2013 - present

John Swallow

48

President, Director

8/29/2013 - present

Grant Brackebusch

44

Vice President, Director

7/18/1996 - present

Directors are elected by shareholders at each annual shareholders meeting and hold their office until the next annual meeting of shareholders or until their respective successors are elected and qualified.

Identification of certain significant employees


The Company does not have any significant employees.


Family Relationships


Fred W. Brackebusch is the father of Grant A. Brackebusch. Tina C. Brackebusch is the wife of Grant A. Brackebusch.


Business Experience

Fred W. Brackebusch, P.E. served as the Chairman of the Board, President, Chief Executive Officer and Treasurer of the Company from 7/18/1996 until he resigned from those positions on 8/29/2013. He holds a B.S. and an M.S. in Geological Engineering 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 in the State of Idaho. He has been the principle owner of Mine Systems Design, Inc., a mining consulting business, which is also a large shareholder in the Company, since 1987.

Ivan R. Linscott, PhD served as the Vice President and Director of the Company from 9/21/2004 until he resigned from those positions on 8/29/2013. He is a physicist at Stanford University. He is a Senior Research Associate for radioscience spacecraft instrument development and is a 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 in the State of Idaho. 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.

1 At a meeting of the Board of Directors of the Company on August 29, 2013, Fred W. Brackebusch resigned as President, Director and Treasurer of the Company.

2 At a meeting of the Board of Directors of the Company on August 29, 2013, Ivan R. Linscott resigned as a member of the Board of Directors of the Company.

3 At a meeting of the Board of Directors of the Company on August 29, 2013, William C. Rust resigned as a member of the Board of Directors of the Company. William C. Rust resigned his position on the Audit Committee by virtue of his resignation from the Board.

4 At a meeting of the Board of Directors of the Company on August 29, 2013, M. Kathleen Sims resigned as a member of the Board of Directors of the Company. M. Kathleen Sims resigned from her position on the Audit Committee by virtue of her resignation from the Board.

5 At a meeting of the Board of Directors of the Company on August 29, 2013, Tina C. Brackebusch resigned as corporate Secretary.



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William C. Rust served as a Director of the Company from 9/21/2004 until he resigned from that position on 8/29/2013. He is a metallurgical engineer with extensive experience in the Silver Valley in the State of Idaho. He worked for Asarco as Chief Metallurgist. He also worked for CoCa mines at the Grouse Creek mine in Central Idaho and for McCulley, Frick and Gilman, an environmental consulting firm. He was all the Mill Manager and Senior Metallurgist with Getchell Gold Inc. in Nevada which operated a 3,200 ton/day gold plant. Mr. Rust is currently self-employed as a metallurgical engineering consultant. He was formerly a member of the Company’s Audit Committee.

M. Kathleen Sims served as a Director of the Company from 9/25/2003 until she resigned from that position on 8/29/13. She is a successful business woman who is majority owner of a Honda car dealership in Coeur d’Alene, Idaho. She is currently a Congresswoman in the Idaho Legislature. She was formerly as 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 necessary experience in financing, business plans and management. She was formerly the chairperson of the Audit Committee.

Tina C. Brackebusch served as corporate Secretary of the Company from 1/1/1997 until she resigned from that position on 8/29/13. She served as the Office Manager for the Company since 1/1/1997 as well. She holds B.S. in Secondary Education from the University of Idaho and teaches English at Wallace High School in Wallace, Idaho.

Delbert Steiner was named the Chief Executive Officer and Chairman of the Board of Directors of the Company on August 29, 2013. He holds a B.S. from Lewis Clark State College and a Juris Doctor from the University of Idaho. He has held the position of CEO and Chairman for the Vancouver based Premium Exploration, Inc. since 2005 and was responsible for day to day business and financial decision making. He practiced law for more than 25 years and has an extensive background in environmental and mining law, including permitting projects from the exploration to mining phases . Mr. Steiner’s extensive background in the mining industry and in operating a publicly traded company qualifies him to sit on the Board of the Company.

John Swallow was named the President and a Director of the Company on August 29, 2013. He holds a B.S. in Finance from Arizona State University. Mr. Swallow was the Vice President of Timberline Drilling, Inc. from November 2011 until accepting the role of President with the Company. From September 2009 until November 2011 Mr. Swallow was self-employed. From January 2006 until September 2009 he served as chairman of Timberline Resources Corporation. He brings wide-ranging experience from within the local mineral exploration industry as well as extensive knowledge of the junior equity markets. Mr. Swallow’s extensive experience in the drilling industry, his previous roles as a chairman of a board and as a vice president of a corporation qualify him to sit on the Board of the Company.

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 is registered in Idaho as a Professional Engineer. 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. His background in the mining industry includes open pit mining planning and supervision as well as various engineering and geotechnical tasks. Mr. Brackebusch’s extensive mining background, knowledge of the Company’s day to day operations, and industry expertise qualifies him to sit on the Board of the Company.

Involvement in Certain Legal Proceedings


To the Company's knowledge, none of the following events have occurred during the past ten (10) years and that are material to an evaluation of the ability or integrity of any director, person nominated to become a director or executive officer of the registrant:

(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:



31





(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii) Engaging in any type of business practice; or

(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

(i) Any Federal or State securities or commodities law or regulation; or

(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Promoters and Control Persons


To the Company's knowledge, none of the following events have occurred during the past five (5) years and that are material to an evaluation of the ability or integrity of any promoter or control person of the registrant:

(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;


(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);


(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:


(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;



32






(ii) Engaging in any type of business practice; or


(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;


(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;


(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;


(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

Shareholder Communications

Company shareholders who wish to communicate with the Board of Directors or an individual director may write to New Jersey Mining Company’s office located at 201 N. Third Street, Coeur d’Alene, Idaho 83814. Your letter should indicate that you are a shareholder and whether you own your shares in your name or in the name of an entity. Letters received will be retained until the next Board meeting when they will be available to the addressed director. Such communications may receive an initial evaluation to determine, based on the substance and nature of the communication, a suitable process for internal distribution, review and response or other appropriate treatment. There is no assurance that all communications will receive a response.

REPORTS TO SECURITY HOLDERS


The Company is not required to deliver an annual report to shareholders and does not plan to provide an annual report in 2013. 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 will be provided on the Company’s website: www.newjerseymining.com .


Conflict of Interest Policy

Our policy was established to guard against any potential conflicts of interest. As the Company grows it will be the job of the audit committee to decide if additional controls need to be put in place.

Code of Ethics

The Board of Directors adopted a Code of Ethical Conduct ( Ex.14 ).

Meetings and Committees of the Board Of Directors

We presently have no formal independent Board committees. Until further determination, the full Board of Directors will undertake the duties of the audit committee, compensation committee and nominating and governance committee.

Compensation Committee

The Board of Directors, in its Compensation Committee role, will be responsible for recommendations to the Board of Directors respecting the compensation of our named executive officers.



33





Audit Committee

The Board of Directors, in its Audit Committee role, will be responsible for selecting the Company’s independent auditors, approve the scope of audit and related fees, and review financial reports, audit results, internal accounting procedures, related-party transactions, when appropriate, and programs to comply with applicable requirements relating to financial accountability. The Audit Committees function will include the development of policies and procedures for compliance by the Company and its officers and directors with applicable laws and regulations. The audit committee has reviewed and discussed the attached audited financial statements with management. The audit committee has received written disclosures from the independent accountant required by Independence Standard Board Standard No. 1, as amended, as adopted by the PCAOB in Rule 3600T and has discussed the independence of the company’s certifying accountant. Based on this review and discussion, the Board of Directors, in its audit committee role, recommended that the audited financial statements be included in this Annual Report.

Nomination and Governance Committee

The Board of Directors, in its Nomination and Governance Committee role, will be responsible for recommendations to the Board of Directors respecting corporate governance principles; prospective nominees for Director; Board member performance and composition; function, composition and performance of Board committees; succession planning; Director and Officer liability insurance coverage; and Director’s responsibilities.

Item 6. Executive Compensation

Compensation of Named Executive Officers

The table below includes summary of cash and other compensation granted to Fred W. Brackebusch, the Company’s former President and Chief Executive Officer, and Grant A. Brackebusch, the Company’s current Vice President, John Swallow the current President and Delbert Steiner the current Chief Executive Officer, (the “Named Executive Officers”)

Executive Officer Summary Compensation Table

Name and principal position

Year

Salary ($)

Bonus ($)

Stock awards 1 ($)

Options awards ($)

Nonequity incentive plan compensation ($)

Nonqualified deferred compensation earnings ($)

All other compensation ($)

Total ($)

Fred Brackebusch, President

2013

 

 

1,000

 

 

 

 

1,000

2012

54,167

 

1,625

 

 

 

 

55,792

Grant Brackebusch, Vice President

2013

24,167

 

2,250

 

 

 

 

26,417

2012

35,139

 

1,625

 

 

 

 

36,764

Delbert Steiner, Chief Executive Officer

2013

20,000

 

 

 

 

 

 

20,000

John Swallow, President

2013

0

 

 

 

 

 

 

0


(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 executives. 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.



34






Discussion, Analysis and Overview of Compensation Program

Compensation Philosophy: Our general compensation philosophy will be designed to link an employee’s total cash compensation with our performance, the employee’s department goals and individual performance. Given our limited operations and limited capital resources, we are subject to various financial restraints in our compensation practices. As an employee’s level of responsibility increases, there will be a more significant level of variability and compensation at risk. By linking incentive compensation to the performance of the Company, we believe that it will create an environment in which our employees will be stakeholders in our success and, thus, benefit all shareholders. As the Company moves from an exploration stage company to a revenue generating company we plan to bring on employees and develop written employee compensation guidelines.

Executive Compensation Philosophy : Our executive compensation philosophy will be designed to establish an appropriate relationship between executive pay and our annual performance, our long-term growth objectives, individual performance of the executive officer and our ability to attract and retain qualified executive officers. We will attempt to achieve these goals by integrating competitive annual base salaries with (a) bonuses based on corporate performance and on the achievement of specified performance objectives, and stock awards through some form of long term incentive plan. We believe that cash compensation in the form of salary and bonus provides our executives with short-term rewards for success in operations and stock awards will provide long term incentives.

In making compensation decisions, the board of directors, in its compensation committee role, will compare each element of total compensation against companies referred to as a “compensation peer group.” The compensation peer group will be a group of companies that the compensation committee will select from readily available information about small companies engaged in similar businesses and with similar resources. As the Company moves from a exploration stage company to a revenue generating company we plan to bring develop written executive compensation guidelines.

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, 2013.


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 year ending December 13, 2013 are as follows:


Director Summary Compensation Table


Name

Year

Fees earned or paid in cash

($)

Stock awards

($)

Option awards

($)

Non-equity incentive plan compensation ($)

Nonqualified deferred compensation earnings

($)

All other compensation

 ($)

Total

($)

Ivan R. Linscott

2013

 

1,000

 

 

 

 

1,000

2012

 

1,625

 

 

 

 

1,625

William C. Rust

2013

 

1,000

 

 

 

 

1,000

2012

 

1,625

 

 

 

 

1,625

M. Kathleen Sims

2013

 

1,000

 

 

 

 

1,000

2012

 

1,625

 

 

 

 

1,625


(1)

Directors Fred W. Brackebusch and Grant A. Brackebusch were 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.



35





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 per year. In 2012 these shares were valued at $1,625 per director. In 2013 these shares were valued at $1,000 per director for all retired Directors and $2,250 for the remaining director Grant Brackebusch. 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 7. Certain Relationships and Related Transactions, and Director Independence.

Transactions with Related Persons


Fiscal Year Ended December 31, 2011:

On or about December 31, 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 $5,000 and management fees of $5,000 based upon the estimated value of the shares issued and services rendered. The issuance was 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 an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Fred W. Brackebusch, Grant A. Brackebusch and Tina Brackebusch each received 25,000 shares for their services as directors and officers.

Fiscal Year Ended December 31, 2012:


On November 15, 2012, the Company quitclaimed and released its interest in a Lease Agreement commonly known as the “Miner’s Slough and Teddy Parcel” back to the Lessor Mine Systems Design, Inc. (“MSD”). MSD is owned by Fred Brackebusch, President and Chairman of the Company and his son Grant A. Brackebusch, Vice President and Board member of the Company. The lease required the payments in the form of a production royalty of 3% of the net smelter return of all ores or concentrates of leased substances mined and shipped from the leased premises. This royalty was to be accounted for and paid monthly. The lease was terminated in accordance with the termination provision in Section 16.2.


During the fiscal year ended December 31, 2012, 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 and management fees of $1,625 based upon the estimated value of the shares issued and services rendered. The issuance was 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 an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Fred W. Brackebusch, Grant A. Brackebusch and Tina Brackebusch each received 25,000 shares for their services as directors and officers.


Fiscal year ended December 31, 2013:


On or about August 29, 2013 the Company issued 125,000 shares of unregistered common stock to its retiring directors and officers for services rendered to the Company. The shares were valued at $0.04 per share based upon fair value at the time of issuance. On December 31, 2013 the Company issued 25,000 shares to Grant Brackebusch for services as a Director of the Company. The shares were valued at $0.09 per share based upon fair value at the time of issuance. The issuances 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 an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

On December 31, 2013 the Company entered into an Exchange Agreement with Idaho Champion Resources, an Idaho limited liability company (“ICR”), whereby the Company acquired One Hundred Percent (100%) of the membership units of ICR in exchange for 5,000,000 shares of unregistered common stock valued at $0.05 per share (Ex. 10.3) . John Swallow, President and Board member of the Company personally owned 26.666% of the membership units of ICR and exchanged his units for 1,333,334 shares of unregistered common stock of the Company with an attributable dollar value of $66,650.



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Review, approval or ratification of transactions with related persons.


Not required for Smaller Reporting Companies.


Promoters and Certain Control Persons


The Company is not aware of any promoter related transactions during the last five fiscal years. Delbert W. Steiner, the Company’s Chief Executive Officer is currently the Company’s control person.


Director Independence


The Board of Directors has determined that Delbert Steiner, John Swallow and Grant Brackebusch are not independent directors.


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. The audit committee is currently vacant.


Item 8. Legal Proceedings.

The Company is not subject to any material pending legal proceedings.


Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

Market Information


The Company's Common Stock currently trades on the OTC Pinks tier of the OTC Markets under the symbol "NJMC". The following table sets forth the range of high and low bid prices as reported by the OTC Markets 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, 2013

High Bid

Low Bid

First Quarter

$0.08

$0.05

Second Quarter

$0.06

$0.04

Third Quarter

$0.05

$0.04

Fourth Quarter

$0.08

$0.07


Shareholders


As of May 1, 2014 there were approximately 79,760,148 common shares issued and outstanding held by 354 shareholders of record.


Transfer Agent


Our transfer agent is Columbia Stock Transfer located at 1869 E. Seltice Way Suite 292, Post Falls, ID 83854.




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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.


Securities Authorized for Issuance Under Equity Compensation Plans


None

Item 10. Recent Sales of Unregistered Securities.

Occasionally, the Company pays for goods and services with restricted common stock. The Company’s 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 the Company’s common stock as quoted on the OTC Markets.

Fiscal Year ended December 31, 2013:

On May 6, 2013 the Company sold 200,000 shares of its common stock to Juniper Resources for $10,000 cash. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On May 22, 2013 the Company issued 180,000 shares of its common stock to Revett Metal Associates in lieu of lease payments due on the Niagara and Copper Camp properties. The shares were valued at $0.05 per share based upon market value at the time of issuance. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On September 24, 2013, the Company conducted a private placement of unit securities. Each unit consisted of one (1) share of the Company’s common stock and One Half (½) purchase warrant, each full warrant exercisable for one (1) share of the Company’s stock at $0.15 per share through May 31, 2015. As of the private placement closing on October 31, 2013, 22,000,000 units were sold for gross proceeds of $1,100,000 before deducting 10% brokerage fees. Pennaluna & Co. acted as the Company’s placement agent. The sale of units was limited to accredited investors in the United States. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act"), and Regulation D Rule 506. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On September 29, 2013 the Company issued 125,000 shares of common stock to its retiring directors and officers for services rendered to the Company. The shares were valued at $0.04 per share based upon fair value at the time the directors and officers retired. The issuance was limited to accredited investors in the United States. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On October 20, 2013 the Company issued 714,286 shares of common stock to Timberline Drilling for drilling services provided to the Company. The shares were valued at $0.07 per share based upon market value at the time of issuance. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On December 31, 2013 the Company issued 5,000,000 shares of common stock valued at $0.05 per share based upon fair value at the time issuance in consideration for an Exchange Agreement (Ex.10.3) under the terms of which the Company received 100% of the membership units of Idaho Champion Resources, LLC. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.



38





Fiscal Year ended December 31, 2012:

On December 31, 2012 the Company issued 150,000 shares of common stock to its directors and officers for services rendered to the Company. The shares were valued at $0.065 per share based upon fair value at the time of issuance. The issuance was limited to accredited investors in the United States. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On November 28, 2012 the Company issued 60,000 shares of its common stock to Revett Metal Associates in lieu of lease payments due on the Copper Camp property. The shares were valued at $0.10 per share based upon market value at the time of issuance. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

Fiscal Year ended December 31, 2011:

On December 31, 2011 the Company issued 150,000 shares of common stock to its directors and officers for services rendered to the Company. The shares were valued at $0.20 per share based upon fair value at the time of issuance. The issuance was limited to accredited investors in the United States. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On December 31, 2011 the Company issued 80,200 shares of common stock to its employees for services rendered to the Company. The shares were valued at $0.20 per share based upon fair value at the time of issuance. The issuance was limited to accredited investors in the United States. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On November 28, 2011 the Company issued 30,000 shares of its common stock to Revett Metal Associates in lieu of lease payments due on the Copper Camp property. The shares were valued at $0.20 per share based upon market value at the time of issuance. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On October 1, 2011 the Company issued 5,000 shares of common stock valued at $0.20 per share based upon fair value at the time of issuance in consideration for services rendered to the Company. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

On April 6, 2011 the Company sold 22,800 shares of its common stock for $5,000 cash. The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act") since the issuance of these securities by the Company did not involve a “public offering”. The shares are deemed restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Act.

Item 11. Description of Registrant’s Securities to be Registered.

The Company is authorized to issue 200,000,000 shares of common stock, no par value and 1,000,000 shares of preferred stock, no par value. As of May 1, 2014, there were 79,760,148 common shares issued and outstanding and no preferred shares outstanding.

Common Stock

Voting Rights . Each stockholder, on each matter submitted to a vote at a meeting of stockholders, has one vote for each share registered in the stockholder’s name on the books of the Company.



39





Quorum . At any meeting of the Shareholders, a majority of all the Shares entitled to vote, represented by Shareholders of record in person or by proxy, shall constitute a quorum at a meeting of Shareholders, but in no event shall a quorum consist of less than one-third (1/3) of the Shares entitled to vote at the meeting. When a quorum is present at any meeting, action on a matter is approved by a voting group if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action, unless the question is one upon which, by express provision of law or of the Articles of Incorporation or of these Bylaws, a different vote is required. Once a quorum is present, Shareholders may continue to transact business at the meeting notwithstanding the withdrawal of enough Shareholders to otherwise leave less than a quorum

Dividend rights . The Board of Directors may, from time to time, declare and the Company may pay dividends on its outstanding shares of Common Stock in cash, property, or its own shares, except when the Company is insolvent or when the payment thereof would render the Company insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the Company’s governing documents or applicable law. The Company has never paid, and has no plans to pay, any dividends on its shares of Common Stock.

No Cumulative Voting Rights. Our stock does not have cumulative voting rights, which means that the holders of more than fifty percent (50%) of the shares voting in an election of directors may elect all of the directors if they choose to do so. In such event, the holders of the remaining shares aggregating less than fifty percent (50%) would not be able to elect any directors.

Preemptive Rights . The stockholders of the Company do not have a preemptive right to acquire the Company’s unissued shares

Right to Amend Bylaws . The Bylaws of the Company may be altered, amended or repealed by the affirmative vote of a majority of the voting stock issued and outstanding at any regular or special meeting of the stockholders. The Board of Directors has the power to make, alter, amend and repeal the Bylaws of the Company. However, any such Bylaws, or any alteration, amendment or repeal of the Bylaws, may be changed or repealed by the holders of a majority of the stock entitled to vote at any stockholders’ meeting.

Preferred Stock

We are authorized to issue 1,000,000 shares of Preferred Stock. As of January 24, 2014, there were no shares of preferred stock issued and outstanding.

The Board of Directors is authorized, subject to the limitations prescribed by law and the provisions hereof, at its option, from time to time, to divide all or any part of the Preferred Stock into series thereof, to establish from time to time the number of shares to be included in any such series, and to fix the designation, powers, preferences and rights of the shares of each such series and qualifications, limitations or restrictions thereof, and to determine variations, if any, between any series so established, but all shares of the same class shall be identical except as to the following relative rights and preferences as to which there may be variations between series:


(a) the number of shares constituting each such series and the distinctive designation of such series;


(b) the rate of dividend, if any, and whether dividends shall be cumulative or noncumulative;


(c) whether or not such series shall be redeemable and, if so, the terms and conditions upon which shares of such series shall be redeemable, including the date or dates after which they shall be redeemable, and the amount per share payable in cases of redemption, which amount may vary under different conditions and at different redemption dates;


(d) the rights, if any, of such series in the event of dissolution of the Corporation or upon any distribution of the assets of the Corporation, including with respect to voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of such series;


(e) the extent, if any, to which such series shall have the benefit of any sinking fund provisions for redemption or purchase of shares;


(f) whether or not the shares of such series shall be convertible and, if so, the terms and conditions of which shares of such series shall be so convertible; and


(g) the voting rights, if any, of such series; and (h) such other powers, designations, preferences and relative participating, optional or other special rights and such qualifications, limitations or restrictions thereon to the extent permitted by law.

Resale of Restricted Securities under Rule 144 . Rule 144 provides an exemption from registration under the Securities Act for sales by holders of “restricted securities” (i.e., securities acquired directly or indirectly from the issuer or an affiliate of the issuer in a



40





transaction or chain of transactions not involving a public offering) and for sales of “control securities” (i.e., securities held by affiliates, regardless of how they acquired them). The rule contains five general conditions, as summarized below:

·

Current public information. There must be adequate current public information available about the issuer. Reporting companies must have been subject to public reporting requirements for at least 90 days immediately before the Rule 144 sale and must have filed all required reports (other than Forms 8-K) during the 12 months (or shorter period that the company was subject to public reporting) before the sale. For non-reporting companies (including companies that have been subject to the public reporting requirements for less than 90 days), certain other specified public information must be available.


·

Holding period. If the issuer is, and has been for a period of at least 90 days immediately before the sale, subject to public reporting requirements, a minimum of six months must elapse between the later of the date of the acquisition of the securities from the issuer, or from an affiliate of the issuer, and any resale of such securities in reliance on Rule 144.


·

Volume limitations. In any three-month period, resales may not exceed a sales volume limitation equal to the greater of (i) the average weekly trading volume for the preceding four calendar weeks, or (ii) one percent of the outstanding securities of the class.


·

Manner-of-sale requirements. Resales must be made in unsolicited “brokers’ transactions” or transactions directly with a “market maker” and must comply with other specified requirements.


·

Filing of Form 144. The seller must file a Form 144 if the amount of securities being sold in any three-month period exceeds 5,000 shares or $50,000 in aggregate sales price.


·

Non-affiliates. If the issuer is, and has been for a period of at least 90 days immediately before the sale, subject to public reporting requirements, any person who is not an affiliate of the issuer at the time of the sale, and has not been an affiliate during the preceding three months, must only comply with the current public information and holding period requirements. However the current public information requirement does not apply to restricted securities sold for the account of a person who is not an affiliate of the issuer at the time of the sale and has not been an affiliate during the preceding three months, provided a period of one year has elapsed since the later of the date the securities were acquired from the issuer or from an affiliate of the issuer.


Item 12. Indemnification of Directors and Officers.

Articles of Incorporation

The Company's Articles of Incorporation state in Paragraph 4 of Article VII, titled, "Directors", the following:

4. To the fullest extent now or hereafter permitted by applicable law, a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages arising from any conduct as a director, except:


 (a) for any breach of the Director's duty of loyalty to the corporation or its shareholders;


 (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;


 (c) for any transaction from which the director derived an improper personal benefit; or


 (d) if required by statute, failing to meet the standards set forth in Idaho Code Section 30-1-48.


Any repeal or modification of the foregoing paragraph by the shareholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing prior to the time of such repeal or modification.


The Company's Articles of Incorporation state in Article VIII, titled, "Indemnification" the following:


This corporation shall provide any indemnification allowed by the Idaho Business Corporation Act and shall indemnify directors, officers, agents and employees as follows:


1. To the fullest extend now or hereafter permitted by applicable law, this corporation shall indemnify its officers and directors whether they are serving the corporation or, at its request, any other entity, as an officer, director or in any other capacity.




41





2. This corporation may indemnify other employees and agents to the extent as may be authorized by the Board of Directors or the Bylaws and be permitted by law, whether the employees and agents are serving this corporation or, at its request, any other entity.


3. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such Bylaws, resolutions or contracts in implementing such provisions, including, but not limited to, implementing the manner in which determinations as to any indemnity or advancement of expenses shall be made, or such further indemnification agreements as may be permitted by law.


4. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled under any statute, provision or the Articles of Incorporation, Bylaws or other agreements.


5. No amendment or repeal of this Article shall apply to or have any effect on any right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.


By-laws

Paragraph 2.18 of the Company’s by-laws provide that any director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages arising from any conduct as a director, to the fullest extent permitted by law. The Idaho Business Corporation Act (“IBCA”) currently states that a director shall not be liable to the corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, as a director unless a party asserting liability meets their burden of proof. The by-laws additionally state that if the IBCA is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the IBCA, as amended.

The SEC’s Position on Indemnification for Securities Act Liabilities .

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to the Company’s directors, officers or controlling persons, the Company has been advised that in the opinion of the Commission this indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

Item 13. Financial Statements and Supplementary Data.

Not required for Smaller Reporting Companies.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 15. Financial Statements and Exhibits.



(a) List Financial Statements filed as a part of this Registration Statement





42






CONSOLIDATED FINANCIAL STATEMENTS


New Jersey Mining Company

(A Exploration Stage Company)

Table of Contents



Page


Consolidated Balance Sheets, December 31, 2013 and 2012

45


Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended

December 31, 2013 and 2012 and from inception on July 18, 1996

through December 31, 2013

46


Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31,

2013 and 2012 and for the period from inception on July 18, 1996 through

December 31, 2013

47-50


Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012 and from inception

on July 18, 1996 through December 31, 2013

51


Notes to Financial Statements

52-62






















43







[NJMC10A2JUN414SEC002.JPG]




To the Board of Directors

New Jersey Mining Company

 

We have audited the accompanying consolidated balance sheets of New Jersey Mining Company ( An Exploration Stage Company ) (“the Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity and cash flows for the years then ended and from inception on July 18, 1996 through December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Jersey Mining Company ( An Exploration Stage Company ) as of December 31, 2013 and 2012, and the results of its consolidated operations and comprehensive income (loss) and cash flows for the years then ended and from inception on July 18, 1996 through December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

 

 

  [NJMC10A2JUN414SEC003.JPG]

DeCoria, Maichel & Teague, P.S.

Spokane, Washington

April 2, 2014














44







New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Balance Sheets

December 31, 2013 and 2012

 

 

2013

 

2012

ASSETS

 

 

 

 

 

 

 

 

 

  Current assets:

 

 

 

 

    Cash and cash equivalents

$

636,127

$

9,950

    Investment in marketable equity security at fair value(cost-$3,869)

 

9,672

 

20,261

    Joint venture receivables

 

61,143

 

12,525

    Other current assets

 

45,970

 

13,160

    Inventory

 

 

 

19,466

       Total current assets

 

752,912

 

75,362

 

 

 

 

 

  Property, plant and equipment, net of accumulated depreciation

 

4,908,724

 

5,035,276

  Mineral properties, net of accumulated amortization

 

540,433

 

710,075

       Total assets  

$

6,202,069

$

5,820,713

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

  Current liabilities:

 

 

 

 

    Accounts payable

$

40,208

$

47,548

    Accrued payroll and related payroll expenses

 

22,016

 

6,805

    Note payable related party, current

 

36,701

 

37,899

    Account Payable Marathon Gold

 

 

 

62,500

    Obligations under capital lease, current

 

26,367

 

32,009

    Notes payable, current

 

55,663

 

148,834

      Total current liabilities

 

180,955

 

335,595

 

 

 

 

 

    Asset retirement obligation

 

10,949

 

9,797

    Note payable related party, non-current

 

180,417

 

184,940

    Obligations under capital lease, non-current

 

 

 

26,367

    Notes payable, non-current

 

193,880

 

166,839

      Total non-current liabilities

 

385,246

 

387,943

 

 

 

 

 

        Total liabilities

 

566,201

 

723,538

 

 

 

 

 

    Commitments (Note 4 and 6)

 

 

 

 

 

 

 

 

 

  Stockholders’ equity:

 

 

 

 

    Preferred stock, no par value, 1,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

    Common stock, no par value, 200,000,000 shares authorized;

 

 

 

 

      2013-73,760,148 and 2012-45,515,862 shares issued and outstanding

 

11,755,469

 

10,439,219

    Deficit accumulated during the exploration stage

 

(9,302,024)

 

(8,509,851)

    Accumulated other comprehensive income:

 

 

 

 

    Unrealized gain on marketable equity security

 

5,803

 

16,392

      Total New Jersey Mining Company stockholders’ equity

 

2,459,248

 

1,945,760

    Non-controlling interest in New Jersey Mill Joint Venture

 

3,176,620

 

3,151,415

      Total stockholders' equity

 

5,635,868

 

5,097,175

        Total liabilities and stockholders’ equity

$

6,202,069

$

5,820,713

 

 

 

 

 




The accompanying notes are an integral part of these consolidated financial statements.



45






New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Years Ended December 31, 2013 and 2012, And from Inception (July 18, 1996) through December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

From Inception

 

 

 

 

 

 

(July 18, 1996)

 

 

December 31,

 

Through

 

 

2013

 

2012

 

December 31, 2013

Income earned during the exploration stage

 

 

 

 

 

 

  Sales of gold

$

21,049

$

 

$

458,171

  Sales of concentrate

 

 

 

 

 

601,168

  Drilling and exploration contract income

 

 

 

769,084

 

2,371,344

  Joint venture management fee income

 

8,890

 

45,341

 

133,263

  Contract milling income

 

83,762

 

21,174

 

104,936

  Engineering services income

 

 

 

68,700

 

232,522

    Total income earned during the exploration stage

 

113,701

 

904,299

 

3,901,404

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

  Contract milling costs

 

82,544

 

15,499

 

1,431,252

  Drilling and exploration contract expense

 

154

 

348,391

 

1,198,090

  Engineering services expense

 

 

 

19,500

 

71,591

  Management

 

38,556

 

55,052

 

2,010,147

  Exploration   

 

173,794

 

1,046

 

2,593,922

  Net loss (gain) on sale of or abandonment of mineral property

 

109,000

 

 

 

(172,398)

  Write down of mineral property

 

324,142

 

 

 

324,142

  Net gain on sale of equipment

 

(108,208)

 

(9,900)

 

(166,101)

  Depreciation and amortization

 

98,208

 

144,393

 

1,066,315

  General and administrative expenses  

 

184,805

 

241,765

 

3,511,586

    Total operating expenses

 

902,995

 

815,746

 

11,868,546

    Operating income (loss)

 

(789,924)

 

88,553

 

(7,967,142)

 

 

 

 

 

 

 

Other (income) expense:

 

 

 

 

 

 

  Timber sales

 

 

 

 

 

(54,699)

  Timber expense

 

300

 

 

 

14,854

  Royalties and other income

 

(26,032)

 

(19,667)

 

(151,144)

  Royalties expense

 

 

 

 

 

44,089

  Distribution from Golden Chest LLC

 

(119,450

 

 

 

(119,450)

  Gain on sale of marketable equity security

 

 

 

 

 

(92,269)

  Interest income

 

(256)

 

(382)

 

(49,540)

  Interest expense

 

55,621

 

21,968

 

169,474

  Write-off of Goodwill and investment

 

 

 

 

 

120,950

  Equity in loss of Golden Chest LLC

 

99,500

 

822,500

 

1,475,205

    Total other (income) expense

 

9,683

 

824,419

 

1,357,470

 

 

 

 

 

 

 

Income tax (provision) benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(798,977)

 

(735,866)

 

(9,324,612)

Net loss attributable to non-controlling interest

 

6,804

 

12,974

 

22,588

Net loss attributable to New Jersey Mining Company

$

792,173

$

722,892

$

9,302,025

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

Net income (loss)

 

(798,977)

 

(735,866)

 

(9,324,612)

  Unrealized gain (loss) on marketable equity security

 

(10,589)

 

918

 

5,803

Comprehensive income (loss)

 

(809,566)

 

(734,948)

 

(9,318,809)

Comprehensive loss attributable to non-controlling interest

 

6,804

 

12,974

 

22,588

Comprehensive income (loss) attributable to New Jersey Mining Company

$

(802,762)

$

(721,974)

$

(9,296,221)

 

 

 

 

 

 

 

Net loss per common share-basic and diluted

$

(0.02)

$

(0.02)

$

(0.35)

 

 

 

 

 

 

 

Weighted average common shares outstanding-basic and diluted

 

50,212,993

 

45,311,682

 

26,191,348


The accompanying notes are an integral part of these consolidated financial statements.




46






New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Statement of Changes in Stockholders' Equity

For the Years Ended December 31, 2013, and 2012 (audited), and for the Period From Inception (July 18, 1996) Through December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

 

 

 

 

 

 

Total

 

 

Common stock

 

 

Accumulated

 

 

Comprehensive

 

 

Treasury

 

 

Non-controlling

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Income

 

 

Stock

 

 

Interest

 

 

Equity

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Assets and liabilities of New Jersey Joint Venture

 

10,000,000

 

$

207,968

 

$

 

 

 

 

 

$

 

 

 

 

 

$

207,968

  Acquisition of Plainview Mining Company

 

1,487,748

 

 

148,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

148,000

  Cash from sales

 

228,816

 

 

110,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110,115

  Services

 

14,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(44,174)

 

 

 

 

 

 

 

 

 

 

 

(44,174)

Balance, December 31, 1997

 

11,730,564

 

 

466,083

 

 

(44,174)

 

 

 

 

 

 

 

 

 

 

 

421,909

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Acquisition of Plainview Mining Company

 

1,512,252

 

 

152,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

152,000

  Cash from sales

 

117,218

 

 

29,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,753

  Services

 

18,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock acquired with Plainview acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

(136,300)

 

 

 

 

 

(136,300)

Net loss

 

 

 

 

 

 

 

(30,705)

 

 

 

 

 

 

 

 

 

 

 

(30,705)

Balance, December 31, 1998

 

13,378,034

 

 

647,836

 

 

(74,879)

 

 

 

 

 

(136,300)

 

 

 

 

 

436,657

Issuance of common stock for services

 

79,300

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(23,738)

 

 

 

 

 

 

 

 

 

 

 

(23,738)

Balance, December 31, 1999

 

13,457,334

 

 

647,836

 

 

(98,617)

 

 

 

 

 

(136,300)

 

 

 

 

 

412,919

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Silver Strand property

 

50,000

 

 

68,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68,750

  Services

 

62,100

 

 

4,313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,313

Net loss

 

 

 

 

 

 

 

(20,492)

 

 

 

 

 

 

 

 

 

 

 

(20,492)

Balance, December 31, 2000

 

13,569,434

 

 

720,899

 

 

(119,109)

 

 

 

 

 

(136,300)

 

 

 

 

 

465,490

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Grenfel lease

 

1,000,000

 

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,000

  Lost Eagle property

 

50,000

 

 

5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000

  Roughwater property

 

255,000

 

 

25,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,500

  Services

 

68,400

 

 

6,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,840

Net loss

 

 

 

 

 

 

 

(6,448)

 

 

 

 

 

 

 

 

 

 

 

(6,448)

Balance, December 31, 2001

 

14,942,834

 

 

858,239

 

 

(125,557)

 

 

 

 

 

(136,300)

 

 

 

 

 

596,382

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Cash

 

1,700,000

 

 

255,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

255,000

  Services

 

9,835

 

 

1,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,475

  Directors’ fees

 

15,000

 

 

2,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,250

  Acquisition of Gold Run Gulch Mining Company

 

1,916,250

 

 

273,954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

273,954

Net loss, as previously reported

 

 

 

 

 

 

 

(51,307)

 

 

 

 

 

 

 

 

 

 

 

(51,307)

Balance, December 31, 2002, as previously reported

 

18,583,919

 

 

1,390,918

 

 

(176,864)

 

 

 

 

 

(136,300)

 

 

 

 

 

1,077,754

Change in accounting for exploration costs

 

 

 

 

 

 

 

(9,883)

 

 

 

 

 

 

 

 

 

 

 

(9,883)

Correction of error in accounting for stock issuance costs

 

 

 

 

(25,500)

 

 

25,500

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2002, restated

 

18,583,919

 

$

1,365,418

 

$

(161,247)

 

 

 

 

$

(136,300)

 

 

 

 

$

1,067,871


The accompanying notes are an integral part of these consolidated financial statements.




47






New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Statement of Changes in Stockholders' Equity, continued

For the Years Ended December 31, 2013, and 2012 (audited), and for the Period From Inception (July 18, 1996) Through December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

 

 

 

 

 

 

Total

 

 

Common stock

 

 

Accumulated

 

 

Comprehensive

 

 

Treasury

 

 

Non-controlling

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Income

 

 

Stock

 

 

Interest

 

 

Equity

Balance, December 31, 2002

 

18,583,919

 

$

1,365,418

 

$

(161,247)

 

 

 

 

$

(136,300)

 

 

 

 

$

1,067,871

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Exercise of stock purchase warrants

 

810,000

 

 

200,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

200,750

  Cash, net of issuance costs

 

795,000

 

 

318,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

318,000

  Management and directors’ fees

 

381,200

 

 

144,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

144,326

  Equipment

 

5,000

 

 

3,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,000

  Services

 

21,915

 

 

7,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,262

  Exploration lease

 

20,000

 

 

8,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,000

Treasury stock cancelled

 

(1,947,144)

 

 

(136,300)

 

 

 

 

 

 

 

 

136,300

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(379,274)

 

 

 

 

 

 

 

 

 

 

 

(379,274)

Balance, December 31, 2003

 

18,669,890

 

 

1,910,456

 

 

(540,521)

 

 

 

 

 

0

 

 

 

 

 

1,369,935

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Exercise of stock purchase warrants

 

1,437,500

 

 

398,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

398,750

  Cash

 

1,184,550

 

 

511,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

511,440

  Management and directors’ fees

 

153,460

 

 

102,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102,273

  Equipment

 

28,650

 

 

16,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,476

  Services

 

26,750

 

 

14,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,550

  Exploration lease

 

20,000

 

 

12,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,000

Net loss

 

 

 

 

 

 

 

(922,555)

 

 

 

 

 

 

 

 

 

 

 

(922,555)

Balance, December 31, 2004

 

21,520,800

 

 

2,965,945

 

 

(1,463,076)

 

 

 

 

 

0

 

 

 

 

 

1,502,869

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Cash

 

309,100

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,000

  Exercise of stock purchase warrants

 

195,250

 

 

78,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78,100

  Management and directors’ fees

 

334,275

 

 

132,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

132,725

  Services

 

82,170

 

 

37,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37,826

  Exploration and lease

 

149,400

 

 

74,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74,321

  Equipment

 

11,500

 

 

4,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,700

Value of shares issued in prior years

 

 

 

 

24,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,050

Net loss

 

 

 

 

 

 

 

(590,485)

 

 

 

 

 

 

 

 

 

 

 

(590,485)

Balance, December 31, 2005

 

22,602,495

 

 

3,442,667

 

 

(2,053,561)

 

 

 

 

 

0

 

 

 

 

 

1,389,106

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Cash

 

4,521,250

 

 

1,368,500

 

 

 

 

$

 

 

 

 

 

 

 

 

 

1,368,500

  Management and directors’ fees

 

236,480

 

 

127,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127,063

  Services

 

162,860

 

 

56,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,137

  Exploration

 

10,000

 

 

5,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,750

  Lease

 

30,000

 

 

15,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,000

  Equipment

 

23,400

 

 

12,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,200

Unrealized gain in marketable equity security

 

 

 

 

 

 

 

(991,602)

 

 

911,250

 

 

 

 

 

 

 

 

911,250

Net loss

 

 

 

 

 

 

 

(3,045,163)

 

 

 

 

 

 

 

 

 

 

 

(991,602)

Balance, December 31, 2006

 

27,586,485

 

 

5,027,317

 

 

(991,602)

 

 

911,250

 

$

0

 

 

 

 

$

2,893,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The accompanying notes are an integral part of these consolidated financial statements.



48







New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Statement of Changes in Stockholders' Equity, continued

For the Years Ended December 31, 2013, and 2012 (audited), and for the Period From Inception (July 18, 1996) Through December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

 

 

 

 

 

 

Total

 

 

Common stock

 

 

Accumulated

 

 

Comprehensive

 

 

Treasury

 

 

Non-controlling

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Income

 

 

Stock

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2006

 

27,586,485

 

$

5,027,317

 

$

(3,045,163)

 

$

911,250

 

$

0

 

 

 

 

$

2,893,404

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

4,014,761

 

 

1,533,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,533,319

Exercise of warrants

 

200,000

 

 

120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

120,000

Management and directors fees

 

274,386

 

 

142,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

142,500

Services

 

52,104

 

 

27,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,157

Exploration

 

52,200

 

 

32,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,560

Mineral property agreement

 

60,000

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

Property, plant and equipment

 

20,756

 

 

10,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,239

Accounts payable

 

30,500

 

 

12,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,205

Unrealized gain (loss) in marketable equity security

 

 

 

 

 

 

 

 

 

 

(525,909)

 

 

 

 

 

 

 

 

(525,909)

Net loss

 

 

 

 

 

 

 

(1,453,268)

 

 

 

 

 

 

 

 

 

 

 

(1,453,268)

Balance, December 31, 2007

 

32,291,192

 

 

6,935,297

 

 

(4,498,431)

 

 

385,341

 

 

0

 

 

 

 

 

2,822,207

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

2,400

 

 

950

 

 

 

 

 

 

 

 

 

 

 

 

 

 

950

Exercise of warrants

 

4,350,000

 

 

1,740,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,740,000

Management and directors fees

 

318,700

 

 

108,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108,000

Services

 

74,000

 

 

32,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,000

Exploration

 

35,100

 

 

15,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,390

Mineral property agreement

 

75,000

 

 

21,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,000

Property, plant and equipment

 

14,000

 

 

5,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,600

Unrealized gain (loss) in marketable equity security

 

 

 

 

 

 

 

 

 

 

(375,544)

 

 

 

 

 

 

 

 

(375,544)

Net loss

 

 

 

 

 

 

 

(1,423,829)

 

 

 

 

 

 

 

 

 

 

 

(1,423,829)

Balance, December 31, 2008

 

37,160,392

 

 

8,858,237

 

 

(5,922,260)

 

 

9,797

 

 

0

 

 

 

 

 

2,945,774

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

138,000

 

 

34,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,500

Management and directors fees

 

1,139,320

 

 

334,298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

334,298

Services

 

125,520

 

 

29,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,098

Exploration

 

50,000

 

 

11,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,250

Mineral property agreement

 

72,000

 

 

18,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,000

Unrealized gain (loss) in marketable equity security

 

 

 

 

 

 

 

 

 

 

7,999

 

 

 

 

 

 

 

 

7,999

Net loss

 

 

 

 

 

 

 

(850,786)

 

 

 

 

 

 

 

 

 

 

 

(850,786)

Balance, December 31, 2009

 

38,685,232

 

$

9,285,383

 

$

(6,773,046)

 

$

17,796

 

$

0

 

 

 

 

$

2,530,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





The accompanying notes are an integral part of these consolidated financial statements.




49






New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Statement of Changes in Stockholders' Equity, continued

For the Years Ended December 31, 2013, and 2012 (audited), and for the Period From Inception (July 18, 1996) Through December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

 

 

 

 

 

 

Total

 

 

Common stock

 

 

Accumulated

 

 

Comprehensive

 

 

Treasury

 

 

Non-controlling

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Income

 

 

Stock

 

 

Interest

 

 

Equity

Balance, December 31, 2009

 

38,685,232

 

$

9,285,383

 

$

(6,773,046)

 

$

17,796

 

$

0

 

 

 

 

$

2,530,133

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

5,820,530

 

 

980,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

980,160

Exercise of warrants

 

206,500

 

 

33,936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,936

Management and director's fees

 

150,000

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

Services

 

81,000

 

 

17,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,425

Mineral property agreement

 

72,000

 

 

18,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,000

Accounts payable

 

2,600

 

 

525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

525

Unrealized gain (loss) in marketable equity security

 

 

 

 

 

 

 

 

 

 

(2,321)

 

 

 

 

 

 

 

 

(2,321)

Net loss

 

 

 

 

 

 

 

(540,828)

 

 

 

 

 

 

 

 

 

 

 

(540,828)

Balance, December 31, 2010

 

45,017,862

 

 

10,365,429

 

 

(7,313,874)

 

 

15,475

 

 

0

 

 

 

 

 

3,067,030

Contributions from non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in Mill Joint Venture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,214,436

 

 

2,214,436

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

22,800

 

 

5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000

Management and director's fees

 

150,000

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

Services

 

80,200

 

 

16,040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,040

Exploration

 

5,000

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

Accounts payable

 

30,000

 

 

6,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,000

Net loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,810)

 

 

(2,810)

Net loss attributable to The Company-Restated Note-8

 

 

 

 

 

 

 

(473,085)

 

 

 

 

 

 

 

 

 

 

 

(473,085)

Balance, December 31, 2011, Restated Note-8

 

45,305,862

 

 

10,423,469

 

 

(7,786,959)

 

 

15,475

 

 

0

 

 

2,211,626

 

 

4,863,611

Contributions from non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Mill Joint Venture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

952,763

 

 

952,763

Issuance of common stock for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management and directors fees

 

150,000

 

 

9,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,750

Mineral property agreement

 

60,000

 

 

6,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,000

Unrealized gain (loss) in marketable equity security

 

 

 

 

 

 

 

 

 

 

917

 

 

 

 

 

 

 

 

917

Net loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,974)

 

 

(12,974)

Net income

 

 

 

 

 

 

 

(722,892)

 

 

 

 

 

 

 

 

 

 

 

(722,892)

Balance, December 31, 2012

 

45,515,862

 

$

10,439,219

 

$

(8,509,851)

 

$

16,392

 

$

0

 

$

3,151,415

 

$

5,097,175

Contributions from non-controlling interest in Mill JV

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,009

 

 

32,009

Issuance of common stock and warrants for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, net of offering costs

 

22,200,000

 

 

1,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management and director's fees

 

150,000

 

 

7,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

714,286

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mineral property agreement

 

5,180,000

 

 

259,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) in marketable equity security

 

 

 

 

 

 

 

 

 

 

(10,589)

 

 

 

 

 

 

 

 

 

Net loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,804)

 

 

(6,804)

Net loss attributable to the Company

 

 

 

 

 

 

 

(792,173)

 

 

 

 

 

 

 

 

 

 

 

(792,173)

Balance, December 31, 2013

 

73,760,148

 

$

11,755,469

 

$

(9,302,024)

 

$

5,803

 

$

0

 

$

3,176,620

 

$

5,635,868


The accompanying notes are an integral part of these consolidated financial statements.




50






New Jersey Mining Company

(A Exploration Stage Company)

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2013 and 2012, And from Inception (July 18, 1996) through December 31, 2013

 

 

 

 

 

 

From Inception

 

 

 

 

 

 

(July 18, 1996)

 

 

December 31,

 

Through

 

 

2013

 

2012

 

December 31, 2013

Cash flows from operating activities:

 

 

 

 

 

 

    Net loss

$

(798,977)

$

(735,866)

$

(9,324,612)

Adjustments to reconcile net loss to net cash provided

 

 

 

 

 

 

  (used) by operating activities:

 

 

 

 

 

 

    Depreciation and amortization

 

98,208

 

144,393

 

1,066,315

    (Gain) loss on sale of equipment

 

(108,208)

 

(9,900)

 

(154,829)

    Write down of goodwill, investment, and mineral property

 

433,142

 

 

 

554,092

    Gain on sale of mineral property

 

 

 

 

 

(281,334)

    Gain on sale of marketable equity security

 

 

 

 

 

(92,269)

    Accretion of asset retirement obligation

 

1,152

 

1,152

 

10,111

    Equity in loss of Golden Chest LLC

 

99,500

 

822,500

 

1,475,206

  Common stock issued for:

 

 

 

 

 

 

    Management and directors’ fees

 

7,250

 

9,750

 

1,186,335

    Services and other

 

 

 

 

 

255,874

    Exploration expense

 

50,000

 

 

 

161,521

  Change in:

 

 

 

 

 

 

    Deposits

 

 

 

44,280

 

 

    Joint venture receivables

 

(48,619)

 

119,192

 

(61,143)

    Other current assets

 

(32,810)

 

42,283

 

(45,969)

    Inventory

 

19,464

 

(1,053)

 

 

    Other assets

 

 

 

 

 

(778)

    Accounts payable

 

(7,336)

 

(74,511)

 

55,956

    Accrued payroll and related payroll expense

 

15,209

 

(47,563)

 

22,011

    Account payable Marathon Gold

 

(62,500)

 

62,500

 

 

    Accrued reclamation costs

 

 

 

 

 

(1,443)

      Net cash provided (used) by operating activities

 

(334,525)

 

377,157

 

(5,174,956

 

 

 

 

 

 

 

  Cash flows from investing activities:

 

 

 

 

 

 

    Purchases of property, plant and equipment

 

(10,084)

 

(1,086,034)

 

(4,448,661)

    Purchase of mineral property

 

(4,500)

 

(4,500)

 

(12,904

    Proceeds from sale of mineral property

 

24,000

 

 

 

584,000

    Contributions to Golden Chest LLC

 

(99,500)

 

(822,500)

 

(922,000)

    Proceeds from sale of equipment

 

112,000

 

9,900

 

171,074

    Redemption (purchase) of reclamation bonds

 

 

 

 

 

(120,500)

    Purchase of marketable equity security

 

 

 

 

 

(7,500)

    Proceeds from sales of marketable equity securities

 

 

 

 

 

95,901

    Cash of acquired companies

 

 

 

 

 

38,269

    Deferral of development costs

 

 

 

 

 

(759,209)

      Net cash provided (used) by investing activities

 

21,916

 

(1,903,134)

 

(5,381,530)

 

 

 

 

 

 

 

  Cash flows from financing activities:

 

 

 

 

 

 

    Exercise of stock purchase warrants

 

 

 

 

 

2,571,536

    Sales of common stock and warrants, net of issuance costs

 

1,000,000

 

 

 

6,246,236

    Payments on capital lease

 

(32,009)

 

(30,156)

 

(274,672)

    Principal payments on notes payable

 

(55,492)

 

(94,841)

 

(640,644)

    Principal payments on note and other payables, related party, net

 

(5,722)

 

95,171

 

90,949

    Contributions from non-controlling equity interest in Mill JV

 

32,009

 

952,764

 

3,199,208

      Net cash provided by financing activities

 

938,786

 

922,938

 

11,192,613

    Net change in cash and cash equivalents

 

626,177

 

(603,039)

 

636,127

    Cash and cash equivalents, beginning of period

 

9,950

 

612,989

 

0

      Cash and cash equivalents, end of period

$

636,127

$

9,950

$

636,127

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

    Interest paid in cash, net of amount capitalized

$

55,621

$

21,967

$

157,455

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Common stock issued for:

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

$

50,365

Mineral properties agreement

$

259,000

$

6,000

$

616,600

Payment of accounts payable

 

 

 

 

$

18,730

Acquisitions of companies, excluding cash

 

 

 

 

$

743,653

Capital lease obligation incurred for equipment acquired

 

 

 

 

$

275,838

Notes payable for property and equipment acquired

 

 

 

 

$

884,397

Mineral property transferred to Golden Chest LLC

 

 

 

 

$

553,205

Debt relieved from sale of equipment

$

10,636

 

 

$

13,421

Related party note payable for property acquired

 

 

$

223,807

$

223,807)


The accompanying notes are an integral part of these consolidated financial statements.



51



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated 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 also performs contract milling, drilling and exploration activities, and provides engineering services.


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 exploration stage.


2.

Summary of Significant Accounting Policies


Exploration Stage Enterprise

The Company's consolidated financial statements are prepared in accordance with accounting guidance for exploration 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 exploration stage. In conjunction with exploration stage disclosure requirements, inception to date figures are included in the financial statements.


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.


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, 2013 and December 31, 2012, the Company’s percentage ownership and method of accounting for each joint venture is as follows:


 

December 31, 2013

December 31, 2012

Joint Venture

% Ownership

Significant Influence?

Accounting Method

% Ownership

Significant Influence?

Accounting Method

New Jersey Mill Joint Venture

65%

Yes

Consolidated

65%

Yes

Consolidated

Golden Chest LLC

48%

No

Cost

50%

Yes

Equity




52



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




2.

Summary of Significant Accounting Policies, continued:


Noncontrolling Interests in Consolidated Financial Statements

The Company follows the changes issued by the Accounting Standards Codification (“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.


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, deferred income taxes, estimation of asset retirement obligations and reclamation liabilities. Actual results could differ from those estimates.


Revenue Recognition

As an exploration stage company, the Company's revenue from operations is referred to as income earned during the exploration 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 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. Revenues from mill operations and custom milling are recognized in the period in which the milling is performed and collection of payment is deemed probable.


Inventory

Dore' and concentrate inventories at hand at period end 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.



53



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




2.

Summary of Significant Accounting Policies, continued:


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, 2013 and 2012, and their respective hierarchy level. We had no other assets or liabilities accounted for at fair value at December 31, 2013 or 2012.


 

Balance at

December 31,

2013

Balance at

December 31,

2012

Hierarchy

Level

Investments in marketable

    equity securities


$9,672


$20,261


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, 2013 and 2012, the effect of the Company’s potential issuance of shares from the exercise of 11,000,000 and 5,961,550 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 9 of the financial statements.


Reclassifications

Certain prior period amounts have been reclassified to conform to the 2013 financial statement presentation. Reclassifications had no effect on net loss, stockholders' equity, or cash flows as previously reported.



54



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




2.

Summary of Significant Accounting Policies, continued:


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.


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.


Impairment of Properties

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.


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.



55



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




2.

Summary of Significant Accounting Policies, continued:


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.

Property, Plant and Equipment


Property, plant and equipment at December 31, 2013 and 2012, consisted of the following:


 

 

2013

 

2012

Mill land

$

225,289

$

225,289

Mill building

 

522,786

 

522,786

Milling equipment

 

3,716,011

 

3,716,011

 

 

4,464,086

 

4,464,086

  Less accumulated depreciation

 

(144,236)

 

(119,375)

    Total mill

 

4,319,850

 

4,344,711

Building and equipment at cost

 

495,037

 

739,437

Less accumulated depreciation

 

(348,021)

 

(514,729)

  Total building and equipment

 

147,016

 

224,708

Land

 

441,858

 

465,857

  Total

$

4,908,724

$

5,035,276


During the year ended December 31, 2012 $14,932 in interest was capitalized in conjunction with the mill expansion project. See note 7 No interest was capitalized in 2013


During the year ended December 31, 2013 the Company sold a drill and an excavator with a total cost basis of $240,055 for $112,000. Since both pieces of equipment were fully depreciated at the time of sale, a gain on sale of equipment of $112,000 was recorded in the consolidated statement of operations.


During the year ended December 31, 2012, a lease agreement was entered into with Hecla Mining Company on the Company’s Little Baldy land holding. Under the agreement, Hecla is paying $24,000 per year to the Company for the option to obtain the claim interests. The Company has recorded these farm-out receipts as a reduction in the carrying value of the land for the years ended December 31, 2012 and 2013.




56



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




3.

Property, Plant and Equipment, continued


For years ended December 31, 2013 and 2012, milling and other equipment include assets under capital lease amounting to $91,625. The lease is being amortized over its terms. Accumulated amortization at December 31, 2013 and 2012 was $65,258 and $33,249, respectively. At December 31, 2013, the estimated future minimum lease payments under capital leases were as follows:


Year ending December 31, 2014

$

27,566

Total

 

27,566

Less: Amounts representing interest costs

 

(1,199)

Net present values

 

26,367

Less: Capital lease obligations-current portion

 

(26,367)

Long-term capital lease obligations

$

0


4.

Notes Payable


At December 31, 2013 and 2012, notes payable are as follows:


 

 

2013

 

2012

2011 Dodge pickup 36 month note payable, 0.00% interest rate, collateralized by

 

 

 

 

  pickup, monthly payments of $740

$

1,479

$

10,350

2005 Dodge Pickup 48 month note payable, 8.04% interest rate payable monthly,

 

 

 

 

  collateralized by pickup, monthly payments of $420

 

 

 

11,669

Hagby Diamond Drill 36 month note payable, 6.9% interest rate payable monthly,

 

 

 

 

  collateralized by drill and guaranteed by former President Fred Brackebusch and

 

 

 

 

  Vice President Grant Brackebusch, monthly payments of $3,962

 

83,344

 

112,899

Property with shop 36 month note payable, 4.91% interest rate payable monthly, remaining

 

 

 

 

  principal of note due in one payment at end of term, monthly payments of $474

 

49,800

 

53,021

Property 39 month note payable, 5.0% interest rate payable monthly, collateralized

 

 

 

 

  by property, monthly payments of $1,000

 

5,997

 

17,386

Property 120 month note payable, 11.0% interest rate payable monthly, remaining

 

 

 

 

  principal of note due in one payment at end of term, collateralized by property,

 

 

 

 

  monthly payments of $1,122

 

108,923

 

110,348

Total notes payable

 

249,543

 

315,673

Due within one year

 

55,663

 

148,834

Due after one year

$

193,880

$

166,839



Maturities of debt outstanding at December 31, 2013 are as follows:


2014

 

55,663

2015

 

45,592

2016

 

44,704

2017

 

2,207

2018

 

2,462

Thereafter

 

98,915

Total

 

$ 249,543




57



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




5.

Mineral Properties


Mineral properties and deferred development costs are as follows:


 

 

December 31,

 

 

2013

 

2012

New Jersey

$

271,340

$

604,792

McKinley

 

250,000

 

 

Silver Button/Roughwater

 

25,500

 

25,500

Toboggan

 

5,000

 

5,000

Revett Niagara

 

 

 

47,000

Copper Camp

 

 

 

48,500

  Less Accumulated Amortization

 

(11,407)

 

(20,717)

    Total

$

540,433

$

710,075


New Jersey

The New Jersey 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. At December 31, 2013 and 2012 the balance includes asset retirement costs of $6,340.A reassessment of the Grenfel/Coleman mineral property carrying was done based on the current gold price and resulted in a write down of the property carrying value from $584,075 to $259,933. The related expense was recognized on the Statement of Operations and Comprehensive Loss as write down of mineral property.


McKinley

In December of 2013 the Company acquired Idaho Champion Resources, LLC (“ICR”) for 5,000,000 shares of the Companies stock at a fair value of $0.05 per share. ICR is the lessee of several mines, which the Company refers to as the “McKinley Project”. John Swallow, NJMC’s President owned 27% of ICR. The McKinley Project is an exclusive exploration and mining lease which covers several historic mines and prospects, including the McKinley Mine, Ibex Mine, and Big Easy Mine, on private land located in central Idaho near the town of Lucile. NJMC has received all rights and agreements, intellectual property, historic and recent due diligence, surveys and maps, along with a 12-month option to purchase the historic McKinley Mine, located on 62 acres within the overall land package.


Silver Button/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.


Toboggan

Toboggan 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 had 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. During the first and second quarters of 2013, the Company issued a total of $9,000 in common stock to RMA for lease payments due on the properties. Lease payments were not paid during the third and fourth quarters, and in 2013 December 2013 the Company quit claimed the Niagara/Copper Camp properties back to RMA and has no further interest in the properties. A loss on abandonment of mineral property was recorded at that time for $109,000.



58



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




6.

Asset Retirement Obligation


The Company has established asset retirement obligations associated with the ultimate closing of its properties. Below is a reconciliation as of December 31, 2013 and 2012 of the Company’s asset retirement obligations. The estimated reclamation costs were discounted using a credit adjusted, risk-free interest rate of 5.6%.


 

 

2013

 

2012

Balances at January 1

 

9,797

 

8,645

Accretion expense

 

1,152

 

1,152

Balances at December 31

 

10,949

 

9,797


7.

Mining and Milling Venture Agreements


Golden Chest LLC ("GC")

In December of 2010, a limited liability company (LLC) was formed between the Company and Marathon Gold USA (MUSA). MUSA's contribution to GC was $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. At inception, GC purchased the patented mining claims 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 quarterly payments and the $250,000 balance due in the seventh and final year. The note is collateralized by 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 and through June of 2013 was 50 percent per partner. In May and June of 2013, the Company elected not to participate in some funding calls resulting in dilution of its share. 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. After dilution of its share in 2013, significant influence was no longer possessed and accounting for the Joint Venture reverted back to the cost method.


On September 3, 2013 the GC signed a lease agreement with Juniper Resources, LLC (Juniper) of Boise, Idaho for a defined portion of the Golden Chest mine property, (a 400 meter strike length along the Idaho vein below the No. 3 Level). The lease with Juniper calls for an initial payment of $50,000 to GC, which was paid, and a work requirement of 1,500 to 3,000 meters of core drilling which has also been completed. Juniper signed the lease and made a payment of $200,000 to GC at the end of November 2013. Juniper is required to make land payments of $125,000 per quarter on the promissory note on behalf of GC. Additionally, Juniper will pay a 2% net smelter royalty to GC on all gold production from the leased area with the $250,000 initial payments treated as an advance on this royalty. The lease has a term of 39 months.


Accounts receivable from GC 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 GC for $5,608 and an account payable with MUSA existed for $62,500. As of December 31, 2013 an account receivable existed with GC for $19,802. In addition, income and expense items for the twelve month period ended December 31, 2013 and 2012 related to MUSA and GC were as follows:


 

 

2013

 

2012

Drilling and exploration contract income

 

 

$

 769,084

Joint Venture Management fees income

$

 8,890

$

 45,341

Drilling and exploration contract expense

$

 154

$

 348,391

Equity in loss of GC (through June 30, 2013

$

 99,500

$

 822,500

Distribution from GC

$

 119,450

 

 




59



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




7.

Mining and Milling Venture Agreements, continued


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 by the Company during 2012 to UMS. Engineering services to UMS in the twelve month period ending December 31, 2012 were $68,700. As of December 31, 2013 and 2012, an account receivable existed with the Mill Joint Venture and UMS for $41,341 and $6,916 respectively.


8.

Income Taxes


The Company did not recognize a provision (benefit) for income taxes for the years ended December 31, 2013 and 2012.


At December 31, 2013 and 2012, 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, 2013 and December 31, 2012. The significant components of the deferred tax asset at December 31, 2013 and 2012 were as follows:


 

 

December 31,

 

December 31 ,

 

 

2013

 

2012

Deferred tax asset

 

 

 

 

Net operating loss carry forward

$

3,546,000

$

3,257,000

Exploration/development

 

746,000

 

659,000

Lease income

 

19,000

 

10,000

Total deferred tax assets

 

4,311,000

 

3,926,000

Valuation allowance

 

(3,778,000)

 

(3,568,000)

Net

 

533,000

 

358,000

Deferred tax liabilities

 

 

 

 

Property, plant, and equipment

 

(533,000)

 

(358,000)

Total deferred tax liabilities

 

(533,000)

 

(358,000)

Net deferred tax asset

$

0

$

0


At December 31, 2013 and 2012 the Company had net operating loss carry forwards of approximately $8,865,000 and $8,143,000 respectively for both federal and the state of Idaho, which expire in the years 2017 through 2033.


The income tax benefit shown in the financial statements for the years ended December 31, 2013 and 2012 differs from the statutory rate as follows:


 

 

December 31,

2012

 

December 31,

2011

Provision (benefit) at statutory rate

 

$

(348,000)

 

$

(257,000)

State taxes, net of federal taxes

 

 

(37,000)

 

 

(37,000)

Effect of 2011 Revision

 

 

 

 

 

(235,000)

Increase (decrease) in valuation allowance

 

 

385,000

 

 

529,000

Total provision (benefit)

 

$

0

 

$

0


We are open to examination of our income tax filings in the United States and state jurisdictions for the 2011 through 2013 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. Certain tax positions taken in the 2011 through 2013 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, but only revise to the net operating loss carry forward balance.



60



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




9.

Equity


The Company has authorized 200,000,000 shares of no par common stock at December 31, 2013 and 2012. In addition, the Company has authorized 1,000,000 shares of no par preferred stock, none of which had been issued at December 31, 2013 or 2012.


Stock Purchase Warrants Outstanding

Transactions in common stock purchase warrants for the year ended December 31, 2013 and 2012, are as follows:


 

 

Number of

 

Exercise

 

 

Warrants

 

Prices

Balance, December 31, 2011

 

6,099,550

 

0.30-0.40

  Expired

 

(138,000)

 

0.40

    Balance, December 31, 2012

 

5,961,550

 

0.30

  Issued in connection with private placement

 

11,000,000

 

0.15

  Expired

 

(5,961,550)

 

0.30

    Balance, December 31, 2013

 

11,000,000

 

0.15


These warrants expire as follows:


Shares

Exercise Price

Expiration Date

11,000,000

$0.15

May 31, 2015


Common Stock issued for Management and Directors Fees

During 2013 and 2012 the Company issued 150,000 shares each year of its restricted common stock for management and directors fees. The Company recorded expense of $7,250 and $9,749, respectively, based upon fair value of the shares issued.


Common Stock issued For Cash

A private placement was initiated by the Company in September of 2013. Each unit consist of 1 share of the Company’s common stock and ½ purchase warrant, each full warrant exercisable for one share of the Company’s common stock at $0.15 through May 31, 2015. At closing of the private placement on October 31, 2013, 22,000,000 shares were sold for net proceeds of $990,000 after deducting 10% brokerage fees. Additionally, 200,000 shares were sold by the Company for cash at $0.05 each, resulting in net proceeds of $10,000. No shares were sold in 2012.


Common Stock Issued for Mineral Property

During 2013 and 2012 the Company issued 5,180,000 and 60,000 shares, respectively, of its common stock for mineral properties. The Company recorded $259,000 and $6,000 based upon the fair value of the shares issued.


Common Stock Issued for Services and Exploration

During 2013 the Company issued 714,286 shares of its common stock for exploration and other services rendered the Company. The Company recorded $50,000 based upon fair value of the shares issued. No shares were issued for this purpose in 2012.



61



New Jersey Mining Company

(A n Exploration Stage Company)

Notes to Consolidated Statements




10.

Related Party Transactions


Fred Brackebusch was President, Treasurer, and a Director of the Company. He resigned all positions on August 29, 2013. Grant Brackebusch, Fred Brackebusch's son, is the Vice-President and a Director of the Company. Grant Brackebusch's wife, Tina Brackebusch, was the Company's Corporate Secretary prior to August 29, 2013. 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 2013 and 2012, the Company issued 125,000 shares, of its common stock to members of the Board of Directors for their services as directors. These stock awards were recorded as directors' fees of $6,250 and $8,125 respectively, based upon the fair value of the shares issued. Fred and Grant Brackebusch each received 25,000 shares in 2012 and 2013, valued at between $0.04 and $0.065 per share. In 2012 the shares were valued at $1,625 each. In 2013 Fred Brackebusch’s shares were valued at $1,000 and Grant Brackebusch’s shares were valued at $2,250 as Directors of the Company. In 2012 and 2013 Tina Brackebusch received 25,000 shares as Corporate Secretary. These shares were valued $1,625 and $1,000, respectively.


·

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 $215,368 of this note remained with $34,951 in principle payable within 1 year and the remaining $180,417 due after one year as follows: 2015-$39,384 2016-44,378, 2017-$50,007, 2018-$46,648. Monthly payments are $4,910.


·

In December of 2013 the Company issued 5,000,000 shares of its common stock to an entity partially owned by John Swallow, our President, for a mineral property. The shares had a fair value at the date of issuance of $250,000.


11.

Investment in Marketable Security


In 2006, the Company purchased 1,875,000 common shares of Gold Crest Mines Inc for $7,500. No shares were sold in 2013 or 2012.


At December 31, 2013, the Company held 967,180 of these shares with a market value of $0.01 per share, for a total fair value of $9,672. At December 31, 2013, the excess market value of $5,803 over the $3,869 remaining cost basis of the shares was recognized as accumulated other comprehensive income in the equity section of the Company’s balance sheet.


12.

Subsequent Events


During the first quarter of 2014, the Company offered and sold Unit securities through a Regulation D, Rule 506(b) private placement realizing net proceeds of $405,000. The offering was conducted by a licensed broker dealer and the subscribers were all “accredited investors”. Each unit consisted of two shares of the Company’s common stock and one purchase warrant. Each warrant is exercisable for one share of the Company’s common stock at $0.15 per share through March 4, 2017. The Company sold 3,000,000 Unit securities priced at $0.15 per Unit.




62







(b)

Exhibit Table


Exhibit Number

Description of Exhibit

3.0

Articles of Incorporation of New Jersey Mining Company filed July 18, 1996

3.1

Articles of Amendment filed September 29, 2003

3.2

Articles of Amendment filed November 10, 2011

3.3

Bylaws of New Jersey Mining Company

10.1

Venture Agreement with United Mine Services, Inc. dated January 7, 2011

10.2

Mining Lease with Juniper Resources, LLC dated September 3, 2013

10.3

Exchange Agreement with Idaho Champion Resources, LLC dated December 31, 2013

10.4

Second Amendment to Sale Agreement, Amendment to Lease Agreement, Release of Mortgage and Quitclaim Deed - Metaline Contact Mines and Beasley dated October 15, 2013

10.5

Idaho Champion Resources Lease with Cox dated September 4, 2013

10.6

Memorandum of Understanding and Option to Purchase McKinley Mine dated November 18, 2013

14*

Code of Ethical Conduct

21*

Subsidiaries of the Registrant


*

Filed with the Registrant’s Form 10 on February 24, 2014.





63







SIGNATURES


Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.



New Jersey Mining Company


June 4, 2014

/s/ John Swallow

Dated:________________________

_______________________________________

By: John Swallow

Its: President


/s/ Delbert Steiner

_______________________________________

By: Delbert Steiner

Its: Chief Executive Officer









64


Exhibit 3.0


ARTICLES OF INCORPORATION

OF

NEW JERSEY MINING COMPANY


      The undersigned, being over the age of eighteen (18) years, for the purpose of forming a


 corporation under the Idaho Business Corporation Act, hereby certifies and adopts the following


 Articles of Incorporation.



ARTICLE I

Name and Duration


     The name of this corporation shall be  NEW JERSEY MINING COMPANY , and its


 existence shall be perpetual.



ARTICLE II

Purpose and Powers


     This corporation shall have unlimited power to engage in and to do any lawful act


 concerning any or all lawful business for which corporations may be incorporated under


 the Idaho Business Corporation Act, as amended


.


ARTICLE III

Preemptive Rights


     Shareholders of this corporation shall not have preemptive rights to acquire additional


 shares offered for sale by this  corporation.




ARTICLE IV

Cumulative Voting

     Shareholders of this corporation shall not have cumulative voting rights.


-1-







ARTICLE V

Registered Agent and Office


     The registered agent of this corporation and the street address of the registered office of this corporation are as follows:

Registered Agent

Registered Office Address

Fred W. Brackebusch

89 Appleberg Road

Kellogg, Idaho 83837


ARTICLE VI

Shares


1.   The aggregate number of shares which this corporation shall have authority to   issue is 21,000,000 shares, of which 20,000,000 shares shall be Common Stock having no par value per share and 1,000,000 shares shall be Preferred Stock having no par value per share.  Cumulative voting rights shall not exist with respect to any shares of stock of securities converted into shares of stock of the Corporation.

     

2. This corporation shall have the right to purchase its own shares from the unreserved and unrestricted capital surplus available, as well as from the unreserved and unrestricted earned surplus available.



3. The Board of Directors is hereby authorized, subject to the limitations prescribed by law and the provisions hereof, at its option, from time to time, to divide all or any part of the Preferred Stock into series thereof, to establish from time to time the number of shares to be included in any such series, and to fix the designation, powers, preferences and rights of the shares of each such series and qualifications, limitations or restrictions thereof, and to determine variations, if any, between any series so established, but all shares of the same class shall be identical except as to the following relative rights and preferences as to which there may be variations between series:


(a)  the number of shares constituting each such series and the distinctive designation of such series;


(b)  the rate of dividend, if any, and whether dividends shall be cumulative or noncumulative;




-2-





                  

(c)  whether or not such series shall be redeemable and, if so, the terms and conditions upon which shares of such series shall be redeemable, including the date or dates after which they shall be redeemable, and the amount per share payable in  cases of redemption, which amount may vary under different conditions and at different redemption dates;


(d)

      the rights, if any of such series in the event of dissolution of the

Corporation or upon any distribution of the assets of the Corporation, including with respect to voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of such series;


(e)     the extent, if any, to which such series shall have the benefit of any sinking fund provisions for redemption or purchase of shares;



(f)     whether or not the shares of such series shall be convertible and, if so, the terms and conditions of which shares of such services shall be so convertible;


(g)

the voting rights, if any, of such series; and


(h)

such other powers, designations, preferences and relative participating,

optional or other special rights and such qualifications, limitations or restrictions thereon to the extent permitted by law..


ARTICLE VII

Directors


1.

The initial directors of this corporation shall be two in number and their

names and address is as follows:


Name

Address

Fred W. Brackebusch

P.O. Box 1019

Kellogg, Idaho 83837


Grant A. Brackebusch

P.O. Box 1019

Kellogg, Idaho 83837






-3-




    



2.

The term of the initial directors shall be until the first annual meeting of the shareholders of this corporation and until their successor or successors are elected and qualified.


3.

Only directors, the chief executive officer, if any, or the president, if any, will have the power to call meetings or special meetings of the shareholders.


4.

To the fullest extent now or hereafter permitted by applicable law, a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages arising from any conduct as a director, except:


a.

     For any breach of the Director’s duty of loyalty to the corporation or its shareholders;


b.

for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;


c.

for any transaction from which the director derived an improper personal benefit; or


d.

if required by statute, failing to meet the standards set forth in Idaho Code Section 30-1-48.


Any repeal or modification of the foregoing paragraph by the shareholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing prior to the time of such repeal or modification.


5.

At such time when the Board of Directors shall consist of nine (9) or more members, in lieu of electing the whole number of Directors annually, the directors shall be divided into three (3) classes, each class to contain one-third of the total members, or as near as may be, the term of office of Directors of the first class to expire at the first annual meeting of shareholders after the election, that of the second class to expire at the second annual meeting after their election, and that of the third class to expire at the third annual meeting after their election.  At each annual meeting after such classification the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the third succeeding annual meeting, if there be three (3) classes.


-4-










ARTICLE VIII

Indemnification

This corporation shall provide any indemnification allowed by the Idaho Business Corporation Act and shall indemnify directors, officers, agents and employees as follows:


1.

To the fullest extend now or hereafter permitted by applicable law, this corporation shall indemnify its officers and directors whether they are serving the corporation or, at its request, any other entity, as an officer, director or in any other capacity.


2.

This corporation may indemnify other employees and agents to the extent as may be authorized by the Board of Directors or the Bylaws and be permitted by law, whether the employees and agents are serving this corporation or, at its request, any other entity.


3.

The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such Bylaws, resolutions or contracts in implementing such provisions, including, but not limited to, implementing the manner in which determinations as to any indemnity or advancement of expenses shall be made, or such further indemnification agreements as may be permitted by law.


4.

The foregoing rights if indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled under any statute, provision or the Articles of Incorporation, Bylaws or other agreements.


5.

No amendment or repeal of this Article shall apply to or have any effect on any right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.



ARTICLE IX

            Incorporator

The name and address of the incorporator is:

Name

Address


Fred W. Brackebusch

89 Appleberg Road

Kellogg, Idaho 83837

-5-








IN WITNESS WHEREOF, the incorporator has executed these Articles of Incorporation in duplicate this  15 th day of  July    , 1996.




/s/  Fred W. Brackebusch _______________

FRED W. BRACKEBUSCH, Incorporator





CONSENT TO APPOINTMENT AS REGISTERED AGENT



I, FRED W. BRACKEBUSCH, consent to serve as registered agent in the State of Idaho for the following corporation:   NEW JERSEY MINING COMPANY.

I understand that, as agent for the corporation, it will be my responsibility to accept service of process in the name of the corporation; to forward all mail and license renewals to the appropriate officer (s) of the corporation; and to immediately notify the Office of the Secretary of State of my resignation or of any changes in the address of the registered office of the corporation for which I am agent.




     15  July   1996        

/s/ Fred W. Brackebusch_____       

FRED W. BRACKEBUSCH











-6-







Exhibit 3.1

ARTICLES OF AMENDMENT


To the Secretary of State of the State of Idaho Pursuant to Title 30, Chapter 1, Idaho Code, the undersigned corporation amends its articles of incorporation as follows:

1. The name of the corporation is: New Jersey Mining Company

2. The text of each amendment is as follows:

Article VI

1. The aggregate number of shares which this corporation shall have authority to issue is 51,000,000, of which 50,000,000 shares shall be Common Stock having no par value per share and 1,000,000 shares shall be Preferred Stock having no par value per share.  Cumulative voting rights shall not exist with respect to any shares of stock of securities converted into shares of stock of the Corporation.

3. The date of adoption of the amendment(s) was:   September 25, 2003.

4. Manner of adoption:

The number of shares outstanding and entitled to vote was:  17,262,690.

The number of shares cast for and against each amendment was:

Amended Article VI

Shares for

Shares against

9,777,442

0


Dated: September 25, 2003


Signed:  /s/ Grant A. Brackebusch           


Typed Name:    Grant A. Brackebusch      


Capacity: Vice President                            


FILED EFFECTIVE

2003 SEP 29 AM 8:56

SECRETARY OF STATE

STATE OF IDAHO




Exhibit 3.2

ARTICLES OF AMENDMENT


To the Secretary of State of the State of Idaho Pursuant to Title 30, Chapter 1, Idaho Code, the undersigned corporation amends its articles of incorporation as follows:

1. The name of the corporation is: New Jersey Mining Company

2. The text of each amendment is as follows:

Article VI

1. The aggregate number of shares which this corporation shall have authority to issue is 201,000,000, of which 200,000,000 shares shall be Common Stock having no par value per share and 1,000,000 shares shall be Preferred Stock having no par value per share.  Cumulative voting rights shall not exist with respect to any shares of stock of securities converted into shares of stock of the Corporation.

3. The date of adoption of the amendment(s) was:   October 28, 2011.

4. Manner of adoption:

Approval by the shareholders is required and the shareholders duly approved the amendment(s) as required by either Title 30, Idaho Code or by the Articles of Incorporation.


Dated:  November 8, 2011


Signed:  /s/ Grant A. Brackebusch          


Typed Name:    Grant A. Brackebusch      


Capacity: Vice President                            


FILED EFFECTIVE

11 NOV 10 AM 9:04

SECRETARY OF STATE

STATE OF IDAHO




Exhibit 3.3


BYLAWS

OF

NEW JERSEY MINING COMPANY


ARTICLE I

Shareholders

  

1.01

   Annual Meeting.  The annual meeting of the Shareholders of  NEW

JERSEY MINING COMPANY (the “Corporation”) shall be held within sixty (60) days after the end of the Corporation’s fiscal year end.  The failure to hold an annual meeting at the time stated in these Bylaws shall not affect the validity of any corporate action.


1.02    Special Meeting.   Except as otherwise provided by law, special meetings of Shareholders of this Corporation shall be held whenever called by the Chief Executive Officer, the President or by the Board of Directors (the “Board”).


1.03   Place of Meetings .  Meetings of Shareholders shall be held at Kellogg, Idaho, or at such place within or without the State of Idaho, as determined by the Board, pursuant to proper notice.


1.04    Notice .  Written notice of each Shareholders’ meeting stating the time and place and, in case of a special meeting, the purpose(s) for which such meeting is called, shall be given by or at the direction of any officer or any one or more Shareholders entitled to call such meeting of the Shareholders, either personally or by mail, charges prepaid, not less than (10) (unless a greater period of notice is required by law in a particular case), nor more than fifty (50) days prior to the date of the meeting, to each Shareholder of record entitled to vote, to the Shareholder’s address as it appears on the current record of Shareholders of this Corporation.  If mailed first class postage prepaid, such notice shall be deemed to be effective when mailed to the Shareholders at such address as provided above.  If notice is sent to a Shareholder’s address, telephone number or other number appearing on the records of the Corporation, the notice is effective when dispatched.


1.05   Waiver of Notice.  A Shareholder may waive any notice required to be given by these Bylaws, or the Articles of Incorporation of this Corporation, or any of the corporate laws of the State of Idaho, before or after the meeting that is the subject of such notice.  A valid waiver is created by any of the following three methods:  (a) delivery to the Corporation of a writing, signed by the Shareholder entitled to the notice; (b) attendance at the meeting, unless the Shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; or (c) failure to object to a matter at the time of presentation of the matter.









1.06

Quorum.  At any meeting of the Shareholders, a majority of all the Shares entitled to vote, represented by Shareholders of record in person or by proxy, shall constitute a quorum at a meeting of Shareholders, but in no event shall a quorum consist of less than one third (1/3) of the Shares entitled to vote at the meeting.  When a quorum is present at any meeting, action on a matter is approved by a voting group if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action, unless the question is one upon which by express provision of law or the Articles of Incorporation or of these Bylaws, a different vote is required.  Once a quorum is present, Shareholders may continue to transact business at the meeting notwithstanding the withdrawal of enough Shareholders to otherwise leave less than a quorum.


1.07

Proxy and Voting.  Shareholders of record may vote at any Corporation. meeting either in person or by proxy executed in writing.  A proxy is effective when received by the person authorized to tabulate votes for the Corporation.  A proxy is valid for eleven (11) months unless a longer period is expressly provided in the proxy.  Subject to the provisions of the laws of the State of Idaho, and unless otherwise provided in the Articles of Incorporation, each holder of Shares of stock in this Corporation shall be entitled at each Shareholders’ meeting to one vote on each matter submitted to a vote for every Share of stock standing in such Shareholder’s name on the books of this Corporation.


         

1.08    

Action Without a Meeting.  Any action required or permitted to be taken at a meeting of the Shareholders may be taken without a meeting if a consent in writing setting forth the action so taken, shall be signed by all the Shareholders entitled to vote with respect to the subject matter thereof.  Action taken by such unanimous consent is effective when all consents are in the possession of the Corporation, unless the consent specifies a later date.


                       If the corporate laws of the State of Idaho require that notice of a proposed action be given to nonvoting Shareholders and the action is to be taken by unanimous consent of the voting Shareholders, the Corporation must give its nonvoting Shareholders written notice of the proposed action at least ten (10) days before the action is taken.  The notice must contain or be accompanied by the same material that would have been required to be sent to the nonvoting Shareholders in a notice of meeting at which the proposed action would have been submitted to such Shareholders for action.


1.09     Conference Telephone.  Meetings of the Shareholders may be effectuated by means of a conference telephone or similar communications equipment y means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at such meeting.


1.10

Adjournment.  A majority of the Shares represented at the meeting, even if less than a quorum, may adjourn the meeting from time to time.  At such reconvened meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally notified.  If a meeting is adjourned to a



1




different date, time or place, notice need not be given of the new date, time or place if a new date time or place is announced at the meeting before adjournment; however, if a new record date for the adjourned meeting is or must be fixed in accordance with the corporate laws of the State of Idaho, notice of the adjourned meeting must be given to persons who are Shareholders as of the new record date.


ARTICLE II

Board of Directors


2.01   Number, Tenure and Qualifications.  The business affairs and property of this Corporation shall be managed by a Board of not less than one (1) director nor more than nine (9) directors.  The number of directors may at any time be increased or decreased by the Shareholders or by the Board at any annual, regular or special meeting.  Directors need not be Shareholders of this Corporation or residents of the State of Idaho.  As required by the Articles of Incorporation, when there are nine members of the Board, the members shall be divided into three classes to create a staggered Board.


2.02     Powers of Directors.  The directors shall be elected, by the Shareholders at each annual Shareholders’ meeting, to hold office until the next annual meeting of the Shareholders or until their respective successors are elected and qualified.


2.03    Powers of Directors.  The Board shall have the entire management of the business of this corporation.  In addition to the powers and authorities by these Bylaws and the Articles of Incorporation expressly conferred upon it, the Board may exercise all such powers of this Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed to be exercised or done by the Shareholders.


2.04    Regular Meetings.  The regular meetings of the Board shall be held at such places and at such times as the Board, by vote, may determine, and, if so determined, no notice thereof need be given.


2.05   Special Meetings.   Special meetings of the Board may be held at any time or place whenever called by any officer or two or more directors, notice thereof being given to each director by the officer calling or by the officer directed to call the meeting.


2.06

Notice.  Notice of special meetings of the Board, stating the date, time and place thereof, shall be given at least two (2) days prior to the date of the meeting.  Such notice may be oral or written.  Oral notice may be communicated in person or by telephone, wire or wireless equipment, which does not transmit a facsimile of the notice.  Oral notice is effective when communicated.


Written notice may be transmitted by mail, private carrier or personal delivery; telegraph or teletype; or telephone, wire or wireless equipment which transmits a facsimile of the notice.  Written notice is effective at the earliest of the following: (a) when dispatched, if notice is sent to the director’s address, telephone number or other number appearing upon the records of the Corporation; (b) when received; (c) five (5)



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Days after its deposit in the U.S. mail if mailed with first class postage; (d) on the date shown on the return receipt requested, and the receipt is signed by or on behalf of the addressee.


2.07    Waiver of Notice.  A director may waive notice of a special meeting of the Board either before or after the meeting, and such waiver shall be deemed to be equivalent of giving notice.  The waiver must be in writing, signed by the director entitled to the notice and delivered to the Corporation for inclusion in its corporate records.  Attendance of a director at a meeting shall constitute waiver of notice of that meeting unless said director attends for the express purpose of objecting to the transaction of business because the meeting has not been lawfully called or convened.


2.08    Conference Telephone.  Meetings of the Board or any committee designated by the Board may be effectuated by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at such meetings.


2.09    Quorum of Directors.  A majority of the members of the Board shall constitute a quorum for the transaction of business.  When a quorum is present at any meeting, a majority of the members present thereat shall decide any question brought before such meeting, except as otherwise provided by law or the Articles of Incorporation or by these Bylaws.


2.10    Adjournment.  Any meeting of the Board may be adjourned and continued at a later time, including a meeting at which a quorum is not present.  Notwithstanding Section 2.06, notice of the adjourned meeting or of the business to be transacted there, other than by announcement at the meeting of which the adjournment is taken, shall not be necessary.  At an adjourned meeting at which a quorum is present, any business may be transacted which could have been transacted at the meetings as originally called.


2.11    Action Without a Meeting.  Any action required or permitted to be taken by the Board at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.  Action by consent is effective when the last director signs the consent, unless the consent specifies a later date.


2.12    Resignation and Removal.  Any director of this Corporation may resign at any time by giving written notice to the Board, or to the chairperson, president or secretary of this Corporation.  Any such resignation shall be effective when the notice is delivered, unless the notice specifies a later date.


           The Shareholders, at any meeting called expressly for that purpose, may remove from office, with our without cause, one or more directors and elect their successors.  A director may be removed only if the number of votes cast for removal exceeds the number of votes case against removal.





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2.13    Vacancies.   Unless otherwise provided by law, if the office of any director becomes vacant by any reason other than removal, the directors may, by the affirmative vote of the majority of the remaining directors, though less than a quorum, choose a successor or successors who shall hold office for the unexpired term of the predecessor director.  Vacancies in the Board may also be filled for the unexpired term by the Shareholders at a meeting called for that purpose, unless such vacancies shall have been filled by the directors.  Vacancies resulting from an increase in the number of directors may be filled in the same manner.


2.14    Compensation.   By resolution of the Board, each director may be paid expenses, if any, of attendance at each meeting of the Board, and may be paid a stated salary as director, or a fixed sum for attendance at each meeting of the Board, or both.  No such payment shall preclude any director from serving this Corporation in any other capacity and receiving compensation therefore.


2.15    Presumption of Assent.  A director of this Corporation who is present at a meeting of the Board at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless: (a) the director objects at the beginning of the meeting, or promptly upon the director’s arrival, to the holding of the meeting or transacting business at the meeting; (b) the director’s dissent or abstention from the action taken is entered in the minutes of the meeting; or (c) the director shall file written dissent or abstention with the presiding officer of the meeting before such adjournment or to the Corporation within a reasonable time after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.


2.16    Committees.  The Board may, by resolution adopted by a majority of the full Board, designate from among its members an Executive Committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all the authority of the Board, except no such committee shall have the authority to (a) authorize or approve a distribution except according to a general formula or method prescribed by the Board; (b) approve or propose to Shareholders action which the corporate law requires to be approved by Shareholders; (c) fill vacancies on the Board or on any of its committees; (d) amend the Articles of Incorporation; (e) adopt, amend or repeal Bylaws; (f) approve a plan of merger not requiring Shareholder approval; or (g) authorize or approve the issuance or sale or contract for sale of Shares, or determine the designation and relative rights, preferences and limitations on a class or series of Shares, except that the Board may authorize a committee, or a senior executive officer of the Corporation to do so within the limits specifically prescribed by the Board.


2.17    Advisory Directors.  The Board may, by Resolution adopted by a majority of the Full Board, designate Advisory Directors, up to a maximum of five at one time, who shall have experience or knowledge to assist the board with particular issues or general operations of the company.  The Advisory Directors will hold such designation at the pleasure of the Board and not for a specific term.  Advisory Directors are not permitted to cast votes on issues before the Board.  Advisory Directors, if attending a Board meeting at the request of the board, may be paid expenses, if any, of attendance of



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said meeting and may be paid a fixed sum for such attendance or a stated salary, as determined by the Board.


2.18    Limitation of Liability.  A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages arising from any conduct as a director, to the fullest extent now or hereafter permitted by applicable law.  If the Idaho Business Corporation Act is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of this corporation shall be eliminated or limited to the fullest extend permitted by said Act, as so amended.  Any repeal or modification of the foregoing paragraph by the shareholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing prior to the time of such repeal or modification.


ARTICLE III

Officers


3.01     Positions.  The officers of this Corporation may be a president, one or more vice-presidents, and a treasurer, as appointed by the Board.  The Board shall appoint a secretary.  The Board, in its discretion, may appoint a chairman from amongst its members to serve as chairman of the Board, who, when present, shall preside at all meetings of the Board, and who shall have such other powers as the Board may determine.  No officer need be a Shareholder of this Corporation.  One individual may hold more than one position at the discretion of the Board.


3.02    Additional Officers and Agents.  The Board, at its discretion, may appoint a general manager, one or more assistant treasurers, and one or more assistant secretaries, and such other officers or agents as it may deem advisable, and prescribe the duties thereof.


3.03    Appointment and Term of Office.   The officers of this Corporation shall be appointed annually by the Board at the first meeting of the Board held after each annual meeting of the Shareholders.  If officers are not appointed at such meeting, such appointment shall occur as soon as possible thereafter.  Each officer shall hold office until a successor shall have been appointed and qualified or until said officer’s death or until said officer shall have resigned or shall have been removed in the manner hereafter provided.  The appointment of an officer does not itself create contract rights.


3.04    Powers and Duties.   If the Board appoints persons to fill the officer positions, such officer shall have the following powers and duties:


a.

President.   The president shall be the chief executive officer of this Corporation, shall have general supervision of the business of this Corporation, and, when present, shall preside at all meetings of the Shareholders and, unless a chairman of the Board has been elected and is present, shall preside at meetings of the Board.  The president, or any vice-president or such other person(s) as are specifically authorized by vote of the Board, shall sign all bonds, deeds, mortgages, and any other agreements, and



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such signature(s) shall be sufficient to bind this Corporation.  The president shall perform such other duties as the Board shall designate.


b.    Vice-President.   During the absence or disability of the president, the vice-president (or in the event that there be more than one vice-president, the vice-presidents in the order designated by the Board) shall exercise all functions of the president.  Each vice-president shall have such powers and discharge such duties as may be assigned from time to time to such vice-president by the president or by the Board.


c.    Secretary.  The secretary shall keep accurate minutes of all meetings of the Shareholders and the Board, and shall perform all the duties commonly incident to this office, and shall perform such other duties and have such other powers as the Board shall designate.  In the secretary’s absence, an assistant secretary shall perform the secretary’s duties.


d.   Treasurer.  The treasurer, an agent, or such other person as authorized by the Board shall have the care and custody of the money, funds, a valuable papers, and documents of this Corporation, and shall have and exercise, under the supervision of the Board, all the powers and duties commonly incident to this office.


3.05    Salaries.  The salaries of the officers shall be fixed from time to time by the Board.  No officer shall be prevented from receiving such salary by reason of the fact that said officer is also a director of this Corporation.


3.06    Resignation or Removal.  Any officer of this Corporation may resign at any time by giving written notice to the Board, or to any officer of this Corporation.  Any such resignation is effective when the notice is delivered, unless the notice specifies a later date.


The Board, by vote of not less than a majority of the entire Board, may remove from office any officer or agent elected or appointed by it.  The removal shall be without prejudice to the contract rights, if any, of the person so removed.  The appointment of an officer or agent shall not of itself create contract rights.


3.07    Vacancies.  If the office of any officer or agent becomes vacant by any reason, the directors may, by the affirmative vote of a majority of the directors, choose a successor or successors who shall hold office for the unexpired term.


ARTICLE IV

Certificates of Shares and Their Transfer


4.01    Issuance: Certificates of Shares.  No Shares of this Corporation shall be issued unless authorized by the Board or a committee of the Board.  Such authorization shall include the maximum number of Shares to be issued, the consideration to be received, and a statement that the Board considers the consideration to be adequate.  Certificates for Shares of the Corporation shall be in such form as is consistent with the provisions of the Idaho Business Corporation Act and shall state:



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a.

The name of the Corporation and that the Corporation is organized under the laws of the State of Idaho;


b.

The name of the person to whom issued; and


            c.       The number and class of Shares and the designation of the series,            if any, which such certificate represents.


 The certificate shall be signed by original or facsimile signature of two officers of the Corporation, and the seal of the Corporation may be affixed thereto.


402.    Transfer of Stock. Shares of stock may be transferred by delivery of the certificate accompanied by either an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign, and transfer the same on the books of this Corporation, signed by the person appearing on the certificate to be the owner of the Shares represented thereby, and shall be transferable on the books of this Corporation upon surrender thereof so assigned or endorsed.


4.03    Loss of Certificates.  In case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board shall prescribe.


4.04

Transfer Books.  For the purpose of determining Shareholders entitled to notice of or to vote at any meeting of Shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of Shareholders for any other proper purpose, the Board may fix, in advance, a record date for any such determination of Shareholders, such date in any case to be not more than seventy (70) days and, in case of a meeting of Shareholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of Shareholders is to be taken.  If no record date is fixed for the determination of Shareholders entitled to notice of or to vote at a meeting of Shareholders, or Shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Shareholders.  When a determination of Shareholders entitled to vote at any meeting of Shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.


4.05

Voting Record.  The officer or agent having charge of the stock transfer books for Shares of this Corporation shall make a complete record of the Shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of Shares held by each.  Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Shareholder during the whole time of the meeting for the purposes thereof.





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ARTICLE V

Books and Records; Financial Statements


5.01

Books and Records.  The Corporation:


            a.

Shall keep as permanent records minutes of all meetings of its Shareholders and Board of Directors, a record of all actions taken by the Shareholders or Board without a meeting, and a record of all actions taken by a committee of the Board of Directors exercising the authority of the Board on behalf of the Corporation;


b.

Shall maintain appropriate accounting records;


c.

Or its agent shall maintain a record of its Shareholders, in a form that permits preparation of a list of the names and addresses of all Shareholders, in alphabetical order by class of Shares showing the number and class of Shares held by each; and


c.

Shall keep a copy of the following records at its principal office:


            (1)

The Articles of Restated Articles of Incorporation and all amendments to them currently in effect;


(2)

The Bylaws or Restated Bylaws and all amendments to them currently in effect;


(3)

The minutes of all Shareholders’ meetings, and records of all actions taken by Shareholders without a meeting, for the past three (3) years;


(4)

Its financial statements for the past three (3) years, including balance sheets showing, in reasonable detail, the financial condition of the Corporation as of the close of each fiscal year, and an income statement showing the results of its operations during each fiscal year prepared on the basis of generally accepted accounting principles or, if not, prepared on a basis explained therein;


(5)

All written communications to Shareholders generally within the past three (3) years;


(6)

A list of the names and business addresses of its current directors and officers; and


(7)

Its most recent annual report delivered to the Secretary of State of Idaho.





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5.02

Financial Statements.  Not later than four (four months after the close of its fiscal year, and in any event prior to the annual meeting of Shareholders, the Corporation shall prepare a balance sheet and income statement as of the close of the fiscal year.  Upon written request, the Corporation shall mail to any Shareholder a copy of the most recent balance sheet and income statement.  If the annual financial statements are reported upon by a public accountant, the accountant’s report must accompany them.


ARTICLE VI

Indemnification of Officers,

Directors, Employees and Agents


6.01

General.  This Corporation shall provide any indemnification allowed by the Idaho Business Corporation Act and shall indemnify directors, officers, agents and employees as follows:


6.02

Officers and Directors.  This Corporation shall indemnify its officers and directors to the fullest extent required or permitted by the Idaho Business Corporation Act, now or hereafter in force, whether they are serving the Corporation or, at its request, any other entity, as an officer, director or in any other capacity.


6.03

Implementation.  The Board of Directors may take such action as is necessary to carry out these indemnifications provisions and is expressly empowered to adopt, approve and amend from time to time any Bylaws, resolutions or contracts in implementing such provisions, including, but not limited to, the manner in which determinations as to any indemnity or advancement of expenses shall be made, or such further indemnification agreements as may be permitted by law shall be implemented.


6.04

Other Employees and Agents.   This Corporation shall indemnify other employees and agents to the extent as may be authorized by the Board of Directors or the Bylaws and be permitted by law, whether the employees and agents are serving this Corporation or, at its request, any other entity.


6.05

Non-Exclusivity.  The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled under any statute, provisions or the Articles of Incorporation, Bylaws or other agreements.


6.06

Pre-existing Rights.  No amendment or repeal of this Article shall apply to or have any effect on any right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.










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ARTICLE VII

Amendments


7.01

By the Shareholders.  These Bylaws may be amended or repealed by the affirmative vote of a majority of the Shares present at any meeting of the Shareholders if notice of the proposed amendment is contained in the notice of the meeting.


4.02

By the Board of Directors.  These Bylaws may be amended or repealed by the affirmative vote of a majority of the whole Board of Directors at any meeting of the Board, if notice of the proposed amendment is contained in the notice of the meeting.  However, the directors may not modify the Bylaws fixing their qualifications, classifications or term of office.





CERTIFICATION


The undersigned secretary of   NEW JERSEY MINING COMPANY does hereby certify that the above and foregoing Bylaws of said Corporation were adopted by the Directors as the Bylaws of   NEW JERSEY MINING COMPANY as of _________, 1996, and that the same do now constitute the Bylaws of this Corporation.


DATED this ____day of _________, 1996.




/s/ FRED W. BRACKEBUSCH

- Secretary







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Exhibit 10.1


VENTURE AGREEMENT


THIS VENTURE AGREEMENT (“Agreement”) is made and entered into effective as of January  7 ,   2011 (the “Effective Date”)


BETWEEN :


New Jersey Mining Company

a corporation incorporated under the laws of Idaho

P. O. Box 1019

Kellogg, Idaho 83837

Facsimile: 208.783.3331

 (hereinafter “ NJMC ”)


United Mine Services, Inc.

a corporation incorporated under the laws of Idaho

P.O. Box 828

Pinehurst, ID 83850

Facsimile: 208.682.9472

(hereinafter “UMS )


RECITALS


A. NJMC holds an interest in certain “Properties” situated in Shoshone County, Idaho which are described in Exhibit A and defined in Section 1 below.


B. UMS wishes to participate with NJMC in the operation of the New Jersey Mill in order to have a mineral processing facility for ores from its Crescent mine or other properties, and NJMC desires to grant such rights to UMS in order to reduce its operating costs for its ores and to improve metallurgical efficiency of the plant.


NOW THEREFORE, in consideration of the covenants and terms contained herein, NJMC and UMS agree as follows:


1 . DEFINITIONS . As used in this Agreement, the following terms shall have the meanings specified in this Section.  Cross-references in this Agreement to Articles, Sections, Subsections and Exhibits refer to Articles, Sections, Subsections and Exhibits of this Agreement, unless specified otherwise.


Accounting Procedure ” means the procedure set forth in Exhibit C .


Affiliate ” of a Participant means an entity or person that Controls, is Controlled by, or is under common Control with the Participant.


Agreement ” means this Venture Agreement, including any amendments and modifications hereof, and all appendices, schedules and exhibits which are incorporated herein by this reference.


Area of Interest ” has the meaning ascribed in Exhibit “B” .

Assets ” means the Properties, Products, and all other real and personal property, tangible and intangible, held for the benefit of the Participants hereunder.


Budget ” means a detailed estimate of all costs to be incurred by the Participants with respect to a Program and a schedule of cash advances to be made.


Chargee ” means the holder of an Encumbrance as described in Section 13.5 .





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Claims ” means the mining claims identified in Exhibit A .


Confidential Information ” has the meaning described in Section 15.6 .


Continuing Obligations ” means obligations or responsibilities that are reasonably expected to continue or arise after Operations on a particular area of the Properties have ceased or are suspended, including, but not limited to, Environmental Compliance.


Control ” used as a verb means, when used with respect to an entity, the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity through (i) the legal or beneficial ownership of voting securities or membership interests; (ii) the right to appoint managers, directors or corporate management; (iii) contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when used with respect to a person, means the actual or legal ability to control the actions of another, through family relationship, agency, contract or otherwise; and “Control” used as a noun means an interest which gives the holder the ability to exercise any of the foregoing powers.


Development ” means all preparation (other than Exploration) for the removal and recovery of Products, including the construction or installation of leach pads, a mill or any other improvements to be used for the mining, handling, milling, beneficiation or other processing of Products.


Effective Date ” means the date set forth on the top of page one of this Agreement.


Encumbrance” or “Encumbrances” means mortgages, deeds of trust, security interests, pledges, liens, net profits interests, royalties or overriding royalty interests, other payments out of production, or other burdens of any nature applicable to the Properties.


Environmental Compliance” means actions performed during or after Operations to comply with the requirements of all Environmental Laws or contractual commitments related to reclamation of the Properties or other compliance with Environmental Laws.


Environmental Laws” means Laws aimed at reclamation or restoration of the Properties; abatement of pollution; protection of the environment; monitoring environmental conditions; protection of wildlife, including endangered species; ensuring public safety from environmental hazards; protection of cultural or historic resources; management, storage or control of hazardous materials and substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances into the environment, and all other Laws relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes.


Environmental Liabilities ” means any and all claims, actions, causes of action, damages, losses, liabilities, obligations, penalties, judgments, amounts paid in settlement, assessments, costs, disbursements, or expenses (including, without limitation, legal fees and costs, experts’ fees and costs, and consultants’ fees and costs) of any kind or of any nature whatsoever that are asserted against either Participant or the Venture, by any person or entity other than the other Participant, alleging liability (including, without limitation, liability for studies, testing or investigatory costs, cleanup costs, response costs, removal costs, remediation costs, containment costs, restoration costs, corrective action costs, closure costs, reclamation costs, natural resource damages, property damages, business losses, personal injuries, penalties or fines) arising out of, based on or resulting from (i) the presence, release, threatened release, discharge or emission into the environment of any hazardous materials or substances existing or arising on, beneath or above the Properties and/or emanating or migrating and/or threatening to emanate or migrate from the Properties to off-site properties; (ii) physical disturbance of the environment caused by or relating to Operations; or (iii) the violation or alleged violation of any Environmental Laws arising from or relating to Operations.


Existing Data ” means maps, drill logs and other drilling data, core tests, pulps, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records, and any other material or information relating to the Properties, which is owned or controlled by NJMC.




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Government Fees ” means all rentals, holding fees, location fees, maintenance payments or other payments required by any law, rule or regulation to be paid to a federal, state, provincial, territorial or other governmental authority, in order to locate or maintain any licenses, permits, claims, concessions, fee lands, mining leases, surface leases, Claims or other tenures included in the Properties.


Initial Contribution ” means that contribution each Participant agrees to make, or is deemed to have made, pursuant to Sections 5.1 and 5.2 .


Indemnified Participant ” has the meaning described in Subsection 2.5.1


Indemnifying Participant ” has the meaning described in Subsection 2.5.1 .


Joint Account ” means the account maintained in accordance with the Accounting Procedure showing the charges and credits accruing to the Participants.


Law” or “Laws ” means all federal, state, provincial, territorial and local laws (statutory or common), rules, ordinances, regulations, grants, concessions, franchises, licenses, orders, directives, judgments, decrees, and other governmental restrictions, including permits and other similar requirements, whether legislative, municipal, administrative or judicial in nature, including Environmental Laws, which are applicable to the Properties, the Area of Interest, or Operations, regardless of whether or not in existence or enacted or adopted hereafter; provided, however, nothing in this definition is intended to make laws applicable to the parties during periods when the laws are not applicable by their terms or the timing of their enactment.


Management Committee ” means the committee established under Article 7 .


Manager ” means the person or entity appointed under Article 8 to manage Operations, or any successor Manager.


Memorandum of Agreement ” means the document attached as Exhibit D .


Mining ” means the mining, extracting, producing, handling, milling, or other processing of Products.


 “ Notice” or “Notices ” has the meaning described in Section 15.1 .


Operations ” means the activities carried out under this Agreement.


Participant ” and “ Participants ” mean the persons or entities that from time to time have Participating Interests.


Participating Interest ” means the percentage interest representing the ownership interest of a Participant in the Assets, and in all other rights and obligations arising under this Agreement, as such interest may from time to time be adjusted hereunder. Participating Interests shall be calculated to three decimal places and rounded to two (e.g., 1.519% rounded to 1.52%).  Decimals of .005 or more shall be rounded up to .01; decimals of less than .005 shall be rounded down.  The initial Participating Interests of the Participants are set forth in Subsection 6.1.1 .


Prime Rate ” has the meaning described in Section 9.10


Products ” means all metals, ores, concentrates, minerals, and mineral resources, including materials derived from the foregoing, produced from the Properties under this Agreement, as well as timber and timber products.


Program ” means a description in reasonable detail of Operations to be conducted by the Manager, as described in Article 9 .


Properties ” means the licenses, permits, claims, concessions, fee lands, mining leases, surface leases




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or other rights or interests (as applicable) described in Exhibit A or acquired by the Venture within the Area of Interest.


 “ Transferring Entity ” has the meaning described in Subsection 13.3.1 .


Venture ” means the contractual relationship of the Participants under this Agreement.


2. REPRESENTATIONS AND WARRANTIES; RECORD TITLE; INDEMNITIES


2.1 Representations and Warranties .


2.1.1 Capacity of Participants . Each Participant represents and warrants to the other Participant as follows: (i) it is a corporation duly incorporated, qualified to transact business, and in good standing under the Laws of its jurisdiction and in the USA (ii) it has the full right, power and capacity to enter into and perform this Agreement and all transactions contemplated herein, and all corporate, board of directors and other actions required to authorize it to enter into and perform this Agreement have been properly taken; (iii) it will not breach any other agreement or arrangement by entering into or performing this Agreement, and this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms; and (iv) it has relied solely on its own appraisals and estimates as to the potential of the Properties, and upon its own geologic, engineering and other interpretations related thereto.


2.1.2 Representations and Warranties by NJMC . NJMC represents and warrants the following:


2.1.2.1 With respect to the Claims, (i) the Claims were properly laid out and monumented; (ii) all required location and validation work was properly performed; (iii) all Notices/certificates (as applicable) were properly recorded/filed with appropriate governmental agencies; (iv) all Government Fees required to hold or maintain the Claims have been paid through September 1, 2011 ; and (v) all affidavits or other recordings/filings required to maintain the Claims in good standing have been properly and timely recorded with appropriate governmental agencies.


2.1.2.2 With respect to portions of the Properties in which NJMC holds an interest under licenses, permits, leases or other contracts, NJMC represents and warrants (i) it is in exclusive possession of such Properties; (ii) it has not received any Notice of default of any of the terms or provisions of such leases or other contracts; (iii) it has the authority under such leases and other contracts to perform fully its obligations under this Agreement; (iv) such leases or other contracts are valid and in good standing; (v) it has no knowledge of any act or omission or any condition on the Properties which could be considered or construed as a default under any such lease or other contract; and (vi) to its knowledge, such Properties are free and clear of all Encumbrances or defects in title.  


2.1.2.3 Except as specified on Exhibit A (if any), NJMC has not entered into any other agreement with respect to its interest in and to the Properties that is currently valid and outstanding, and there are no leases or subleases or Encumbrances on the Properties, nor any defects in title.


2.1.2.4 Except as to matters of record, no other person or entity is claiming an interest in, or in conflict with, the Properties; provided however, as to unpatented mining claims paramount title is in the United States.


2.1.2.5 There are no actions, suits, claims, proceedings, litigation or investigations pending or threatened against it that relate to the Properties, or that could, if continued, adversely affect the ability of UMS or NJMC to fulfill its obligations under this Agreement or NJMC’s ability to exercise its rights under this Agreement.


2.1.2.6 To the best of NJMC’s knowledge, there is no latent condition on the Properties that could result in any Environmental Liabilities or other type of enforcement proceeding,




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or any recovery by any governmental agency or private party of remedial or removal costs, natural resources damages, property damages, damages for personal injuries or other costs, expenses, damages or injunctive relief arising from any alleged injury or threat of injury to health, safety or the environment.  The Properties are in the Bunker Hill Superfund Site and future actions under CERCLA or other laws could affect the Properties.


2.1.2.7 NJMC has delivered to UMS all Existing Data in its possession or control, and true and correct copies of all leases or other agreements relating to the Assets.


2.2 Disclosures . Each Participant represents and warrants that it is not aware of any material facts or circumstances that have not been disclosed in this Agreement, which should be disclosed to the other Participant in order to prevent the representations and warranties in this Agreement from being materially misleading.


2.3 Record Title . Title to real and personal property included in the Assets shall be held in the name of the Manager for the benefit of the Participants. Each Participant agrees to execute appropriate documents to reflect changes resulting from changes in Participating Interests in accordance with Section 6.6 below.


2.4 Joint Loss of Title . Any failure of loss of title to the Assets shall be charged to the Participants in proportion to their Participating Interests as they exist at the time a loss occurs, and all costs of defending title shall be charged to the Joint Account.


2.5 Indemnities .


2.5.1 Each Participant shall indemnify the other Participant, its directors, officers, employees, agents and attorneys or Affiliates (collectively “ Indemnified Participant ”) against any loss, cost, expense, damage or liability (including legal fees and other expenses) due to claims by third parties arising out of or based on a breach by the Participant (“ Indemnifying Participant ”) of any representation, warranty or covenant contained in this Agreement.


2.5.2 If any claim or demand by a third party is asserted against an Indemnified Participant in respect of which such Indemnified Participant may be entitled to indemnification under this Agreement, written Notice of such claim or demand shall promptly be given to the Indemnifying Participant.  The Indemnifying Participant shall have the right, but not the obligation, by notifying the Indemnified Participant within thirty (30) days after its receipt of the Notice of the claim or demand, to assume the entire Control of (subject to the right of the Indemnified Participant to participate, at the Indemnified Participant’s expense and with counsel of the Indemnified Participant’s choice), the defense, compromise, or settlement of the matter.  Any damages to the Assets or business of the Indemnified Participant caused by a failure by the Indemnifying Participant to defend, compromise, or settle a claim or demand in a reasonable and expeditious manner requested by the Indemnified Participant, after the Indemnifying Participant has given Notice that it will assume control of the defense, compromise, or settlement of the matter, shall be included in the damages for which the Indemnifying Participant shall be obligated to indemnify the Indemnified Participant.  Any settlement or compromise of a matter by the Indemnifying Participant shall include a full release of claims against the Indemnified Participant which has arisen out of the indemnified claim or demand.


3. NAME, PURPOSES, AND TERM


3.1 General . NJMC and UMS hereby enter into this Agreement for the purposes hereinafter stated. All of the Participants’ rights and obligations in connection with the Assets, the Area of Interest and all Operations shall be subject to and governed by this Agreement.


3.2 Name . The Manager shall conduct the business of the Venture in the name of the Venture, doing business as the “ New Jersey Mill Joint Venture ”. The Manager shall accomplish any registration required by applicable, assumed or fictitious name statutes and similar statutes.  




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3.3 Purposes . This Agreement is entered into for the following purposes and for no others, and shall serve as the exclusive means by which the Participants, or either of them, accomplish such purposes: (i) to conduct Mineral Processing operations within the Properties for the benefit of the Participants; (ii) to acquire additional real property and other interests within the Area of Interest only for mineral processing purposes; (iii) to evaluate and engage in expanded Mineral Processing Operations on the Properties; (iv) to engage in disposition of Products, to extent permitted in Article 10 ; (v) to complete and satisfy all Environmental Compliance obligations and other Continuing Obligations relating to the Properties; and (vi) to perform any other operation or activity necessary, appropriate, or incidental to any of the foregoing.


3.4 Limitation . Unless the Participants otherwise agree in writing, Operations shall be limited to the purposes described in Section 3.3 , and nothing in this Agreement shall be construed to enlarge such purposes.


3.5 Term . Unless the Venture is earlier terminated or otherwise terminates as provided in this Agreement, the term of this Agreement is for so long as any of the Properties are jointly owned by the Participants and thereafter until all materials, supplies, and equipment have been salvaged and disposed of, a final accounting has been made between the Participants, and any required Environmental Compliance has been completed and accepted by the appropriate governmental agencies.


4. RELATIONSHIP OF THE PARTICIPANTS


4.1 No Partnership . Nothing contained in this Agreement shall be deemed to constitute either Participant the partner of the other, nor, except as otherwise herein expressly provided, to constitute either Participant the agent or legal representative of the other, nor to create any fiduciary relationship between them.  The Participants do not intend to create, and this Agreement shall not be construed to create, any mining, commercial, tax or other partnership.  Neither Participant shall have any authority to act for or to assume any obligation or responsibility on behalf of the other Participant, except as otherwise expressly provided herein.  The rights, duties, obligations and liabilities of the Participants shall be several and not joint or collective.  Each Participant shall be responsible only for its obligations as herein set out and shall be liable only for its share of the costs and expenses as provided herein. It is the Participants’ intent that their ownership of Assets and the rights acquired hereunder shall be as tenants in common.  


4.2 Taxes . Each Participant shall be directly responsible for paying its income taxes and individually file its tax returns with the proper authorities and independently file claims for and recover any income tax credits.  A Participant’s decisions with respect to such tax matters shall not have any binding effect on the course of actions taken by the other Participant.


4.3 Other Business Opportunities . Except as expressly provided in this Agreement, each Participant shall have the right independently to engage in and receive full benefits from business activities, whether or not competitive with Operations, without consulting the other.  The doctrines of “corporate opportunity” or “business opportunity” shall not be applied to any other activity, venture, or operation of either Participant, and, neither Participant shall have any obligation to the other with respect to any opportunity to acquire any property outside the Area of Interest at any time, or within the Area of Interest after the termination of this Agreement, except as provided in Section 11.8 .  Unless otherwise agreed in writing, no Participant shall have any obligation to mill, beneficiate, or otherwise treat any Participant’s share of Products in any facility owned or controlled by such Participant, except as provided in Section 8.2 .


4.4 Termination or Transfer of Rights to Properties . Except as otherwise provided in this Agreement, neither Participant shall permit or cause all or any part of its interest in the Assets or this Agreement to be sold, exchanged, encumbered, surrendered, abandoned, partitioned, divided, or otherwise terminated, by judicial means or otherwise.  The Participants hereby waive and release all rights of partition, or of sale in lieu thereof, or other division of Assets, including any such rights provided by any Law.


4.5 Implied Covenants . The implied covenants of good faith and fair dealing are the only implied covenants in this Agreement. No other implied covenants recognized under applicable Law shall be valid or enforceable with respect to this Agreement.





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4.6 No Royalty or Other Interests . Except as provided in Section 6.4 , no Participant shall be entitled or permitted to create any royalty or similar carried interest in all or any part of the Assets.


4.7 No Third Party Beneficiary Rights . This Agreement shall be construed to benefit the Participants and their respective successors and permitted assigns only, and shall not be construed to create third party beneficiary rights in any other party, governmental agency or organization.


5. CONTRIBUTIONS BY PARTICIPANTS


5.1 NJMC’s Initial Contribution . NJMC hereby contributes to the Venture all of its right, title and interest in and to the Properties, together with all of its respective right, title and interest in and to any licenses and permits relating to the Properties and all Existing Data. NJMC hereby also contributes the mineral processing equipment and improvements identified in Exhibit A .  The agreed value of NJMC’s initial contribution comprised of its interests in the contributed Properties, Existing Data, milling equipment and improvements listed on Exhibit A is five million dollars ($5,000,000).


The parties recognize and understand that the fee land that makes up a part of the Properties has been subject to a lease made on September 15, 1993 between NJMC as lessee and ZECO lessor.  Secondly, that some of the claims that constitute the Properties are owned by NJMC without regard to and not subject to the lease referred to in this paragraph.

The parties further acknowledge and agree that the Manager is authorized, on or after the Effective Date of this Agreement, to purchase the foregoing leased mining properties from the respective lessors for the total sum of $225,000, and terminate the lease. This purchase shall be charged against the Joint Account.  NJMC has furnished to UMS a copy of the transaction documents for its information.

5.2 UMS’s Initial Contribution . UMS shall make an initial cash contribution of one hundred thousand dollars ($100,000) to the Venture on the Effective Date of this Agreement.  Additionally, UMS shall pay the Venture the total amount needed to expand the mill processing rate to 15 tonnes/hour (16.5 short tons per hour) or 10,000 tonnes per month (11,025 short tons per month), estimated to be $2,300,000 as shown in Exhibit E Initial Program and Budget.  Consent of UMS is required for any greater than 10% in excess of Exhibit E Initial Program and Budget. UMS is required to fund the mill expansion to 15 tonnes/hour.  Should the mill expansion actual cost exceed $3,000,000, the Initial Participating Interests in Section 6.1.1 will be adjusted accordingly.  UMS shall advance the funds necessary to complete the Initial Program and Budget within 5 days of the request by the Manager.  The Manager shall request funds according to the schedule necessary to procure and install equipment and facilities.


The agreed value of UMS’s initial contribution for purposes of this Agreement is two and one-half million dollars ($2,500,000.00).

5.3. Additional Contributions . The Participants shall contribute funds for adopted Programs and Budgets in proportion to their respective Participating Interests, subject to election permitted in Section 9.4 .


6. PARTICIPATING INTERESTS


6.1 Participating Interests


6.1.1 Initial Participating Interest . The Participants shall have the following initial Participating Interests in the Venture subject to adjustment as discussed in Section 5.2.


NJMC

67%


UMS

33%



6.1.2 Changes in Participating Interests .  A Participant’s Participating Interest shall only be changed as follows:





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6.1.2.1 upon an election or deemed election by a Participant pursuant to Section 9.4 not to contribute to an adopted Program and Budget in accordance with the percentage reflected by its Participating Interest;


6.1.2.2 as provided in Section 6.4 ;


6.1.2.3 in the event of default by a Participant in making its agreed upon contribution to an adopted Program and Budget or upon UMS’s default in making payments for the Initial Contribution to expand the mill pursuant to Subsection 5.2 , followed by an election by the other Participant to invoke Section 6.3 ;


6.1.2.4 upon withdrawal, pursuant to Article 11 ;

6.1.2.5 pursuant to a transfer by a Participant of all or a portion of its Participating Interest in accordance with Article 13 ; or


6.1.2.6 upon acquisition by either Participant of part or all of the Participating Interest of the other Participant, however arising.


6.2 Voluntary Reduction in Participation – Dilution . After the Participants have completed their Initial Contributions, a Participant may elect, as provided in Section 9.4 , to limit its contributions to an adopted Program and Budget (without regard to its vote on adoption of the Program and Budget) by partially contributing or not contributing at all to an adopted Program and Budget.


In such event, the other, non-diluting Participant shall then have the option to either fully fund the remaining portion of the adopted Program and Budget; or, within fifteen (15) days following the election of the diluting Participant under Subsection 9.4.2 , to propose a reduced alternative Program and Budget to which the Participants shall, within seven (7) days, make a re-election under Subsection 9.4.1 or Subsection 9.4.2 .  If the non-diluting Participant elects to continue with the initially adopted Program and Budget, the Participating Interest of the Participant electing not to participate shall be recalculated at the time of election by dividing the sum of (a) the value of that Participant’s Initial Contribution as defined in Sections 5.1 or 5.2 , plus (b) the total of all that Participant’s contributions to previous Programs and Budgets, by the sum of (a) and (b) above for all Participants, plus (c) the amount the non-diluting Participant elects to contribute to the approved Program and Budget, and multiplying the result by 100.  That is:


(a)+(b) diluting Participant  x  100  =  Recalculated Participating Interest

(a)+(b) all Participants +(c)


The Participating Interest of the other, non-diluting Participant shall thereupon become the difference between 100% and the recalculated Participating Interest.


As soon as practicable after the necessary information is available at the end of each period covered by an adopted Program and Budget, a recalculation of each Participant’s Participating Interest shall be made in accordance with the preceding formula to adjust, as necessary, the recalculations made at the beginning of such period to reflect actual contributions made by the Participants during the period.  Except as otherwise provided in this Agreement, a diluting Participant shall retain all of its rights and obligations under this Agreement, including the right to participate in future Programs and Budgets at its recalculated Participating Interest.


6.3 Default in Making Contributions


6.3.1 If a Participant elects to contribute to an approved Program and Budget and then defaults in making a contribution or cash call under an approved Program and Budget the non-defaulting Participant may, but is not obligated to, advance the defaulted contribution on behalf of the defaulting Participant and treat the same, together with any accrued interest, as a demand loan bearing interest from the date of the advance at the rate provided in Section 9.10 .  The failure to repay said loan within ten (10) days following demand shall be a default.




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6.3.2 The Participants acknowledge that if a Participant defaults in making a contribution to an approved Program and Budget or a cash call under Section 9.9 , or in repaying a loan under Subsection 6.3.1 , as required hereunder, it will be difficult to measure the damages resulting from such default and the damage to the non-defaulting Participant could be significant. In the event of such default, as reasonable liquidated damages, the non-defaulting Participant may, with respect to any such default not cured within thirty (30) days after Notice to the defaulting Participant of such default, declare the defaulting Participant in default, in which case the defaulting Participant’s Participating Interest shall be reduced by two times the amount that would otherwise be calculated pursuant to Section 6.2 .


6.3.3 If UMS defaults in payment of its Initial Contribution for mill expansion under Subsection 5.2 as required hereunder, then NJMC may, with respect to any default not cured within thirty (30) day after Notice to UMS of such default, declare UMS to be in default, in which case UMS’s Participating Interest shall be reduced by the amount calculated under Section 6.2 after reducing UMS’s Initial Contribution by the total amount owing as of the date that UMS is declared to be in default.

6.4 Elimination of Minority Participating Interest . Upon the reduction of its Participating Interest to Five Percent (5%) or less, a Participant shall be deemed to have withdrawn from the Venture and shall relinquish its entire Participating Interest, free and clear of any Encumbrances arising by, through or under that Participant. Such relinquished Participating Interest shall be deemed to have accrued automatically to the other Participant.


6.5 Continuing Liabilities Upon Adjustments of the Participating Interests . Any actual or deemed withdrawal of a Participant or any reduction of a Participant’s Participating Interest under this Agreement shall not relieve such Participant of its share of any liability, whether it accrues before or after such withdrawal or reduction, arising out of Operations conducted prior to such withdrawal or reduction, including, without limitation, Environmental Compliance and other Continuing Obligations.  For purposes of this Article 6 , such Participant’s share of such liability shall be equal to its Participating Interest at the time that the events or omissions giving rise to such liability occurred.  The increased Participating Interest accruing to a Participant as a result of the reduction of the other Participant’s Participating Interest shall be free from royalties, liens or other Encumbrances arising by, through or under such other Participant, other than those to which both Participants have given their written consent.


6.6 Documentation of Adjustments to Participating Interests . An adjustment to a Participating Interest need not be evidenced during the term of this Agreement by the execution and recording of appropriate instruments, but each Participant’s Participating Interest shall be shown in the books of the Manager.  However, either Participant, at any time upon the request of the other Participant, shall execute and acknowledge instruments necessary to evidence or effectuate such adjustment in a form sufficient for recording in the jurisdiction where the Properties are located.


6.7 Grant of Lien or Security Interest


6.7.1 Subject to Section 6.8 , each Participant grants to the other Participant a lien upon and a security interest in its Participating Interest, including all of its right, title and interest in the Assets and the Participant’s share of Products, whenever acquired or arising, and the proceeds from and accessions to the foregoing.


6.7.2 The liens and security interests granted by Subsection 6.7.1 shall secure every obligation or liability of the Participant granting such lien or security interest created under this Agreement, including the obligation to repay a loan granted under Subsection 6.3.1 and UMS’s obligation to pay the promissory note under Subsection 5.2.2 .  Each Participant hereby agrees to take all action necessary to perfect such lien and security interests and hereby appoints the other Participant, its attorney-in-fact, to execute, file and record all security documents necessary to perfect or maintain such lien and security interests.


6.8 Subordination of Interests . Each Participant shall, from time to time, take all necessary actions,




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including execution of appropriate agreements, to pledge and subordinate its Participating Interest, any liens it may hold which are created under this Agreement, other than those created pursuant to Section 6.7 hereof, and any other right or interest it holds with respect to the Assets (other than any statutory lien of the Manager) to any secured borrowings for Operations approved by the Management Committee.

 


7. MANAGEMENT COMMITTEE


7.1 Organization and Composition . Upon execution of this Agreement, the Participants shall establish a Management Committee to determine overall policies, objectives, procedures, methods and actions under this Agreement. The Management Committee shall initially consist of two (2) members appointed by NJMC and one (1) member appointed by UMS.  These may change through majority vote of the Participants.  Each Participant may appoint one or more alternates to act and vote in the absence of a regular member.  Any alternate so acting shall be deemed a member.  Appointments shall be made or changed by prior written Notice to the other Participant.


7.2 Decisions . Each Participant, acting through its appointed members, shall have votes on the Management Committee, in proportion to its Participating Interest.  Unless otherwise provided in this Agreement, the vote of a Participant with a Participating Interest greater than fifty percent (50%) shall determine the decisions of the Management Committee.  In the event of a tie vote, the Participant designated as Manager shall have the deciding vote of the Management Committee, after considering the legitimate concerns of the other Participant.


7.3 Meetings . The Management Committee shall hold regular meetings at least annually in Kellogg, Idaho, U.S.A. or at other mutually agreed places. The Manager shall give thirty (30) days Notice to the Participants of such regular meetings (unless such Notice is waived by the Participants).  Additionally, any Participant may call a special meeting upon seven (7) days Notice to the Manager and the other Participant (unless such Notice is waived by the Participants). In case of emergency, reasonable Notice of a special meeting shall suffice. With respect to a regular or special meeting of the Management Committee, there shall be a quorum if at least one member representing each Participant having greater than a twenty percent (20%) Participating Interest is present. Each Notice of a meeting shall include an itemized agenda prepared by the Manager in the case of a regular meeting, or by the Participant calling the meeting in the case of a special meeting, but any matter may be considered with the consent of all Participants.  The Manager shall prepare minutes of all meetings and shall distribute copies of such minutes to the Participants within thirty (30) days after the meeting.  The Participants shall have thirty (30) days after receipt to sign and return such copies or to provide any written comments on such minutes to the Manager.  If a Participant timely submits written comments on such minutes, the Management Committee shall seek, for a period not to exceed thirty (30) days, to agree upon minutes of such meeting acceptable to the Participants.  At the end of such period, failing agreement by the Participants on revised minutes, the minutes of the meeting shall be the original minutes as prepared by the Manager, together with the comments on the minutes made by the other Participant.  These documents shall be placed in the minute book maintained by the Manager.  If personnel employed in Operations are required to attend a Management Committee meeting, reasonable costs incurred in connection with such attendance shall be a Venture cost.  All other costs associated with Management Committee meetings shall be paid for by the Participants individually.


7.4 Action Without Meeting . Subject to the Notice and quorum requirements under Section 7.3 , the Management Committee may hold meetings by telephone conferences in lieu of meetings in person, so long as minutes are prepared in accordance with Section 7.3 .  The Management Committee may also take actions in writing signed by all members.


7.5 Matters Requiring Approval . Except as otherwise delegated to the Manager in Section 8.2 or as otherwise provided in this Agreement, the Management Committee shall have exclusive authority to determine all management matters related to this Agreement.


8. MANAGER


8.1 Appointment . The Participants hereby appoint NJMC as the Manager with overall management




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responsibility for Operations and to remain as Manager until it resigns pursuant to Section 8.4 .


8.2 Powers and Duties of Manager . Subject to the terms and provisions of this Agreement, the Manager shall have the following powers and duties:


8.2.1 the Manager shall manage, direct, and control Operations to process a minimum amount of ore (unless not available) of 7,000 dry tonnes per month for UMS’ mines and 3,000 dry tonnes per month for NJMC’s mines, and shall prepare and present to the Management Committee proposed Programs and Budgets. If either Participant does not use the processing capacity allocated to it in any month, the Manager will offer such unused capacity to the other Participant;


8.2.2 the Manager shall implement the decisions of the Management Committee, shall make all expenditures necessary to carry out adopted Programs, and shall promptly advise the Management Committee if it lacks sufficient funds to carry out its responsibilities under this Agreement;


8.2.3 the Manager shall use reasonable efforts to:   (i) purchase or otherwise acquire all material, supplies, equipment, water, utility and transportation services required for Operations, such purchases and acquisitions to be made on the best terms available, taking into account all of the circumstances; (ii) obtain such customary warranties and guarantees as are available in connection with such purchases and acquisitions; and (iii) keep the Assets free and clear of all Encumbrances, except for those existing at the time of, or created concurrent with, the acquisition of such Assets, or mechanic’s or materialmen’s liens which shall be released or discharged in a diligent manner, or Encumbrances specifically approved by the Management Committee;


8.2.4 the Manager shall conduct such title examinations and cure such title defects relating to the Properties as may be advisable in the reasonable judgment of the Manager;


8.2.5 the Manager shall:   (i) make or arrange for all payments required by concessions, leases, licenses, permits, contracts, and other agreements related to the Assets; (ii) pay all taxes, assessments and like charges on Operations and Assets except taxes determined or measured by a Participant’s sales revenue or net income.  If authorized by the Management Committee, the Manager shall have the right to contest, in the courts or otherwise, the validity or amount of any taxes, assessments, or charges if the Manager deems them to be unlawful, unjust, unequal, or excessive, or to undertake such other steps or proceedings as the Manager may deem reasonably necessary to secure a cancellation, reduction, readjustment, or equalization thereof before the Manager shall be required to pay them, but in no event shall the Manager permit or allow title to the Assets to be lost as the result of the non-payment of any taxes, assessments, or like charges; and (iii) do all other acts reasonably necessary to maintain the Assets;


8.2.6 the Manager shall: (i) apply for all necessary permits, licenses and approvals; (ii) comply with the Laws; (iii) notify promptly the Management Committee of any allegations of substantial violation thereof; and (iv) prepare and file all reports or notices required for Operations.  In the event of any violation of permits, licenses, Laws or approvals, the Manager shall timely cure or dispose of such violation through performance, payment of fines and penalties, or both, and the cost thereof shall be charged to the Joint Account;


8.2.7 the Manager shall notify the other Participant promptly of any litigation, arbitration, or administrative proceeding commenced against the Venture.  The Manager shall prosecute and defend, but shall not initiate without consent of the Management Committee, all litigation or administrative proceedings arising out of Operations. The non-managing Participant shall have the right to participate, at its own expense, in such litigation or administrative proceedings. The Management Committee shall approve in advance any settlement involving payments, commitments or obligations in excess of one-hundred thousand dollars ($100,000) in cash or value;


8.2.8 the Manager may dispose of Assets, whether by sale, assignment, abandonment or other




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transfer, in the ordinary course of business, except that Properties may be abandoned or surrendered only as provided in Article 12 .  However, without prior authorization from the Management Committee, the Manager shall not: (i) dispose of Assets in any one transaction having a value in excess of one-hundred thousand dollars ($100,000), (ii) enter into any sales contracts or commitments for Products, except as permitted in Section 10.2 ; (iii) begin a liquidation of the Venture; or (iv) dispose of all or a substantial part of the Assets necessary to achieve the purposes of the Venture;


8.2.9 the Manager shall have the right to carry out its responsibilities hereunder through agents, Affiliates or independent contractors;


8.2.10 the Manager shall keep and maintain all required accounting and financial records pursuant to the Accounting Procedure and in accordance with generally accepted U.S. GAAP accounting procedures;


8.2.11 the Manager shall select and employ at competitive rates all supervision and labor necessary or appropriate to all Operations hereunder.  All persons employed hereunder, the number thereof, their hours of labor and their compensation shall be determined by the Manager, and they shall be employees of the Manager;


8.2.12 the Manager shall keep the Management Committee advised of all Operations by submitting in writing to the Management Committee: (i) quarterly progress summaries with applicable data and an annual report by each January 31, and quarterly progress reports, which include statements of expenditures and comparisons of such expenditures to the adopted Budget (with all quarterly summaries or reports due within 30 days following the end of each calendar quarter); (ii) periodic summaries of data acquired; (iii) copies of reports concerning Operations; (iv) a detailed final report within sixty (60) days after completion of each Program and Budget, which shall include comparisons between actual and budgeted expenditures; and (v) such other reports as the Management Committee may reasonably request.  At all reasonable times, the Manager shall provide the Management Committee or the representative of any Participant, upon the request of any member of the Management Committee, access to, and the right to inspect and copy, all information acquired in Operations, including but not limited to, maps, drill logs, core tests, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records.  In addition, the Manager shall allow the non-managing Participant, at its sole risk and expense, and subject to reasonable safety regulations, to inspect the Assets and Operations at all reasonable times, so long as the inspecting Participant does not unreasonably interfere with Operations;


8.2.13 the Manager shall arrange insurance for the benefit of the Participants, in such amounts and of such nature as the Manager deems necessary to protect the Assets and Operations of the Venture;


8.2.14 the Manager shall perform or cause to be performed all assessment and other work, and shall pay all Government Fees required by Law in order to maintain in good standing all licenses, permits, claims, concessions, fee lands, mining leases, surface leases mining leases, surface leases, Claims and other tenures included within the Properties  The Manager shall timely record and file with the appropriate governmental office any required affidavits, notices of intent to hold and other documents in proper form attesting to the payment of Government Fees and the performance of assessment work, in each case in sufficient detail to reflect compliance with the applicable requirements;


8.2.15 if authorized by the Management Committee, the Manager may:   (i) locate, amend or relocate any unpatented mining claim or mill site or tunnel site, (ii) locate any fractions resulting from such amendment or relocation, (iii) apply for patents or mining leases or other forms of mineral tenure for any such unpatented claims or sites, (iv) abandon any unpatented mining claims for the purpose of locating mill sites or otherwise acquiring from the United States rights to the ground covered thereby, (v) abandon any unpatented mill sites for the purpose of locating mining claims or otherwise acquiring from the United States rights to the ground covered thereby, (vi) exchange with or convey to the




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United States any of the Properties for the purpose of acquiring rights to the ground covered thereby or other adjacent ground, and (vii) convert any unpatented claims or mill sites into one or more leases or other forms of mineral tenure pursuant to any federal law hereafter enacted.


8.2.16 the Manager shall prepare an Environmental Compliance plan for all Operations consistent with the requirements of any applicable Laws or contractual obligations and shall include in each Program and Budget sufficient funding to implement the Environmental Compliance plan and to satisfy the financial assurance requirements of any applicable Law or contractual obligation pertaining to Environmental Compliance.  To the extent practical, the Environmental Compliance plan shall incorporate concurrent reclamation of Properties disturbed by Operations;


8.2.17 the Manager shall undertake to perform Continuing Obligations when and as economic and appropriate, whether before or after termination of the Venture.  The Manager shall have the right to delegate performance of Continuing Obligations to persons having demonstrated skill and experience in relevant disciplines.  As part of each Program and Budget submittal, the Manager shall specify in such Program and Budget the measures to be taken for performance of Continuing Obligations and the cost of such measures.  The Manager shall keep the other Participant reasonably informed about the Manager’s efforts to discharge Continuing Obligations.  Authorized representatives of each Participant shall have the right from time to time to enter the Properties to inspect work directed toward satisfaction of Continuing Obligations and audit books, records, and accounts related thereto;


8.2.18 if Participating Interests are adjusted in accordance with this Agreement the Manager shall propose from time to time one or more methods for fairly allocating costs for Continuing Obligations in a manner consistent with Section 6.5 ;


8.2.19 the Manager shall undertake all other activities reasonably necessary to fulfill the foregoing.


8.3 Standard of Care . The Manager shall discharge its duties under Section 8.2 and conduct all Operations in a good, workmanlike and efficient manner, in accordance with sound mining, environmental and other applicable industry standards and practices, and in material compliance with the terms and provisions of concessions, leases, licenses, permits, contracts and other agreements pertaining to Assets.  The Manager shall not be liable to the non-managing Participant for any act or omission resulting in damage, loss cost, penalty or fine to the Venture or non-managing Participant, except to the extent caused by or attributable to the Manager’s willful misconduct or gross negligence.  The Manager shall not be in default of its duties under this Agreement, if its inability to perform results from the failure of the non-managing Participant to perform acts or to contribute amounts required of it by this Agreement.


8.4 Resignation; Deemed Offer to Resign . The Manager may offer to resign upon not less than thirty (30) days prior Notice to the Management Committee, in which case the other Participant may select the successor Manager by Notice to the Management Committee within thirty (30) days after the Notice of resignation, and may appoint itself or a third party as the successor Manager.  If any of the following shall occur, the Manager shall be deemed to have offered to resign, which offer shall be accepted by the other Participant (along with the appointment of a successor Manager), if at all, within ninety (90) days following such deemed offer:


8.4.1 the Participating Interest of the Manager (including that of its Affiliates) becomes less than 50% for any reason other than the transfer, grant or assignment by the Manager to an Affiliate of all or any part of its interest in or to this Agreement, its Participating Interest, or the Assets; or


8.4.2 the Manager fails to perform a material obligation imposed upon it under this Agreement, and such failure continues for a period of sixty (60) days after Notice from the other Participant demanding performance; or


8.4.3 the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official is appointed for a substantial part of the Manager’s assets, and such appointment




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is neither made ineffective nor discharged within thirty (30) days after the making thereof, or such appointment is consented to, requested by, or acquiesced in by the Manager; or


8.4.4 the Manager commences a voluntary case under any applicable bankruptcy, insolvency or similar law now or hereafter in effect; or consents to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official of any substantial part of its assets; or makes a general assignment for  the benefit of creditors; or takes corporate or other action in furtherance of any of the foregoing; or


8.4.5 entry is made against the Manager of a judgment, decree or order for relief affecting its ability to serve as Manager, or a substantial part of its Participating Interest or other assets by a court of competent jurisdiction in an involuntary case commenced under any applicable bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in effect.


Under Subsections 8.4.4 or 8.4.5 above, any appointment of a successor Manager shall be deemed to pre-date the event causing a deemed offer of resignation.


8.5 Payments to Manager . The Manager shall be compensated for its services and reimbursed for its costs hereunder in accordance with the Accounting Procedure set forth in Exhibit C .


8.6 Transactions With Affiliates . If the Manager engages Affiliates to provide services hereunder, it shall do so on terms no less favorable than would be the case with unrelated persons in arm’s-length transactions.


8.7 Independent Contractor . The Manager is and shall act as an independent contractor and not as the agent of the other Participant.  The Manager shall maintain complete control over its employees and all of its subcontractors with respect to performance of the Operations.  Nothing contained in this Agreement or any subcontract awarded by the Manager shall create any contractual relationship between any subcontractor and the other Participant.  The Manager shall have complete control over and supervision of Operations and shall direct and supervise the same so as to ensure their conformity with this Agreement.


9. PROGRAMS AND BUDGETS


9.1 Operations Pursuant to Programs and Budgets .  Operations shall be conducted, expenses shall be incurred, and Assets shall be acquired pursuant to a Program and Budget approved pursuant to Section 9.2 .  Every Program and Budget adopted pursuant to this Agreement shall provide for accrual of reasonably anticipated Environmental Compliance expenses for all operations contemplated under the Program and Budget.


9.2 Presentation of Programs and Budgets . Proposed Programs and Budgets shall be prepared by the Manager and shall be for six (6) month periods or longer periods not to exceed one (1) year.  Each adopted Program and Budget, regardless of length, shall be reviewed at least once per year at the annual meeting of the Management Committee.  Notwithstanding whether a portion of a previous period’s Program and Budget is being carried forward to fund activities continuing beyond the current year, at least thirty (30) days prior to the annual meeting of the Management Committee, a proposed Program and Budget for the succeeding period shall be prepared by the Manager and submitted to the Participants.  Within ten (10) days of receipt of the proposed Program and Budget, the Participants may submit written comments to the Manager detailing revisions or modifications that they would like to have made to the proposed Program and Budget.  If such written comments are received, the Manager, working with the other Participant, shall seek for a period of time not to exceed fifteen (15) days to develop a revised Program and Budget acceptable to both Participants.  The Manager shall submit any revised proposed Program and Budget to the Participants at least five (5) days prior to the annual meeting of the Management Committee.


9.3 Adoption of Proposed Programs and Budgets . At the annual meeting, the Management Committee shall consider and vote on the proposed Program and Budget.




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9.4 Election to Participate . By Notice to the Management Committee within twenty (20) days after the final vote adopting a Program and Budget, a Participant may elect to contribute to such Program and Budget as follows:


9.4.1 in proportion to its respective Participating Interest or Minimum Monthly Capacity, as of the beginning of the period covered by the Program and Budget, or wholly for improvements used only by the Participant, the contribution formula to be as designated by the Management Committee; or


9.4.2 partially or not at all, in which case its Participating Interest shall be recalculated as provided in Section 6.2 , and such recalculated Participating Interest shall be effective the first day of the period covered by the adopted Program and Budget.


If a Participant fails to provide Notice to the Management Committee under this Section 9.4 , the Participant will be deemed to have elected to contribute to such Program and Budget in proportion to its Participating Interest at the beginning of such Program and Budget period.


9.5 Budget Overruns; Program Changes . The Manager shall immediately notify the Management Committee of any material departure from an adopted Program and Budget.  Material departure shall be defined as Budget overruns of ten percent (10%) or $50,000, whichever is greater.  


9.6 Re-Election to Participate . If the Manager expended or incurred obligations of less than eighty percent (80%) of the adopted Budget, within thirty (30) days of receiving the Manager's report on expenditures, a diluted Participant may notify the other Participant of its election to reimburse the other Participant for the difference between any amount contributed by the diluted Participant to such adopted Program and Budget and the diluted Participant's proportionate share (at the diluted Participant's former Participating Interest) of the actual amount expended or incurred for the Program, plus interest on the difference accruing at the rate described in Section 9.10 .  The diluted Participant shall deliver the appropriate amount (including interest) to the other Participant with such Notice.  Failure of the diluted Participant to so notify and tender such amount shall result in dilution occurring in accordance with Section 6.2 and shall bar the diluted Participant from its rights under this Section 9.6 concerning the relevant adopted Program and Budget.


9.7 Emergency Expenditures . In case of emergency, the Manager may take any action it deems necessary to protect life, limb or property, to protect the Assets or to comply with Law.  The Manager may also make reasonable expenditures on behalf of the Participants for unexpected events that are beyond its reasonable control.  In the case of an emergency or unexpected expenditure, the Manager shall promptly notify the Participants of the expenditure, and the Manager shall be reimbursed therefore by the Participants in proportion to their respective Participating Interests at the time the emergency or unexpected expenditure is incurred.


9.8 Quarterly Statements . The Manager shall submit to the Management Committee quarterly statements of account reflecting in reasonable detail the charges and credits to the Joint Account.


9.9 Cash Calls . On the basis of adopted Programs and Budgets, the Manager shall submit to each Participant, prior to the fifteenth (15 th ) day of each month, a billing for estimated cash and Environmental Compliance fund requirements for the next month.  Within fifteen (15) days after receipt of each billing, or a billing made pursuant to Sections 9.7 or 11.4 , each Participant shall advance to the Manager its proportionate share of the estimated amount.  Time is of the essence of payment of such billings.  The Manager shall at all times maintain a cash balance approximately equal to the rate of disbursement for up to two (2) months.  After a decision has been made to begin Development, all funds in excess of immediate cash requirements shall be invested in interest-bearing accounts for the benefit of the Joint Account.





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9.10 Failure to Meet Cash Calls . A Participant that fails to meet cash calls in the amount and at the times specified in Section 9.9 shall be in default, and the amounts of the defaulted cash call shall bear interest from the date due at an annual rate equal to five (5) percentage points over the Prime Rate or the maximum interest rate permitted by law, if less than this.  “ Prime Rate ” means the annual percentage rate in effect from time to time for demand, commercial loans quoted by CITIBANK, N.A. at its main branch in New York City, New York, U.S.A. to its most credit-worthy customers. Such interest shall accrue to the benefit of and be payable to the non-defaulting Participant, but shall not be deemed as amounts contributed by the non-defaulting Participant in the event dilution occurs in accordance with Article 6 .  The non-defaulting Participant shall have those rights, remedies and elections specified in Section 6.3 , as well as any other rights and remedies available to it by Law.


9.11 Audits . Upon request of any Participant made within twenty-four (24) months following the end of any calendar year (or, if the Management Committee has adopted an accounting period other than the calendar year, within twenty-four (24) months after the end of such period), the Manager shall order an audit of the accounting and financial records for such calendar year (or other accounting period).  All exceptions to the audit and claims upon the Manager for discrepancies disclosed by such audit shall be made in writing not later than three (3) months after receipt of the audit report by the Participant that requested the audit.  A Participant’s failure to make such exceptions or claims within the three (3) month period shall (i) mean that the audit is correct and binding upon the Participants and (ii) result in a waiver of any right to make claims upon the Manager for discrepancies disclosed by the audit.  The audits shall be conducted by an firm of certified public/chartered accountants selected by the Manager, unless otherwise agreed by the Management Committee.  In addition each Participant shall have the right to conduct an independent audit of all books, records and accounts, at the expense of the requesting Participant, and which audit right will be limited to the period not more than twenty-four (24) months prior to the calendar year in which the audit is conducted.  All exceptions to and claims upon the Manager for discrepancies disclosed by such audit shall be made in writing within three (3) months after completion or delivery of such audit, or they shall be deemed waived.


10. DISPOSITION OF PRODUCTION


  Left blank intentionally.


11. WITHDRAWAL AND TERMINATION


11.1 Termination by Agreement . The Participants may terminate the Venture at any time by written agreement.


11.2 Termination Where No Program Proposed . If neither Participant proposes a Program and Budget for a period of two (2) consecutive years, then the Venture shall terminate.


11.3 Withdrawal . A Participant may elect to withdraw as a Participant from the Venture upon the later of not less than sixty (60) days Notice to the other Participant, or the end of the then current Program and Budget. Upon such withdrawal, the Venture shall terminate, and the withdrawing Participant shall be deemed to have transferred to the remaining Participant, without cost and free and clear of royalties, liens or other Encumbrances arising by, through or under such withdrawing Participant, except those which all Participants have given their written consent after the Effective Date of this Agreement, all of its Participating Interest.  Any withdrawal under this Section 11.3 shall not relieve the withdrawing Participant of its share of liabilities to third parties (whether such accrues before or after such withdrawal) arising out of Operations conducted prior to such withdrawal. For purposes of this Section 11.3 , the withdrawing Participant’s share of such liabilities shall be equal to its Participating Interest at the time that the act or omission giving rise to such liability occurred.


11.4 Continuing Obligations . On termination of the Venture, the Participants shall remain liable for Continuing Obligations, including Environmental Liabilities, until final settlement of all accounts and for any liability, whether it accrues before or after termination, if it arises out of Operations during the term of the Agreement.  For purposes of this Section 11.4 , a Participant’s share of such liabilities shall be equal to its Participating Interest at the time that the act or omission giving rise to such liability occurred.





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11.5 Disposition of Assets on Termination . Promptly after termination under Sections 11.1 or 11.2 , the Manager shall take all action necessary to wind up the activities of the Venture and to dispose of or distribute the Assets, and all costs and expenses incurred in connection with the termination of the Venture shall be expenses chargeable to the Venture.


11.6 Right to Data After Termination . After termination of the Venture under Section 11.1 , each Participant shall be entitled to copies of all information acquired hereunder as of the date of termination and not previously furnished to it, but a terminating or withdrawing Participant shall not be entitled to any such copies after any other termination or withdrawal.


11.7 Non-Compete Covenants . A Participant that is deemed to have withdrawn pursuant to Section 6.4 or has withdrawn pursuant to Section 11.3 shall not directly or indirectly acquire any interest in property within the Area of Interest for two (2) years after the effective date of withdrawal.  If the withdrawing Participant, or the Affiliate of a withdrawing Participant, breaches this Section 11.7 , such Participant or Affiliate shall be obligated to offer to convey to the non-withdrawing Participant, without cost, any such property or interest so acquired.  Such offer shall be made in writing and can be accepted by the non-withdrawing Participant at any time within forty-five (45) days after it is received by such non-withdrawing Participant.


11.8 Continuing Authority . On termination of the Venture under Sections 6.9, 11.1, 11.2 or 11.3, the Participant which was the Manager prior to such termination or withdrawal (or the other Participant in the event of a withdrawal by the Manager) shall have the power and authority to do all things on behalf of both Participants which are reasonably necessary or convenient to:


11.8.1 wind-up Operations; and


11.8.2 complete any transaction and satisfy any obligation, unfinished or unsatisfied, at the time of such termination or withdrawal, if the transaction or obligation arises out of Operations prior to such termination or withdrawal.  The Manager shall have the power and authority to grant or receive extensions of time or change the method of payment of an already existing liability or obligation, prosecute and defend actions on behalf of both Participants and the Venture, encumber Assets, and take any other reasonable action in any matter with respect to which the former Participants continue to have, or appear or are alleged to have, a common interest or a common liability.


11.9 Survival of Ingress and Egress After Termination . After termination of the Venture, the Participants shall continue to have rights of ingress and egress to the Properties for purposes of ensuring Environmental Compliance.


12. ABANDONMENT AND SURRENDER OF PROPERTIES


12.1 The Management Committee may authorize the Manager to surrender or abandon some or all of the Properties.  If the Management Committee authorizes any such surrender or abandonment over the objection of a Participant, the Participant that desires to abandon or surrender shall assign to the objecting Participant, by deed, assignment, or appropriate document, and without cost to the objecting Participant, all of the surrendering Participant’s interest in the Properties to be abandoned or surrendered, and the abandoned or surrendered Properties shall cease to be part of the Properties. Provided, however, the objecting Participant shall assume all responsibility and liabilities, including but not limited to Environmental Liabilities, with regard to the surrendered or abandoned Properties.


13. TRANSFER OF INTEREST


13.1 General . A Participant shall have the right to transfer to any third party all or any part of its interest in or to this Agreement, its Participating Interest, or the Assets solely as provided in this Article 13 .  For the purposes of this Article 13 the word transfer shall mean to convey, sell, assign, grant an option, create an Encumbrance or in any manner transfer or alienate, but excluding and excepting alienation done for the purposes of obtaining financing pursuant to Section 13.5 .





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13.2 Limitations on Free Transferability . The transfer right of a Participant in Section 13.1 shall be subject to the following terms and conditions:


13.2.1 no Participant shall transfer any interest in this Agreement or the Assets  except by transfer of part or all of a Participating Interest;


13.2.2 no transferee of all or part of any Participating Interest shall have the rights of a Participant unless and until the transferring Participant has provided to the other Participant Notice of the transfer, and the transferee, as of the effective date of the transfer, has committed in writing to be bound by this Agreement to the same extent and nature as the transferring Participant;


13.2.3 no transfer permitted by this Article 13 shall relieve the transferring Participant of its share of any liability, whether accruing before or after such transfer, which arises out of Operations conducted prior to such transfer;


13.2.4 neither Participant, without the consent of the other, shall make a transfer that would violate any Law, or result in the cancellation of any permits, licenses, or other similar authorizations;


13.2.5 the transferring Participant and the transferee shall bear all tax consequences of the transfer;


13.2.6 such transfer shall be subject to a preemptive right in the other Participant as provided in Section 13.3 ;


13.2.7 in the event of a transfer of less than all of a Participating Interest, the transferring Participant and its transferee shall act and be treated as one Participant, and in such event in order for the transfer to be effective, the transferring Participant and its transferee shall provide written Notice to the non-transferring Participant designating a sole authorized agent to act on behalf of their collective Participating Interest.  Such Notice shall provide that (i) the agent has the sole authority to act on behalf of, and to bind the transferring Participant and its transferee on all matters pertaining to this Agreement or the Venture, (ii) the notified Participant may rely on all decisions of, Notices and other communications from, and failures to respond by, the agent, as if given (or not given) by the transferring Participant and its transferee; and (iii) all decisions of, Notices and other communications from, and failures to respond by, the notified Participant to the agent shall be deemed to have been given (or not given) to the transferring Participant and its transferee.


13.3 Preemptive Right . Except as otherwise provided in Section 13.4 , if a Participant desires to transfer all or any part of its Participating Interest or an Affiliate desires to transfer control of a Participant, the other Participant shall have a preemptive right as provided in this Section 13.3 .


13.3.1 If a past or present Participant intends to transfer all or any part of its Participating Interest  or an Affiliate of either Participant intends to transfer Control of such Participant, the transferring Participant or Affiliate (“ Transferring Entity ”) shall promptly notify the other Participant of its intentions.  The Notice shall state the price and all other pertinent terms and conditions of the intended transfer, and shall be accompanied by a copy of the offer or contract for sale.  If the consideration for the intended transfer is, in whole or in part, other than monetary, the Notice shall describe such consideration and its monetary fair market value in United States currency.  The other Participant shall have thirty (30) days from the date such Notice is delivered to notify the Transferring Entity whether it elects to acquire the offered interest at the same price (or its monetary equivalent) and on the same terms and conditions as set forth in the Notice.  If it does so elect, the transfer shall be consummated promptly, but in no event more than thirty (30) days, after Notice of such election is delivered to the Transferring Entity.


13.3.2 If the other Participant fails to so elect within the period provided for in Subsection 13.3.1 , the Transferring Entity shall have ninety (90) days following the expiration of such period to consummate the transfer to a third party at a price and on terms no less favorable to the




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Transferring Entity than those set forth in the Notice required in Subsection 13.3.1 .


13.3.3 If the Transferring Entity fails to consummate the transfer to a third party within the period set forth in Subsection 13.3.2 , the preemptive right of the other Participant in such offered interest shall be deemed to be revived.  Any subsequent proposal to transfer such interest shall be conducted in accordance with all of the procedures set forth in this Section 13.3 .


13.4 Exceptions to Preemptive Right . Section 13.3 shall not apply to:


13.4.1 the transfer by either Participant of all or any part of its Participating Interest to an Affiliate;


13.4.2 incorporation of either Participant, or corporate consolidation or reorganization of either Participant by which the surviving entity shall possess substantially all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of that Participant;


13.4.3 the transfer of Control of either Participant by an Affiliate to such Participant or to another Affiliate;


13.4.4 the creation by any Affiliate of either Participant of an Encumbrance that, if foreclosed, could affect its Control of such Participant, but not any transfer or conveyance in foreclosure (or in lieu of foreclosure) of such Encumbrance, which shall be subject to Section 13.3 ;


13.4.5 a sale or other commitment or disposition of Products or proceeds from sale of Products by either Participant upon distribution to it pursuant to Article 10 ; or


13.4.6 a transfer of direct or indirect Control of such Participant to a third party that is not an Affiliate of such Participant (whether in a single transaction or a series of related transactions, and regardless of the form of such transaction), but only if the fair market value of such Participant’s interest in the Assets does not exceed twenty-five percent (25%) of the combined fair market value of all of the assets of such Participant and all of its Affiliates, if any, direct or indirect Control of which also is being transferred in such transaction or transactions.


13.5 Encumbrances . Neither Participant shall pledge, mortgage, or otherwise create an Encumbrance on its interest in this Agreement or the Assets except for the purpose of securing project financing relating to the Properties, including its share of funds for Development or Mining costs and in such event both Participants, acting reasonably, shall agree to the terms and conditions of such Encumbrance.  The right of a Participant to grant such Encumbrance shall be subject to the condition that the holder of the Encumbrance (“ Chargee ”) first enters into a written agreement with the other Participant, in a form acceptable to that Participant, acting reasonably, which provides:


13.5.1 the Chargee shall not enter into possession or institute any proceedings for foreclosure or partition of the encumbering Participant’s Participating Interest except as provided in Section 13.5.2 and that such Encumbrance shall be subject to the provisions of this Agreement;


13.5.2 the Chargee’s remedies under the Encumbrance shall be limited to the sale of the whole (but only of the whole) of the encumbering Participant’s Participating Interest to the other Participant, or, failing such a sale, at a public auction to be held at least forty-five (45) days after prior Notice to the other Participant, such sale to be subject to the purchaser entering into a written agreement with the other Participant whereby such purchaser assumes all obligations of the encumbering Participant under the terms of this Agreement.  The price of any preemptive sale to the other Participant shall be the remaining principal amount of the loan plus accrued interest and related expenses, and such preemptive sale shall occur within sixty (60) days of the Chargee’s Notice to the other Participant of its intent to sell the encumbering Participant’s Participating Interest.  Failure of a sale to the other Participant to close by the end of such period, unless failure is caused by the encumbering Participant or by the Chargee, shall permit the Chargee to sell the encumbering Participant’s Participating Interest at a public sale; and





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13.5.3 the charge shall be subordinate to any then-existing debt, including project financing previously approved by the Management Committee, encumbering the transferring Participant’s Participating Interest.


14. ACQUISITION WITHIN AREA OF INTEREST


14.1 General . Any interest or right to acquire any interest in real property or water rights, but excluding mining rights and mineral tenure, within the Area of Interest, acquired while this Agreement is in effect by or on behalf of a Participant or any Affiliate shall be subject to the terms and provisions of this Article 14 .  This Section shall apply to any Properties previously abandoned under Article 12 .


14.2 Notice to Non-Acquiring Participant . Within ten (10) days after the acquisition of any interest or the right to acquire any interest in real property, mining rights, mineral tenure or water rights wholly or partially within the Area of Interest (except real property, mining rights, mineral tenure or water rights acquired by the Manager pursuant to a Program), the acquiring Participant shall notify the other Participant of such acquisition by it or its Affiliate.  If the acquisition of any interest pertains to real property, mining rights, mineral tenure or water rights partially within the Area of Interest, then all property subject to the acquisition shall be subject to Article 14 .  The acquiring Participant’s Notice shall describe in detail the acquisition, the lands and minerals covered thereby, the costs thereof, and the reasons why the acquiring Participant believes that the acquisition is in the best interests of the Participants under this Agreement.  In addition to such Notice, the acquiring Participant shall make any and all information concerning the acquired interest available for inspection by the other Participant.


14.3 Option Exercise . If, within thirty (30) days after receiving the acquiring Participant’s Notice, the other Participant notifies the acquiring Participant of its election to accept a proportionate interest in the acquired interest equal to its Participating Interest, then title to such acquired interest shall be conveyed as specified in Section 2.3 , free and clear of all Encumbrances arising by, through or under the acquiring Participant or its Affiliate.  The acquired interest shall become a part of the Properties for all purposes of this Agreement immediately upon the Notice of such other Participant’s election to accept the proportionate interest therein.  Such other Participant shall promptly pay to the acquiring Participant a proportionate share of the latter’s actual out-of-pocket acquisition costs equal to such other Participant’s Participating Interest.


14.4 Option Not Exercised . If the other Participant does not give Notice within the thirty (30) day period set forth in Section 14.3 , it shall have no interest in the acquired interest, and the acquired interest shall not be a part of the Properties or be subject to this Agreement.


15. GENERAL PROVISIONS


15.1 Notices . All Notices, payments and other required communications (“ Notice ” or “ Notices ”) to the Participants shall be in writing, and shall be given (i) by personal delivery to the Participant, or (ii) by electronic communication, with a confirmation sent by registered or certified mail, return receipt requested, or (iii) by registered or certified mail, return receipt requested.  All Notices shall be effective and shall be deemed delivered (i) if by personal delivery on the date of delivery, (ii) if by electronic communication on the date of receipt of the electronic communication or the next business day if the date of receipt is not a business day, and (iii) if solely by mail on the day delivered as shown on the actual receipt.  A Participant may change its address from time-to-time by Notice to the other Participant.


Notice to NJMC shall be sent to :


New Jersey Mining Company

P.O. Box 1019

89 Appleberg Road

Kellogg, ID, USA

Attn: Grant Brackebusch

Fax: 208.783.3331



Notice to UMS shall be sent to :


United Mine Services, Inc.

P.O. Box 828

Pinehurst, ID 83850

Attn: Erik Panke

Fax: 208.682.9472

 

15.2 Waiver . The failure of a Participant to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit the Participant’s right thereafter to enforce any provision or exercise any right.


15.3 Modification . No modification of this Agreement shall be valid unless made in writing and duly executed by the Participants.


15.4 Force Majeure . The obligations of a Participant, other than the payment of money provided hereunder, shall be suspended to the extent and for the period that performance is prevented or delayed by any cause, whether foreseeable or unforeseeable, beyond its reasonable control, including, without limitation, labor disputes (however arising and whether or not employee demands are reasonable or within the power of the Participant to grant); acts of God; Laws, or requests of any government or governmental entity; judgments or orders of any court; inability to obtain on reasonably acceptable terms any public or private license, permit or other authorization; curtailment or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of Environmental Laws; action or inaction by any governmental entity that delays or prevents the issuance or granting of any approval or authorization required to conduct Operations; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot, civil strife, insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink holes, drought or other adverse weather condition; delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors’ or subcontractors’ shortage of, or inability to obtain, labor, transportation, materials, machinery, equipment, supplies, utilities or services; accidents; breakdown  of equipment, machinery or facilities; actions by citizen groups, including but not limited to environmental organizations or native rights groups; or any other cause whether similar or dissimilar to the foregoing.  The affected Participant shall promptly give Notice to the other Participant of the suspension of performance, stating therein the nature of the suspension, the reasons therefor, and the expected duration thereof.  Immediately upon the cessation of force majeure the affected Participant shall notify the other Participant in writing and shall take steps to recommence and or continue the performance that was suspended as soon as reasonably possible. During the period of suspension, the obligations of the Participants to advance funds pursuant to Section 9.9 shall be reduced to levels consistent with Operations.


15.5 Survival of Terms and Conditions . The provisions of this Agreement shall survive the transfer of any interests in the Assets under this Agreement or the termination of the Venture to the full extent necessary for their enforcement and the protection of the Participant in whose favor they run.


15.6 Confidentiality and Public Statements .


15.6.1 Except as otherwise provided in this Section 15.6 , all data, reports, records, and other information of any kind whatsoever indicated as confidential developed or acquired by any Participant in connection with this Venture shall be treated by the Participants as confidential (hereinafter called “ Confidential Information ”) and no Participant shall reveal or otherwise disclose such Confidential Information to third parties without the prior written consent of the other Participant.  Confidential Information that is available or that becomes available in the public domain, other than through a breach of this provision by a Participant, shall no longer be treated as Confidential Information.


15.6.2 The foregoing restrictions shall not apply to the disclosure of Confidential Information to any Affiliate, to any public or private financing agency or institution, to any contractors or subcontractors which the Participants may engage and to employees and consultants of




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the Participants or to any third party to which a Participant contemplates the transfer, sale, assignment, Encumbrance or other disposition of all or part of its Participating Interest pursuant to Article 13 ; provided, however, that in any such case only such Confidential Information as such third party shall have a legitimate business need to know shall be disclosed and the person or company to whom disclosure is made shall first undertake in writing to protect the confidential nature of such information at least to the same extent as the parties are obligated under this Section 15.6 .


15.6.3 In the event that a Participant or an Affiliate thereof is required to disclose Confidential Information to any government, any court, agency or department thereof, or any stock exchange, to the extent required by applicable law, rule or regulation, or in response to a legitimate request for such Confidential Information, the Participant so required shall immediately notify the other Participants hereto of such requirement and the terms thereof, and the proposed form and content of the disclosure prior to such submission.  The other Participant shall have the right to review and comment upon the form and content of the disclosure and to object to such disclosure to the court, agency, exchange or department concerned, and to seek confidential treatment of any Confidential Information to be disclosed on such terms as such Participant shall, in its sole discretion, determine.


15.6.4 The provisions of Section 15.6 shall apply during the term of this Agreement and shall continue to apply to (i) the Participants for a period of two (2) years following the effective date of any termination of this Agreement, and (ii) any Participant who withdraws, who is deemed to have withdrawn, or which forfeits, surrenders, assigns, transfers or otherwise disposes of its Participating Interest for a period of   five (5) years following the occurrence of such event or two (2) years from the effective date of any termination of this Agreement, whichever is sooner .


15.6.5 A Participant shall not issue any press release relating to the Properties or this Agreement except upon giving the other Participant not less than one (1) business day advance written Notice of the contents thereof, and the Participant proposing such press release shall make any reasonable changes to such proposed press release as such changes may be timely requested by the non-issuing Participant, provided, however, the Participant proposing such press release may include in any press release without Notice any information previously reported by the Participant proposing such press release. A Participant shall not, without the consent of the other Participant, issue any press release that implies or infers that the non-issuing Participant endorses or joins the issuing Participant in statements or representations contained in any press release.


15.7 Entire Agreement; Successors and Assigns . This Agreement contains the entire understanding of the Participants and supersedes all prior agreements and understandings, whether written or oral, between the Participants relating to the subject matter hereof, with respect to the Assets subject hereto, and any and all other prior negotiations, representations, offers or understandings between UMS and NJMC relating to the Properties, whether written or oral.  This Agreement and the obligations and rights created herein shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Participants.


15.8 Further Assurances . Each Participant shall take, from time to time and without additional consideration, such further actions and execute such additional instruments as may be reasonably necessary or convenient to implement and carry out the intent and purpose of this Agreement and minimize adverse tax consequences on the Participants.


15.9 Headings . The headings to the Sections of this Agreement and the Exhibits are inserted for convenience only and shall not affect the construction hereof.


15.10 Currency . All dollar amounts expressed herein refer to lawful currency of the United States of America, unless otherwise specified.


15.11 Severability . If any provision of this Agreement is or shall become illegal, invalid, or unenforceable, in whole or in part, the remaining provisions shall nevertheless be and remain valid and enforceable and




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the said remaining provisions shall be construed as if this Agreement had been executed without the illegal, invalid, or unenforceable portion.


15.12 Taxes . Each Participant shall be directly responsible for paying its income taxes and filing its tax returns with the proper authorities and independently file claims for and recover any income tax credits.  A Participant’s decisions with respect to such tax matters shall not have any binding effect on the course of actions taken by the other Participant.  


15.13 Partition . Each of the parties waives, during the term of this Agreement, any right to partition of the Assets or any part thereof and no party shall seek or be entitled to partition of the Properties or other Assets whether by way of physical partition, judicial sale or otherwise during the term of this Agreement.


15.14 Governing Law . This Agreement shall be construed and governed by the laws of the State of Idaho without reference to the choice of law or conflicts of law principles thereof.


15.15 Custom Processing .  No custom milling or processing shall be done for an unrelated third party without the approval of both parties, which approval shall not be unreasonably withheld.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.


NJMC: New Jersey Mining Company


By:

/s/ Fred W. Brackebusch

Name:

Fred W. Brackebusch

Title:

 President

Its Authorized Representative


[

UMS:   United Mine Services, Inc.



By:

 /s/ Greg S. Stewart

Name:

   Greg S. Stewart

Title:

  President

Its Authorized Representative


 

 





Page 23   New Jersey Mill Venture Agreement






EXHIBIT A

to Venture Agreement

PROPERTIES


1.

New Jersey Mill with crushing plant, grinding circuit, flotation circuit, concentrate dewatering and storage, concentrate leaching, paste thickening, and buildings.

2.

New Jersey Mill Site, MS 1998 B

3.

Portions of the surface of MS 1998 A to be used for tailings storage.

4.

Unpatented mill site claims                     

  IMC No.

Claim Name

195777

NJMS 1

195778

NJMS 2

195779

NJMS 3

195780

NJMS 4

195781

NJMS 5

195782

NJMS 6

195783

NJMS 7


5.

Water rights

6.

ZECO lease dated September 15, 1993 .




Page 24   New Jersey Mill Venture Agreement












EXHIBIT B

to Venture Agreement

AREA OF INTEREST




The Area of Interest shall be defined as the western half of Section 10, Township 48 North, Range 3 East, and the eastern half of Section 9, Township 48 North, Range 3 East.
















Page 25   New Jersey Mill Venture Agreement






EXHIBIT C

(to Venture Agreement)

ACCOUNTING PROCEDURE


The financial and accounting procedures to be followed by the Manager and the Participants under the Agreement are set forth below.  Reference in this Accounting Procedure to Articles, Sections and Subsections are to those located in this Accounting Procedure unless it is expressly stated that they are references to the Agreement.  


The purpose of this Accounting Procedure is to establish equitable methods for determining charges and credits applicable to Operations under the Agreement.  It is the intent of the Participants that none of them shall lose or profit by reason of their duties and responsibilities as the Manager.  The Participants shall meet and in good faith endeavor to agree upon changes deemed necessary to correct any unfairness or inequity.  In the event of a conflict between the provisions of this Accounting Procedure and those of the Agreement, the provisions of the Agreement shall control.


1. GENERAL PROVISIONS


1.1 General Accounting Records . The Manager shall maintain detailed and comprehensive accounting records in accordance with this Accounting Procedure, sufficient to provide a record of revenues and expenditures and periodic statements of financial position and the results of operations for managerial, tax, regulatory or other financial reporting purposes.  Such records shall be retained for the duration of the period allowed the Participants for audit or the period necessary to comply with tax or other regulatory requirements.  The records shall reflect all obligations, advances and credits of the Participants.


1.2 Bank Accounts . After the decision is made to begin Development, the Manager shall maintain one or more separate bank accounts for the payment of all expenses and the deposit of all receipts.


2. CHARGES TO JOINT ACCOUNT


Subject to the limitations hereinafter set forth, the Manager shall charge the Joint Account with the following:


2.1 Rentals, Royalties and Other Payments . Maintenance costs and other payments in respect of the Properties, including government rentals, necessary to maintain title to the Assets.


2.2 Labor and Employee Benefits


2.2.1 Salaries and wages of the Manager’s employees directly engaged in Operations, including salaries or wages of employees who are temporarily assigned to and directly employed by the Manager.


2.2.2 The Manager’s cost of holiday, vacation, sickness and disability benefits, worker’s compensation and other customary allowances applicable to the salaries and wages chargeable under Subsection 2.2.1 .


2.2.3 The Manager’s actual cost of established plans for employees’ group life insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus (except production or incentive bonus plans under a union contract based on actual rates of production, cost savings and other production factors, and similar non-union bonus plans customary in the industry or necessary to attract competent employees, which bonus payments shall be considered salaries and wages under Subsection 2.2.1 , rather than employees’ benefit plans) and other benefit plans of a like nature applicable to salaries and wages chargeable under Subsection 2.2. , provided that the plans are limited to the extent feasible to those customary in the industry.


2.2.4 Cost of assessments imposed by governmental authority which are applicable to salaries and wages chargeable under Subsection 2.2.1 , including all penalties except those resulting




Page 26   New Jersey Mill Venture Agreement





from the willful misconduct or gross negligence of the Manager.


2.2.5 Those costs in Subsections 2.2.2, 2.2.3 and 2.2.4 may be charged on a “when and as paid basis” or by “percentage assessment” on the amount of salaries and wages.  If percentage assessment is used, the rate shall be applied to wages or salaries excluding overtime and bonuses.  Such rate shall be based on the Manager’s cost experience and it shall be periodically adjusted to ensure that the total of such charges does not exceed the actual cost thereof to the Manager.


2.3 Assets . Cost of all Assets purchased or furnished for the Venture.


2.4 Transportation. Reasonable transportation costs incurred in connection with the transportation of employees, equipment, material and supplies necessary for the maintenance and operation of Assets.


2.5 Services


2.5.1 The cost of contract services and utilities procured from outside sources, other than services described in Sections 2.10 and 2.14 .  If contract services are performed by an Affiliate of the Manager, the cost charged to the Joint Account shall not be greater than that for which comparable services and utilities are available in the open market.


2.5.2 The costs of using the Manager’s exclusively-owned facilities in support of Operations provided that the charges may not exceed those currently prevailing in the vicinity.  Such costs shall include costs of maintenance, repairs, other operating expenses, insurance, taxes, depreciation and interest at a rate not to exceed Prime Rate plus three percent (3%) per annum.


2.6 Materials, Equipment and Supplies . The cost of materials, equipment and supplies (herein called “ Material ”) purchased from unaffiliated third parties or furnished by either Participant as provided in Section 3 .  The Manager shall purchase or furnish only so much Material as may be required for use in efficient and economical Operations.  The Manager shall also maintain inventory levels of Materials at reasonable levels to avoid unnecessary accumulation of surplus stock.


2.7 Insurance Premiums . Premiums paid or accrued for insurance required for the protection of the Participants, including worker’s compensation insurance.


2.8 Damages and Losses . All costs in excess of insurance proceeds necessary to repair or replace damage or losses to any Assets resulting from any cause other than the willful misconduct or gross negligence of the Manager.


2.9 Legal Expense . All legal costs and expenses incurred in or resulting from the Operations or necessary to protect or recover the Assets.  Routine legal expenses are included under Section 2.14 .


2.10 Audit . Cost of annual audits under Section 9.11 of the Agreement.


2.11 Taxes . All taxes (except income taxes) of every kind and nature assessed or levied upon or in connection with the Assets, the production of Products or Operations, which have been paid by the Manager for the benefit of the Participants.  Each Participant is separately responsible for income taxes which are attributable to its respective Participating Interest.


2.12 District and Camp Expense (Field Supervision and Camp Expenses) . A pro rata portion of (i) the salaries and expenses of the Manager’s superintendent and other employees serving Operations whose time is not allocated directly to such Operations, and (ii) the costs of maintaining and operating the Manager’s project office and any suboffice (as necessary) used for Operations and (iii) all necessary camps, including housing facilities for employees, used for Operations.  The expense of those facilities, less any revenue therefrom, shall include depreciation or a fair monthly rental in lieu of depreciation of the investment.  Such charges shall be apportioned for all Properties served by the employees and facilities on an equitable basis consistent with the Manager’s general accounting practice and generally accepted accounting principles.




Page 27   New Jersey Mill Venture Agreement






2.13 Administrative Charge . The Manager shall charge the Joint Account each month with respect to Operations a Manager’s fee equal to $2.50 per tonne processed , which amount shall be a liquidated amount to reimburse the Manager for its home office overhead and general and administrative expenses for its conduct of Operations, which amount shall be escalated with the consumer price index – all urban consumers (CPI-U).  The fee shall be escalated annually on the anniversary of the effective date of this agreement.  The escalation factor will be found by multiplying the $2.50 per tonne administrative charge by the ratio of the most recent November CPI-U to the base CPI-U of 218.80.  The fee calculation shall not be compounded.


The Manager’s fee is based upon the principle that the Manager shall not make a profit or loss from this administrative charge but should be fairly and adequately compensated for the pro rata share of its costs and expenses.  The specific rate provided for in this Section 2.13 may be amended from time to time by mutual agreement among the Parties hereto if, in practice, the rate is found to be insufficient or excessive.



2.14 Other Expenditures . Any reasonable direct expenditure, other than expenditures which are covered by the foregoing provisions, incurred by the Manager for the necessary and proper conduct of Operations.


3. BASIS OF CHARGES TO JOINT ACCOUNT


3.1 Purchases. Material purchased and services procured shall be charged at prices paid by the Manager after deduction of all discounts actually received.


3.2 Material Furnished by the Manager . At its discretion, the Manager may furnish Material from the Manager’s stocks under the following conditions:


3.2.1 New Material (Condition “A”):  New Material transferred from the Manager’s properties shall be priced f.o.b. the nearest reputable supply store or railway receiving point, where like Material is available, at current replacement cost of the same kind of Material (hereafter, “ New Price ”).


3.2.2 Used Material (Conditions “B” and “C”):


3.2.2.1 material in sound and serviceable condition and suitable for reuse without reconditioning shall be classified as Condition “B” and priced at seventy-five percent (75%) of New Price.


3.2.2.2 other used Material as defined hereafter shall be classified as Condition “C” and priced at fifty percent (50%) of New Price:


3.2.2.2.1 used Material which after reconditioning will be further serviceable for original function as good secondhand Material (Condition “B”),


3.2.2.2.2 used Material which is serviceable for original function but not substantially suitable for reconditioning,


3.2.2.2.3 Material which cannot be classified as Condition “B” or Condition “C” shall be priced at a value commensurate with its use,


3.2.2.2.4 Material no longer suitable for its original purpose but usable for some other purpose shall be priced on a basis comparable with items normally used for such other purpose.


3.3 Premium Prices . Whenever Material is not readily obtainable at prices specified in Sections 3.1 and 3.2 , the Manager may charge the Joint Account for the required Material on the basis of the Manager’s direct cost and expenses incurred in procuring such material; provided, however, that prior Notice of the




Page 28   New Jersey Mill Venture Agreement





proposed charge is given to the Participants, whereupon any Participant shall have the right, by notifying the Manager within ten (10) days of the delivery of the Notice from the Manager, to furnish at the usual receiving point all or part of its share of Material suitable for use and acceptable to the Manager.  If a Participant so furnishes Material in kind, the Manager shall make appropriate credits to its account.


3.4 Warranty of Material Furnished by the Manager or Participants . Neither the Manager nor any Participant warrants the Material furnished beyond any dealer’s or manufacturer’s warranty.


4. DISPOSAL OF MATERIAL


4.1 Disposition Generally . The Manager shall have no obligation to purchase a Participant’s interest in Material.  The Management Committee shall determine the disposition of major items of surplus Material, provided the Manager shall have the right to dispose of normal accumulations of junk and scrap Material either by transfer to the Participants as provided in Section 4.2 or by sale.  The Manager shall credit the Participants in proportion to their Participating Interest for all Material sold hereunder.


4.2 Division in Kind . Division of Material in kind between the Participants shall be in proportion to their respective Participating Interests, and corresponding credits shall be made to the Joint Account.


4.3 Sales . Sales of material to third parties shall be credited to the Joint Account at the net amount received.  Any damages or claims by the Purchaser shall be charged back to the Joint Account if and when paid.


5. INVENTORIES


5.1 Periodic Inventories, Notice and Representations . At reasonable intervals, inventories shall be taken by the Manager, which shall include all such Material as is ordinarily considered controllable by operators of mining properties.  The expense of conducting such periodic inventories shall be charged to the Joint Account.


5.2 Reconciliation and Adjustment of Inventories . Reconciliation of inventory with charges to the Joint Account shall be made, and a list of overages and shortages shall be determined by the Manager.  Inventory adjustments shall be made by the Manager to the Joint Account for overages and shortages, but the Manager shall be held accountable to the Venture only for shortages due to lack of reasonable diligence.


6. INVOICES FOR ORE PROCESSED

6.1 Monthly Charges.  At the end of each month the Manager shall calculate the costs of processing ore for each Participant or other party and issue an invoice to be paid in 5 business days.

6.1.1 Working Capital.  An amount shall be maintained by the Joint Venture in an account which will be used as working capital to fund operations.  This fund total should be approximately equal to two months of operating expenses. Should operating experience dictate, this amount may be adjusted up or down at the operator’s discretion. This fund will initially be funded based upon milling reserved capacity, initially 70% UMG, 30% NJMC, and any later adjustments made to the overall amount shall be charged or refunded at the same rate. This fund will be replenished on a monthly basis based upon the prior months operating usage. When no usage or limited usage occurs, replenishment will be based upon reserved capacity or a combination of reserved capacity and usage at the operator’s discretion.

6.1.2 Consumables.  A general outline for invoicing consumable supplies is provided below.

Reagents – Will be invoiced per usage from inventory so as to reflect differing rates of consumption from different types of ores.




Page 29   New Jersey Mill Venture Agreement





Grinding Balls – Will be invoiced per usage from inventory so as to reflect differing rates of consumption due to harder or softer ores.

Mill liners, cone liners, and jaw plates – Amortize per dry metric tonne based on usage and life expectancy

6.1.3 Electrical power. Charges for electrical power will be based upon each party’s usage. When no usage or limited usage occurs, charges will be based upon reserved capacity or a combination of reserved capacity and usage at the operator’s discretion.

6.1.4 Property Taxes.  Property taxes shall be charged based upon reserved capacity.

6.1.5 Labor. General mill labor, including an allowance for fringe benefits, shall be charged based upon time spent milling.

The mill superintendent’s time, including an allowance for fringe benefits, will be prorated based upon time spent milling when the mill is operating and upon capacity when the mill is idle. Certain circumstances may arise where significant time is spent on issues which are specifically geared towards an individual joint venture partner, even though the mill may be running the other partners ore. In such cases time will be allocated accordingly.

6.1.6 Maintenance and repair.  Labor and materials charges will be based upon historical usage. For minor items this will be based upon weekly usage, and for major items usage will be determined over the life of the component.




Page 30   New Jersey Mill Venture Agreement






EXHIBIT D

(to Venture Agreement)



MEMORANDUM OF AGREEMENT

NOTICE IS HEREBY GIVEN that under that certain Venture Agreement ("Agreement") made and entered into effective                                (the "Effective Date") by and between


New Jersey Mining Company

a corporation incorporated under the laws of Idaho

P.O. Box 1019

89 Appleberg Road

Kellogg, ID 83837 USA

Facsimile: 208.783.3331


(hereinafter “ NJMC ”)


and


United Mine Services, Inc.

a corporation incorporated under the laws of Idaho

P.O. Box 828

Pinehurst, ID 83850

Facsimile: 208.682.9472

(hereinafter “ UMS” )


NJMC and UMS have entered into a Venture Agreement, dated _________ pursuant to which the Participants have agreed to terms for undertaking Mineral Processing operations within the exterior boundaries of the area described in Exhibit B hereto (the " Area of Interest ").  The Agreement shall be the exclusive means by which the Participants, or either of them or any Affiliate, engage in any activity within the Area of Interest; acquire interests in real property within the Area of Interest; or engage in any other lawful purposes related or incidental to the foregoing.  The Agreement provides for joint ownership of the real property and interests described in Exhibit A hereto (the "Properties"), and shall continue for so long as any of the Properties are jointly owned by the Participants hereto and thereafter until all materials, supplies, and equipment have been salvaged and disposed of, a final accounting has been made between the Participants, and reclamation has been completed and accepted by the appropriate governmental agencies, unless the Agreement is earlier termi­nated according to its terms.

IN WITNESS WHEREOF the parties hereto have duly executed this Memorandum of Agreement effective as of the date first written above.


NJMC: New Jersey Mining Company

UMS : United Mine Services, Inc .


By:   /s/ Fred W. Brackebusch

By:   /s/ Greg S. Stewart


Name:  Fred W. Brackebusch

Name:  Greg S. Stewart


Title:  President

Title:  President


Its Authorized Representative

Its Authorized Representative




Page 31   New Jersey Mill Venture Agreement





State    of    Idaho     )

) ss.

County of   Shoshone      )


On this    7 th    day of January, 2011, before me, the undersigned, a Notary Public in and for the State of Idaho, personally appeared, FRED W. BRACKEBUSCH, known or identified to me to be the PRESIDENT of NEW JERSEY MINING COMPANY, the corporation that executed the within instrument, and acknowledged to me that he executed the same on behalf of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

 /s/ Vicki Busby

_________________________________

Notary Public

Residing at   Wallace, Idaho

Commission Expires  July 10, 2012


State    of    Idaho     )

) ss.

County of   Shoshone     )


On this   7 th  day of January, 2011, before me, the undersigned, a Notary Public in and for the State of Idaho, personally appeared, GREG S. STEWART, known or identified to me to be the PRESIDENT of UNITED MINE SERVICES, INC., the corporation that executed the within instrument, and acknowledged to me that he executed the same on behalf of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

/s/ Vicki Busby

__________________________________

Notary Public

Residing at    Wallace, Idaho

Commission Expires   July 10, 2012




Page 32   New Jersey Mill Venture Agreement







EXHIBIT A

to Memorandum of  Agreement

PROPERTIES


1.

New Jersey Mill with crushing plant, grinding circuit, flotation circuit, concentrate dewatering and storage, concentrate leaching, paste thickening, and buildings.

2.

New Jersey Mill Site, MS 1998 B

3.

Portions of the surface of MS 1998 A to be used for tailings storage.

4.

Unpatented mill site claims                     

  IMC No.

Claim Name

195777

NJMS 1

195778

NJMS 2

195779

NJMS 3

195780

NJMS 4

195781

NJMS 5

195782

NJMS 6

195783

NJMS 7


5.

Water rights

6.

ZECO lease dated September 15, 1993 .




Page 33   New Jersey Mill Venture Agreement





EXHIBIT B

(to Memorandum of Agreement)

AREA OF INTEREST



The Area of Interest shall be defined as the western half of Section 10, Township 48 North, Range 3 East, and the eastern half of Section 9, Township 48 North, Range 3 East.




Page 34   New Jersey Mill Venture Agreement





EXHIBIT E

(to Venture Agreement)

INITIAL PROGRAM AND BUDGET

[EX101001.JPG]




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[EX101002.JPG]




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[EX101003.JPG]




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[EX101004.JPG]




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[EX101005.JPG]




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[EX101006.JPG]




Page 40   New Jersey Mill Venture Agreement


Exhibit 10.2

MINING LEASE

( mining claims )


THIS MINING LEASE (hereinafter "Agreement") is made effective this   3rd    day of   September   , 2013 ("Effective Date"), between GOLDEN CHEST LLC, an Idaho limited liability company   ("Owner", whether one or more), whose address is P. O. Box 1019, 89 Appleberg Road, Kellogg, Idaho 83837, and JUNIPER RESOURCES, LLC, an Idaho limited liability company or its designee ("Lessee"), whose address is 967 E. ParkCenter Blvd., PMB #365, Boise, Idaho 83706.



RECITALS


LESSEE desires to obtain exclusive rights to conduct exploration, feasibility work, development, mining, and processing of minerals of a certain defined part of Golden Chest’s mining property, less than the whole known as the Skookum Shoot, situated in Shoshone County, State of Idaho, (hereinafter "the Premises"), and Owner, who owns the Premises, desires to grant such exclusive rights to LESSEE or its designee under the terms and conditions of this Agreement.  The Premises are more particularly described in Exhibit A , which is made a part of this Agreement by this reference.  The portion of the property described on Exhibit A which does not contain the Premises is referred to as the “Remaining Property”.  Golden Chest, LLC is owned by New Jersey Mining Company, an Idaho Corporation (“ NJMC ”), and Marathon Gold USA Corp., a Colorado corporation (“ MG USA ”).


In consideration of the promises, terms and conditions contained in this Agreement, the parties mutually agree as follows:


GENERAL PROVISIONS


SECTION 1

GRANT OF RIGHTS; PURPOSE


1.1

Owner leases the Premises to LESSEE and grants to LESSEE the following rights:


1.1.1

the exclusive right to enter, take possession and use the Premises;


1.1.2

to have the exclusive rights to: (i) explore, drill, develop, and mine the Premises, and to extract, remove, and sell or otherwise dispose of for its own account any and all ores, minerals and mineral substances and metals and related materials of whatever nature and character whether or not specifically confirmed by the parties (hereinafter "Minerals"), (ii) remove Minerals, water, waste, and materials from the Premises by means of underground operations on or in the Premises, (iii) deposit on or in the Premises Minerals, water, waste,  and materials from the Premises and to use any part of the Premises for waste dumps with owners consent, (iv) conduct on or in the Premises mining, and related operations respecting the Premises and other property, and to use any part of the Premises for any purposes incident to such operations, and (v) construct, use, and maintain on the Premises such roads, improvements, structures, equipment, personal property, and fixtures as may be necessary or convenient for the conduct of LESSEE's operations; (vi) utilize any portion of the surface or existing mine for development and access to the Premises;


1.1.3

to have the right of ingress and egress over, upon, under and through the Premises; and





mining lease 4397_final

1



1.1.4

all other rights and privileges which are incidental to or which may be useful, desirable or convenient to LESSEE in the exercise of any or all of the rights hereinabove set forth which are not in conflict with applicable state, federal or local laws, ordinances and regulations.


1.1.5

the right to transfer this Agreement to Gold Hill Reclamation & Mining, Inc. or other related or associated  parties with Owner's consent.  This consent will not be unreasonably delayed, denied or withheld.


SECTION 2

TERM


2.1

This Agreement is granted for an initial term of thirty-nine (39) months from the Effective Date, unless sooner terminated, or extended by Force Majeure as defined in Section 14 below.


SECTION 3

MINIMUM ROYALTIES & PRODUCTION ROYALTIES


3.1

Minimum Royalty Payments.  


3.1.1

While this Agreement is in effect, LESSEE shall pay the owners of Golden Chest LLC directly in proportion to their ownership, in advance minimum royalty payments ("Minimum Royalties") on the dates and in the amounts as follows:


     Amount

Due Date


$ 50,000.00

on the signing of this Agreement;


$200,000.00

no later than Nov 30, 2013;  


Once payment of Production Royalties to Owner begins, LESSEE's obligation to pay Minimum Royalties under this Section 3.1 shall terminate.  


3.1.2

Credit/Offset.

All Minimum Royalties paid to Owner shall be credited against any Production Royalties (as described below) that accrue.  In the event no Minerals are produced from the Premises, Owner shall have no obligation to refund Minimum Royalties.


3.1.3

No Implied Obligations.   Minimum Royalties shall be in lieu of any obligation of LESSEE, express or implied, to explore, develop, mine, or perform any work on or in connection with the Premises, except as provided in Section 6 (UNPATENTED MINING CLAIMS).


3.2

Production Royalty.   If LESSEE sells Minerals, concentrates or products thereof ("Product") mined from the Premises, subject to the provisions of Section 7.5 ( Lesser Interest ), LESSEE shall pay to Owner a production royalty equal to two percent (2%) of Net Smelter Returns (See Exhibit B ) for all Product mined and removed from the Premises and sold and delivered by LESSEE ("Production Royalties").


3.3

Land Payments.

  There is a quarterly payment from Owner to J. W. Beasley Interests, LLC with respect to the Premises of $125,000.00 which is scheduled to change to $500,000 per year unless agreed to by J. W. Beasley Interests. Beginning November 20, 2013, and subject to any default by Owner, LESSEE shall make this payment each quarter directly to J. W. Beasley Interests, LLC or any current




mining lease 4397_final

2



owner of the Premises during the term of this Agreement is terminated or such payment is terminated, whichever is sooner.


3.4

Net Smelter Returns.  LESSEE shall pay OWNER a Net Smelter Return of Two Percent (2%).  The Net Smelter Return (also referred to as the “Production Royalty”) is more particularly described in Exhibit B , which is made a part of this Agreement by this reference.


3.5

Payment Method.  


3.5.1

LESSEE shall make all payments due Owner under this Agreement by check and shall be transmitted to Owner as provided in Section 13 (NOTICES).  LESSEE shall not be liable for the ultimate distribution to Owner or Owner's successors or assigns of payments so made by LESSEE.  All payments to be made to Owner shall be made to the owners of Owner on a pro rata basis relative to the member interest of each owner in Owner at the time of any such payment, with the percentage interest of each owner to be reported by Owner to LESSEE not less than 5 (five) business days prior to any such payment:


At the Effective Date, the Owners of Golden Chest LLC are:


Marathon Gold USA Corp.

52.22%

New Jersey Mining Company

47.78%


Owner and the owners of Owner acknowledge that payments made according to these percentages relieves LESSEE from any obligation to make payments to Owner, and all claims against LESSEE relating to such payments are hereby waived.  


3.5.2

All Production Royalty payments shall be made per Exhibit B.    


3.5.3

Production Royalty payments shall be accompanied by a statement indicating the amount of Product sold and delivered and the computation of the Production Royalty being paid.  Owner shall be entitled to an annual independent audit of the matters covered by the statement, at Owner's expense, provided that the audit is conducted by an accounting firm of recognized standing, at least one of whose members is a member of the American Institute of Certified Public Accountants.  If the audit detects a discrepancy in owners favor, in excess of $10,000.00 USD then that audit’s cost will be at LESSEE’s expense and the discrepancy made whole.   If the audit detects an overpayment to Owner in excess of $10,000.00 USD then the discrepancy will be credited towards future royalty payments.


3.6

Adverse Claims.  If at any time during the term of this Agreement it appears that one or more third parties may have a claim of economic interest or ownership in the Premises, the Minerals, or other payments with respect to the Premises, LESSEE may withhold from any payments which would otherwise be due to Owner under the terms of this Agreement an amount sufficient to satisfy such claims.  LESSEE shall deposit the amount withheld in escrow, giving written notice of the deposit to Owner, with such amount to remain in escrow until the controversy is resolved by decision of a court or arbitrators or otherwise.


SECTION 4

OWNER'S RIGHTS


4.1

Books and Records; Inspection  At reasonable times and subject to compliance with all applicable laws, regulations and safety policies, Owner or Owner's representatives, at their sole risk and liability, shall, for the purpose of inspection, have access to LESSEE's operations on the Premises and to the books




mining lease 4397_final

3



and records of LESSEE necessary to substantiate the compliance of LESSEE with the provisions of this Agreement, it being understood that such inspections by Owner shall not interfere with LESSEE's operations and shall be subject to LESSEE's instructions as to matters relating to health and safety. The Owner shall retain the right to develop, explore and mine those areas of the property not covered by this lease as long as those operations do not interfere with LESSEE’s operation.


SECTION 5

LESSEE'S RIGHTS & PERFORMANCE OBLIGATIONS


5.1

Obligations.


5.1.1

Compliance with Laws.  LESSEE shall comply with all applicable laws, rules, ordinances and regulations of governmental authorities having jurisdiction over LESSEE's operations on the Premises.  


5.1.2

Activities.  LESSEE shall conduct its activities on the Premises in a good and workmanlike manner and in accordance with accepted mining practice.  All decisions with respect to exploration, development, and mining of the Premises and the marketing of Product, including all decisions regarding the commencement, suspension, resumption, or termination of any operations, shall be made by LESSEE in its sole discretion.  LESSEE may sell Product and stockpile Product for any length of time before selling the same.  


5.2

Mining Methods.  LESSEE will be using underground mining methods only for the mining of the Premises, except for the drilling described in Section 5.12.1 .


5.3

Stockpiling.  LESSEE may stockpile any Product produced from the Premises or other property at such place as LESSEE may elect, either upon the Premises or upon other property with owners consent.  


5.4

Crossmining.  LESSEE shall not be required to develop a separate shaft or pit in the Premises.  LESSEE may mine and remove from the Premises through or by means of shafts or openings which may be sunk or made upon the Premises or adjoining or nearby property.


5.5

Commingling.  LESSEE may not commingle Product mined from the Premises without Owner's consent, and the consent of the owners of the Owner.  In the event that commingled production is required due to mill capacity then LESSEE and Owner will develop a plan of operations for such production.


5.6

Tailings and Waste Material.  LESSEE shall have no right, title or interest in waste material or tailings or other material on the Premises after termination of this Agreement except as may be incidental to LESSEE's obligations which survive termination of this Agreement.


5.7

Roads/Maintenance.  LESSEE agrees at its expense to maintain and repair, when necessary, existing roads to the extent made necessary by LESSEE's use thereof.  LESSEE may construct and maintain, at its own expense, any additional roads reasonably necessary or convenient for the conduct of LESSEE's activities on the Premises or on other property.  LESSEE shall endeavor to construct any such additional roads on the Premises at a location agreeable to Owner and LESSEE.  All additional roads shall be constructed and maintained in such a manner as made necessary by LESSEE's operations.  Owner may use any additional road so long as its use does not unreasonably interfere with LESSEE's use.  All timber removed by LESSEE for access to or across the Premises shall be cut in accordance with good forestry practices, and shall be paid for at market prices at the time of cutting, with payment to the Owner per Section 3.5 .





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5.8

Claims and Liens LESSEE shall pay and satisfy all claims and liens for materials, supplies and labor used in connection with LESSEE's operations on the Premises, and shall keep Owner's interest in the Premises free and clear from any and all liens and encumbrances except any such lien or encumbrance which may result from the actions of parties other than LESSEE, its agents, employees, and contractors.


5.9

Easements.  To the extent that Owner has the right to do so, Owner shall grant to LESSEE, at LESSEE's request and without cost to LESSEE, easements upon, over, or through the Premises or upon, over, or through other property owned by Owner, for LESSEE's activities on the Premises or on other property.


5.10

Water and Materials.  


5.10.1

To the extent that Owner has the right to do so, Owner grants LESSEE the free use of water from the Premises for use in LESSEE's operations, but LESSEE shall not use water from Owner's wells, tanks, or surface reservoirs without first obtaining the written consent of Owner, which shall not be unreasonably withheld.  


5.10.2

LESSEE shall conduct its activities so as not to damage any water supply of Owner.  If LESSEE damages or destroys any water supply, LESSEE shall with all reasonable diligence repair, restore, or replace any well, tank, reservoir, or other water facility so as to provide a facility of a capacity and quality substantially as good as that damaged or destroyed, or pay reasonable compensation for such damage or destruction.


5.10.3

Without additional consideration, Owner grants LESSEE the free use of stone, sand, and gravel, clay, earth and other materials from the Premises or Remaining Property for use in LESSEE's activities.


5.11

Fences and Gates.  LESSEE will comply with all legal requirements for the fencing and other protection of pits, caves and excavations made by it or resulting from its activities on the Premises.  Upon termination of this Agreement, LESSEE will leave and surrender the Premises to Owner with all pits, excavations and other openings made by it in the Premises duly fenced and protected in such manner as will at the time fully comply with all statutory or other legal requirements then in force and effect.  LESSEE shall keep closed all gates.

5.12

Work Requirement.  

5.12.1

Commencing from the Effective Date of this Agreement, LESSEE will perform a 5,000-10,000 foot core drilling program to confirm and define the Minerals.  

5.12.2

If the results of the drilling in Subsection 5.12.1 are satisfactory to LESSEE in LESSEE’s sole discretion, and if all permits necessary or convenient to the Mining of the Minerals are obtained, then LESSEE will give notice per Section 13 that it will commence the Work.  This is to be no later than November 30, 2013. The drilling will be conducted according to industry standards.  All the core, assay pulp and assay rejects will be stored on the Remaining Property or other Golden Chest property as long as such facility is available.  

The Work will consist of mining operations of Minerals on the Premises.

Until LESSEE gives such notice, the Work shall not have commenced.




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SECTION 6

UNPATENTED MINING CLAIMS


6.1

Assessment Work.  


6.1.1

LESSEE shall perform all assessment work and pay all holding costs required by state or federal laws and regulations to hold and maintain in good standing the Premises for every assessment year in which LESSEE continues this Agreement beyond the 1st day of August of such assessment year.  If any court or governmental agency decides that the work performed by LESSEE does not constitute the kind of work required by federal or state law, LESSEE shall nevertheless be deemed to have complied with the terms of this Agreement if the work done by LESSEE is of the kind generally accepted in the mining industry as assessment work under existing law.


6.1.2

LESSEE shall be relieved of its obligation to perform assessment work for any period in which assessment work is not required or the assessment work requirement is suspended.  For each year in which LESSEE performs assessment work and if required by law to do so, it will record in the office where the location notice or location certificate is recorded, and in any other proper office in the county (or recording district) in which the claims are located, and in the proper office of the Bureau of Land Management, an affidavit of assessment work or other document complying with the requirements of state and federal law.


6.2

Change in Federal Mining Law.  If the United States amends or replaces the existing system of tenure for land or minerals and if the new system gives Owner an election to acquire rights under the new system in exchange for or in modification of Owner's existing rights, LESSEE may make the election in the name of Owner with respect to any or all of the unpatented claims included in the Premises.  In such event, LESSEE shall have the right to (i) exchange with or transfer to the United States all or any part of any unpatented mining claim or mill site then constituting part of the Premises for the purpose of acquiring rights to the ground covered thereby; and, (ii) convert all or any part of any unpatented mining claim or mill site then constituting part of the Premises into one or more leases or other forms of mineral tenure pursuant to any federal law hereafter enacted.  Any such ground, lease or other form of tenure shall be part of the Premises for all purposes of this Agreement.  For the purpose of calculating the royalties, LESSEE shall be entitled to deduct from amounts received from sale of Product any rentals, royalties or other consideration payable to the United States with respect to forms of tenure contemplated by this section with Owners consent


SECTION 7

TITLE; OWNER'S WARRANTIES, REPRESENTATIONS & COVENANTS


7.1

Owner's Warranties, Representations, and Covenants.  Excepting only the specific title exceptions described in Exhibit A-1 , Owner represents and warrants to LESSEE that:


7.1.1

Owner is in possession of and owns the Premises; LESSEE acknowledges the Real Estate Mortgage to J.W. Beasley Interests, LLC;  Owner knows of no other person claiming any interest in the Premises; and the Premises is free from all liens and encumbrances, except liens for property taxes not yet due and payable.  Owner further warrants to LESSEE the quiet enjoyment of the Premises, the right to explore the same, and that Owner will defend title to the Premises against all persons claiming by, through or under Owner;


7.1.2

There are no royalties, fees or monies (or claims therefor) payable or required to be paid to any person having or claiming an interest in the Premises;




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7.1.3

Owner has full power and authority to execute this Agreement and this Agreement is valid and binding upon it in accordance with its terms;


7.1.4

Owner knows of no violation of any applicable federal, state, regional or county law or regulation relating to zoning, land use, environmental protection or otherwise with respect to the Premises or activities relating thereto; and Owner represents that there is no judgment outstanding and no litigation, proceeding or governmental investigation pending or threatened against the Premises or Owner in connection with the Premises; and


7.1.5

Owner knows of no pre-existing conditions, including without limitation surface disturbances, solid wastes, hazardous wastes, water pollution, or eminent public health or safety hazard, nor any known historic or prehistoric sites or artifacts on the Premises except as follows: existing surface disturbance related to access and drill roads, mine dumps and portals, and the discharge of water from the historic No. 3 level.                                                                                                                                                                                                                                                                                                                                                                                                                           


7.1.6

Owner further represents that: (i) any unpatented mining claims included in the Premises have been properly located, (ii) the location notices or location certificates for the unpatented mining claims included in the Premises have been timely filed in the proper office of the Bureau of Land Management pursuant to ' 314(b) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. ' 1744(b), and (iii) evidence of assessment work or notices of intention to hold for the unpatented mining claims included in the Premises have been timely recorded in the proper county (or recording district) office and timely filed in the proper office of the Bureau of Land Management pursuant to ' 314(a) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. ' 1744(a), for each assessment year for which such recording and filing was required.


7.1.7

LESSEE will not encumber the property in any way, all third party contracts will not allow for liens on the Golden Chest Property.


7.2

Defects In Title.  


7.2.1

Owner covenants that, at LESSEE's request, Owner will take all action necessary, including judicial proceedings, to remove any cloud from and cure any defect in Owner's title to the Premises.  If Owner fails or refuses to take such action, LESSEE may take such action in Owner's name.  Owner shall cooperate with LESSEE in any such action taken.  LESSEE may recover from Owner or from any payments thereafter to become due to Owner under this Agreement all costs and expenses, including reasonable attorney's fees, incurred by LESSEE in such action.


7.2.2

If at any time during the term of this Agreement it appears that any one or more third parties may have a claim against the Premises by reason of any tax, mortgage or other lien, LESSEE may pay any past due payments and shall be subrogated to all rights of the holder against Owner.  If LESSEE makes any payments to one or more third parties as a result of any claim of ownership, tax, mortgage or lien, either by way of contract, settlement, compromise, pursuant to final judgment of any court of record, or otherwise, LESSEE may recover from Owner or from payments thereafter to become due to Owner under this Agreement the amount of any payment and all costs and expenses together with interest thereon, including reasonable attorney’s fees, incurred by LESSEE in connection with such claim of ownership, tax, mortgage or lien.


7.2.3

If the United States or any third person attacks the validity of any mining claim included in the Premises for any reason except LESSEE's failure to comply with its obligation to perform assessment




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work or to record and file evidence thereof pursuant to this Agreement, LESSEE will have no obligation to defend the validity of the claim.


7.3

Title Information.  Owner shall provide LESSEE with all available data, abstracts, title opinions and other information which bear upon Owner's title to the Premises.


7.4

Maintenance of Title.  Owner agrees to satisfy and pay when due any and all outstanding obligations of Owner which if not paid and satisfied could result in LESSEE's interest under this Agreement being defeated or otherwise affected.  LESSEE shall have no obligation or responsibility in respect of any such outstanding obligations but in the event Owner shall fail to make payment when due of any of such outstanding obligations, LESSEE may pay and satisfy the same and deduct the amount thereof from any sums accruing to Owner hereunder.


7.5

Lesser Interest.   The amounts payable to Owner pursuant to the terms of this Agreement are premised on the fact that LESSEE has acquired a full unencumbered 100% interest in the Premises and that LESSEE's rights in the Premises are as herein set forth and are subject to no covenants, conditions, restrictions, or encumbrances other than those created by this Agreement.  In the event that at any time during the term of this Agreement there is any outstanding right, title or interest in the Premises not created or caused by LESSEE such that for any reason LESSEE is not possessed of the entire interest which this Agreement purports to grant, then the amounts payable to Owner under this Agreement shall be reduced by the proportion which any outstanding interest or encumbrance bears to the full unencumbered interest contracted by LESSEE hereunder.


7.6

Undivided Interests.  If Owner owns or hereafter acquires an interest in any part of the Premises greater than that set forth in this Agreement, such interest shall be deemed a part of the Premises and the description of the Premises shall be deemed amended to include such interest.


SECTION 8

INDEMNITY & INSURANCE


8.1

Indemnity.  


8.1.1

LESSEE shall indemnify and hold Owner harmless from all liability to third persons caused by LESSEE's negligent acts or omissions under this Agreement and which result in injury to or death of persons or livestock or damage to personal property or liability for violation of applicable laws or regulations; provided, however, that LESSEE's obligation under this Section shall be conditional upon Owner notifying LESSEE in writing of the existence of any such claim within ten (10) days after Owner first learns thereof, and no obligation to indemnify and hold harmless hereunder shall exist where any injury, death or damage arises out of, or is connected in any way with, the negligent acts or omissions of Owner.


8.1.2

In no event shall either party be liable to the other party for any consequential, special or incidental loss or damage.


8.2

Insurance.  In conducting its operations, LESSEE shall fully comply with the terms and provisions of the Workman's Compensation laws of the State of Idaho.  LESSEE shall also obtain policies of insurance against fire and other risks for which insurance is customarily obtained by LESSEE in similar exploration and mining operations.  LESSEE shall obtain general liability insurance with a minimum limit of Five Million Dollars ($5,000,000.00) combined single limit for bodily injury and property damage.  All such insurance shall be maintained by LESSEE at its own expense throughout the




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duration of this Agreement.  Upon request LESSEE shall furnish to Owner evidence that such insurance is being maintained, in the form of a certificate of insurance, with endorsements providing for: (1) evidence by carrier of continuation of coverage at least (10) days prior to expiration of the policy, and (2) that Owner will be properly notified with a thirty (30) day written notice of any modification or cancellation of such insurance.  The general liability insurance shall be endorsed to name Owner as an additional insured with respect to any claim arising out of LESSEE's activities on or about the Premises or pursuant to this Agreement.


SECTION 9

RECLAMATION


9.1

LESSEE shall perform such reclamation work as is required by the applicable rules, regulations and laws of the State where the Premises are located and of the United States or any other governmental authority with jurisdiction over the Premises; provided, however, LESSEE shall not be responsible for reclamation of any condition existing on the Premises prior to the date of this Agreement nor any condition resulting from activities independent of this Agreement, including without limitation surface disturbances, solid wastes, hazardous wastes, water pollution, or public health or safety hazards, and if LESSEE is required to reclaim such pre-existing or independent condition, Owner shall hold LESSEE harmless and shall reimburse LESSEE for its costs thereof.  


SECTION 10

TAXES


10.1

LESSEE shall pay before delinquency all real and personal property taxes, assessments and charges which may be levied or assessed by any governmental agency having jurisdiction, against the leasehold estate granted by this Agreement.


10.2

Except as hereinafter set forth, Owner shall pay all taxes levied against the Premises prior to the date of this Agreement.  LESSEE shall reimburse Owner upon presentation of paid tax bills or other proof of payment for all real property taxes levied against the Premises during the term of this Agreement to the extent that such taxes are assessed or levied solely upon the mineral estate in the Premises or are based upon LESSEE's activities.  Taxes for taxable periods in which this Agreement begins and ends shall be apportioned.  LESSEE shall pay all taxes levied during the term of this Agreement against all improvements, structures, equipment, personal property, and fixtures placed upon the Premises by LESSEE and all taxes levied against LESSEE as an employer of labor.  


10.3

All taxes shall be paid before delinquent, but neither LESSEE nor Owner shall be under any obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect the other party or any right, title, or interest of the other party in or to the Premises.


SECTION 11

DEFAULT, TERMINATION & SURRENDER


11.1

Default.  


11.1.1

LESSEE shall not be deemed to be in default hereunder until Owner shall first have given to LESSEE written notice of the alleged default, specifying with particularity the circumstances of the default and, if applicable, the amount of money which Owner claims is due and payable by LESSEE.  





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11.1.2

Such notice shall be given in accordance with Section 13 (NOTICES).  LESSEE shall have a period of sixty (60) days from and after receipt of such notice in which to cure the default, or in the event that such default cannot be cured within sixty (60) days to initiate and diligently pursue steps to correct the default, failing which this Agreement shall terminate and all liabilities and obligations of LESSEE, except those liabilities existing on the date of termination, shall terminate.  Any default claimed with respect to the payment of money may be cured by the deposit in escrow in the manner set forth in Section 3.6 ( Adverse Claims ), of the amount in controversy and the giving of notice of the deposit to Owner, the amount to remain in escrow until the controversy is resolved or until there has been a final determination the controversy by arbitrators or a court of competent jurisdiction.


11.1.3

Should LESSEE dispute the existence of the default, then this Agreement shall not terminate unless LESSEE does not initiate and diligently pursue steps to cure the default within sixty (60) days after the default has been determined by a final decision of arbitrators or a court of competent jurisdiction.  


11.2

Termination.   LESSEE may, at any time or from time to time, terminate this Agreement, as to all or any portion of the Premises, by delivering to Owner or by filing for record in the appropriate office (with a copy to Owner) a good and sufficient surrender or notice of termination of this Agreement.  Upon mailing the surrender or notice of termination to Owner or to the appropriate office, this Agreement shall terminate with respect to the Premises described and all rights, liabilities and obligations of LESSEE under this Agreement with respect to the Premises described in such notice shall terminate on the date specified in the notice, except those rights which survive termination and those liabilities and obligations existing on the date of termination.


11.3

Removal of Property.  For a period of six (6) months after the termination of this Agreement, LESSEE shall have the right, but not the obligation, to remove from the Premises all broken or stockpiled Product (subject to the payment of royalties provided for in this Agreement), dumps created by the Lessee s mining activities, tailings, and residue, and all structures, equipment, personal property, and fixtures owned by LESSEE or erected or placed on or in the Premises by LESSEE, except mine timbers in place.  LESSEE may keep one or more watchmen on the Premises during the above-mentioned period.  This right shall survive termination of this Agreement.  The Lessee is responsible for any damages to the existing buildings and roads belonging to the owners and used by the LESSEE. Claims for damage must be presented in writing no more than three (3) months after LESSEE has vacated the property.


11.4

Continued Access.  For as long as LESSEE requires after termination of the Agreement, LESSEE shall have the right of continued access to and across the Premises for purposes of reclamation, compliance with environmental protection laws, regulations and requirements, and for removal of property.  This grant of rights shall survive termination of this Agreement.





SECTION 12

DATA


12.1

Owner's Data.  As soon as practicable following the execution of this Agreement, Owner shall make available to LESSEE for inspection and copying all geological, geophysical, geochemical and engineering information, data and reports in its possession and control relating to the Premises.  


12.2

LESSEE's Data.  LESSEE shall provide to Owner, upon Owner's request, copies of all available information relating to LESSEE's activities on the Premises.  This information shall include copies of all




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LESSEE's maps, drill logs and reports, assays, surveys, reports of records submitted to governmental agencies, and geological, geophysical, geochemical or similar data with respect to the Premises, and shall be provided to Owner without any warranty or representation as to the accuracy, completeness, reliability or usefulness thereof. This information would be reported to the Owners as part of a required annual report.


12.3

Reports.  LESSEE shall deliver to Owner, within sixty (60) days after the end of each anniversary date of this Agreement, a report in reasonable detail of all exploration and other activities of LESSEE on the Premises.


12.4

Confidentiality.  This Agreement and the contents of this Agreement, and all information obtained by Owner or Owner's authorized representatives and arising out of LESSEE's activities on the Premises pursuant to this Agreement shall be kept strictly confidential by Owner and shall not be released to any third party except upon the prior written consent of LESSEE.


SECTION 13

NOTICES


13.1

All notices and other communications under this Agree­ment ("Notices") to the parties shall be in writing, and shall be addressed respectively as follows:


Owner:

Golden Chest LLC

P.O. Box 1019

89 Appleberg Road

Kellogg, Idaho 83837

Marathon Gold USA Corp.

Suite 800, 357 Bay Street

Toronto, Ontario M5H 2T7

New Jersey Mining Company

89 Appleberg Road
P.O. Box 1019 
Kellogg, Idaho 83837


LESSEE:


Juniper Resources, LLC

967 E. ParkCenter Blvd., PMB #365

Boise, ID 83706


A party may change its address by Notice to the other party.


13.2

All Notices shall be given:


13.2.1

by personal delivery (including courier); or


13.2.2

by registered mail, charges prepaid; or


13.2.3

by electronic communication, with a confirmation sent by registered mail.


13.3

All Notices shall be effective and shall be deemed received:


13.3.1

if by personal delivery or by registered mail, on the date of delivery if delivered  during  normal  business  hours, and if not delivered during normal business hours, on the next business day following delivery; or





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13.3.2

if by electronic communication, on the next busi­ness day following receipt of the electronic communication.


13.4

No change or division in the ownership of the Premises or the payments provided for in this Agreement, however accomplished, shall enlarge the obligations or diminish the rights of LESSEE.  Owner covenants that any change in ownership shall be accomplished in such a manner that LESSEE shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, LESSEE may retain all monies otherwise due to Owner until the breach has been cured, except as describe in Section 13.1 above.  No change or division in ownership shall be binding on LESSEE until thirty (30) days after Owner has given LESSEE a certified copy of the recorded instrument evidencing the change or division.


SECTION 14

FORCE MAJEURE


14.1

If LESSEE shall be prevented by Force Majeure from timely performance of any of its obligations under this Agreement, except payment of money to Owner, the failure of performance shall be excused and the period for performance and the term of this Agreement shall be extended for an additional period equal to the duration of the Force Majeure.  Upon the occurrence and upon the termination of any Force Majeure, LESSEE shall promptly notify Owner.  LESSEE shall use reasonable diligence to remedy a Force Majeure, but shall not be required against its better judgment to settle any labor dispute or contest the validity of any law or regulation or any action or inaction of civil or military authority.


14.2

"Force Majeure" means any cause beyond LESSEE's reasonable control, whether or not foreseeable, including but not limited to:  law, regulation or inaction of government; inability to obtain on terms acceptable to LESSEE any license, permit, or other authorization that may be required to conduct operations on or in connection with the Premises; unusually severe weather; damage to or destruction of mine plant or facility; fire; explosion; flood; insurrection; riot; labor dispute; inability after diligent effort to obtain workmen or material; delay in transportation; acts of God; unavailability of suitable market for the Minerals or other products from the Premises; and excessive cost of mining, milling, processing, or marketing, or insufficient prices available for the Minerals or other products from the Premises, which render LESSEE's operations uneconomic (any price for gold below $900/ounce shall constitute an event of Force Majeure).  LESSEE expects the New Jersey mill (the "Mill") to operate at 400 tons per day, or 10,800 short tons per month.  If for any reason the Mill is unavailable to process Minerals, Product or ore delivered to it by LESSEE at the rate of 10,800 tons per month, then such unavailability shall constitute an event of Force Majeure.    In the case of Force Majeure due to the unavailability of the Mill, the term of the Agreement shall be extended by the ratio of 10,800 short tons per month divided by the short tons per month of Minerals, Product or ore actually satisfactorily milled, and multiplying this ratio by thirty (30) days, and then subtracting thirty (30) days.  This difference shall yield the number of days by which the Agreement is extended.  This formula may be expressed as follows: ((10,800 ÷ number of short tons actually satisfactorily milled) x 30) -30.  This event of Force Majeure shall apply to any month the number of short tons of Mineral, Product or ore satisfactorily milled is less than 10,800 short tons.


SECTION 15

MISCELLANEOUS PROVISIONS


15.1

Arbitration.  Any dispute arising out of or related to the negotiation, existence, performance, breach or termination of this Agreement shall be finally determined by arbitration under the then




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Commercial Arbitration Rules of the American Arbitration Association.  The exclusive place of arbitration shall be Boise, Idaho.  The arbitrators shall issue their award within ninety (90) days after submission of the dispute to arbitration.  Costs of arbitration shall be borne equally.  Judgment on any award may be entered in any court having jurisdiction over the person or property of the party against whom the award is entered.


15.2

Choice of Law; Survival.  The formation, interpretation, and performance of this Agreement shall be governed by the internal law, but not the conflicts of law rules, of the State of Idaho.  Any terms or agreements herein which by their nature may or must be performed or occur after termination of this Agreement shall survive such termination.  


15.3

Finders and Brokers.  Each party represents to the other that it has not dealt with anyone who is or may be entitled to a broker's commission, finder's fee or other compensation for introducing the parties or for advising or assisting in connection with this Agreement or the transactions contemplated by it.  Each party shall indemnify and hold the other harmless from any cost or expense, including attorney’s fees and court costs, arising out of such a claim by such a person, including costs incurred in response to discovery and related proceedings in connection with such a claim.


15.4

Additional Documents.  Owner shall execute and deliver to LESSEE such additional documents as may be necessary to carry out the purposes of this Agreement.  If conditions change by reason of acquisitions, conveyances, assignments, or other matters relating to the title to or description of the Premises, Owner and LESSEE shall execute amendments of this Agreement and a Short Form of this Agreement, and any other documents which may be necessary to reflect such changed conditions.


15.5

Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.  If any person named as one of the Owners does not execute this Agreement, it shall nevertheless be binding on those persons executing it.


15.6

Inurement.  This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of Owner and LESSEE.


15.7

Severability.  In the event any provision of this Agreement is held to be invalid or void, it shall not affect the validity of the remaining provisions.  


15.8

Waiver.  No waiver of any breach of this Agreement shall be deemed to be a waiver of any other subsequent breach.  


15.9

Headings.  Headings to the various Sections herein are for reference only and are not to be used for the purpose of construing the provisions therein.  


15.10

Entire Agreement.  This Agreement constitutes the entire agreement of the parties and supersedes all prior understandings and agreements, whether verbal or written.  No modification, variation, or amendment of this Agreement shall be effective unless it is in writing and signed by all the parties to this Agreement.


15.11

Affidavit as to Withholding Tax.  Owner hereby certifies that Owner is not a foreign person and therefore not subject to the 10% withholding tax under the Foreign Investment in Real Property Tax, or has attached hereto a "Qualifying Statement" from the Secretary of Treasury or provided either party has furnished adequate security.




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15.12

Homestead Waiver.  Owner expressly waives and releases all rights, exemptions, and benefits under or by virtue of any homestead, homestead exemption, dower, courtesy, community property, or marital property laws now or hereafter in force in the State in which the Premises is located.    





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IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written.

Golden Chest, LLC is owned by New Jersey Mining Company, an Idaho Corporation (“ NJMC ”), and Marathon Gold USA Corp., a Colorado corporation (“ MG USA ”)

GOLDEN CHEST LLC



BY

/s/ Grant A. Brackebusch

Name:

Grant A. Brackebusch

Title:

Manager

ATTEST:                           

 

/s/ Cary A. Spoor

JUNIPER RESOURCES, LLC



BY

/s/ Christoper W. Guill

Name:

Christopher W. Guill


Title:

Manager

                  


ATTEST:                           

 

/s/ Gina Gordon

MARATHON GOLD USA CORP.



BY

/s/ Phillip C. Walford


Name:

Phillip C. Walford


Title:

President


ATTEST:                           

 

/s/ Jim Kirke

 

NEW JERSEY MINING COMPANY



BY

/s/ Del Steiner

Name:

 Del Steiner


Title:

CEO


ATTEST:                           

 

/s/ Michaela Turk

 






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JUNIPER RESOURCES NOTARY

STATE OF IDAHO

)

) ss.
County of   Ada       

)

On this   3 rd _ day of   September , in the year 2013, before me, a Notary Public in and for the State of Idaho, personally appeared   Christopher Guill , known or identified to me to be the Manager of Juniper Resources, LLC, an Idaho limited liability company, that executed the instrument or the person who executed the instrument on behalf of said limited liability company, and acknowledged to me that such limited liability company executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.



/s/ Connie Duvall

Notary Public in and for said State

Residing at

Boise, Idaho

My Commission Expires January 28, 2017






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GOLDEN CHEST LLC

STATE OF IDAHO

)

) ss.
County of    Shoshone  

)

On this    3 rd       day of September , in the year 2013, before me, a Notary Public in and for the State of Idaho, personally appeared _ Grant A. Brackebusch , known or identified to me to be the Manager of Golden Chest LLC, an Idaho limited liability company, that executed the instrument or the person who executed the instrument on behalf of said limited liability company, and acknowledged to me that such limited liability company executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.



Cary A. Spoor

Notary Public in and for said State

Residing at

Kellogg

My Commission Expires

May 2017







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NEW JERSEY MINING COMPANY NOTARY

STATE OF IDAHO

)

) ss.
County of   Kootenai     

)

On this    3 rd  day of   September , in the year 2013, before me, a Notary Public in and for the State of Idaho, personally appeared   Del Steiner       , known or identified to me to be the president, or vice president, or secretary or assistant secretary of New Jersey Mining Company, an Idaho corporation, the corporation that executed the instrument or the person who executed the instrument on behalf of said corporation, and acknowledged to me that such corporation executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.



Michaela Turk

Notary Public in and for said State

Residing at

Post Falls

My Commission Expires

April 16, 2015





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MARATHON GOLD USA CORP. NOTARY

Province of Ontario     

)

) ss.
County of     York  

)

On this     3 rd day of   September, in the year 2013, before me, a Notary Public in and for the Province of Ontario, personally appeared   Phillip C. Walford    , known or identified to me to be the president of Marathon Gold USA Corp., a Colorado corporation, the corporation that executed the instrument or the person who executed the instrument on behalf of said corporation, and acknowledged to me that such corporation executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.



Jim Kirke

Notary Public in and for said Province

Residing at

Toronto, Ontario

My Commission Expires

N/A





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EXHIBIT A

TO THAT CERTAIN

MINING LEASE

dated the Effective Date

by and between GOLDEN CHEST LLC and

JUNIPER RESOURCES, LLC

EXHIBIT A

Definition of the Premises:
LESSEE will be mining the Skookum Shoot defined as:

·

Within and adjacent to the Idaho Vein

·

Northward along strike to Coordinate 5274700N

·

Southward along strike to Coordinate 5274300N

·

Up-dip to the 3 Level, which is expected to be about 915m elevation

·

Open down-dip

The Skookum Shoot is located on the following patented and unpatented mining claims:

PARCEL 1 :

Golden Chest Patented Mining Claim, M.S. 4 (sometimes referred to as Lot 40) situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book X, Deeds, at page 278.

PARCEL 2 :

Euphemia Patented Mining Claim, M.S. 994 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 4, Deeds, at page 530.

PARCEL 3 :

A.D. Coplen, No. 2, Thomas Kearn and Brile Placer Mining Claims, M.S. 995 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M. Shoshone County, State of Idaho. Patent recorded in Book 4, Deeds, at page 533.

PARCEL 4 :

Dora Patented Mining Claim, M.S. 996 situated in the Summit Mining District in Section 5, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 61.




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PARCEL 5:

Katie Burnett Patented Mining Claim, M.S. 997 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 58.

PARCEL 6 :

Littlefield Bar Placer Patented Mining Claim, M.S. 1062 situated in the Summit Mining District in Sections 4 and 9, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 10, Deeds, at page 72.

PARCEL 7 :

Paymaster Patented Mining Claim, M.S. 1078 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 1.

PARCEL 8 :

Coumerilh Fraction Patented Mining Claim, M.S. 1162 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 7.

PARCEL 9 :

Red Star Patented Mining Claim, M.S. 1745 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 364.

PARCEL 10 :

Stevens Fraction, Jim and Timberking Patented Mining Claims, M.S. 1732 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 391.

PARCEL 11 :

Stevens Bar Patented Mining Claim, M.S. 1735 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 26, Deeds, at page 481.

PARCEL 12 :

Hot Stuff Group consisting of Hot Stuff, Empire, Montana, Utah, Blister and Skookum Patented Mining Claims, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho.  Patent recorded in Book 38, Deeds, at page 200.

EXCEPTION:

Except that portion of Hot Stuff Group consisting of the Empire and Montana Patented Mining Claims, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, Patent recorded in Book 38, Deeds, at page 200 and except that portion of the Hot Stuff Group consisting of that portion of Utah Patented Mining Claim, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, Patent recorded in Book 38, Deeds, at page 200 with the said excepted portion of Utah, described more particularly at that portion of




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Utah Patented Mining Claim lying to the South and East of a straight line from the Northeast corner of Utah to the Southwest corner of Utah, a portion of M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, patent recorded in Book 38, Deeds, at page 200.

PARCEL 13 :

Golden Bricks Patented Mining Claim, M.S. 2247 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 43, Deeds, at page 493.

PARCEL 14 :

That 30’ wide road way currently existing and commonly known as the Newmont Road which is located in the Southwest corner of the Ivy claim in Section 9, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho which initiates on the Shoshone County road right-of-way and runs Westerly into the Littlefield Bar, M.S. 1062 Patented Mining Claim.

JOE DANDY CLAIM

Mineral rights only, MS 506

FLORENCE AND VIOLET CLAIMS

Surface and mineral, MS 2333







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Golden Chest Unpatented Claims

           IMC No.      Document No.  Claim Name

        Loc. Date

183083

387405

Superintendent

15-Jan-99

183084

387406

Eveline

15-Jan-99

186709

414003

GC 1

11-Dec-03

186710

414004

GC 2

09-Dec-03

186711

414005

GC 3

09-Dec-03

186712

414006

GC 4

09-Dec-03

186713

414007

GC 5

09-Dec-03

186714

414008

GC 6

09-Dec-03

186715

414009

GC 7

09-Dec-03

186716

414010

GC 8

09-Dec-03

187931

421248

GC 10

28-Dec-04

187932

421249

GC 11

28-Dec-04

187933

421250

GC 12

28-Dec-04

187934

421251

GC 13

28-Dec-04

187935

421252

GC 14

28-Dec-04

187936

421253

GC 15

29-Dec-04

189074

425788

Patti Beasley No. 1

01-Sep-05

189075

425789

Patti Beasley No. 2

01-Sep-05

189076

425790

Patti Beasley No. 3

01-Sep-05

189077

425791

Patti Beasley No. 4

01-Sep-05

189078

425792

Patti Beasley No. 5

01-Sep-05

204053

461921

Murray #1

25-Jan-11

204054

461922

Murray #2

25-Jan-11

204055

461923

Murray #3

25-Jan-11

204056

461924

Murray #4

25-Jan-11

204057

461925

Murray #5

24-Jan-11

204058

461926

Murray #6

24-Jan-11

204059

461927

Murray #7

24-Jan-11

204060

461928

Murray #8

24-Jan-11

204061

461929

Murray #9

24-Jan-11

204062

461930

Murray #10

27-Jan-11

204063

461931

Murray #11

27-Jan-11

204064

461932

Murray #12

20-Jan-11

204065

461933

Murray #13

20-Jan-11

204066

461934

Murray #14

20-Jan-11

204067

461935

Murray #15

20-Jan-11

204068

461936

Murray #16

20-Jan-11

204069

461937

Murray #17

24-Jan-11

204070

461938

Murray #18

24-Jan-11

204071

461939

Murray #19

24-Jan-11

204072

461940

Murray #20

24-Jan-11

204073

461941

Murray #21

24-Jan-11

204074

461942

Murray #22

24-Jan-11

204075

461943

Murray #23

24-Jan-11

204076

461944

Murray #24

24-Jan-11

204077

461945

Murray #25

24-Jan-11

204078

461946

Murray #26

24-Jan-11

204079

461947

Murray #27

24-Jan-11

204080

461948

Murray #28

24-Jan-11

204081

461949

Murray #29

24-Jan-11

204082

461950

Murray #30

24-Jan-11

204083

461951

Murray #31

24-Jan-11

204084

461952

Murray #32

24-Jan-11

204085

461953

Murray #33

25-Jan-11

204086

461954

Murray #34

24-Jan-11

204087

461955

Murray #35

24-Jan-11

204088

461956

Murray #36

24-Jan-11

204089

461957

Murray #37

25-Jan-11

204090

461958

Murray #38

25-Jan-11

204091

461959

Murray #39

25-Jan-11

204092

461960

Murray #40

25-Jan-11

204093

461961

Murray #41

25-Jan-11

204094

461962

Murray #42

25-Jan-11

204095

461963

Murray #43

25-Jan-11

204096

461964

Murray #44

25-Jan-11

204097

461965

Murray #45

25-Jan-11

204098

461966

Murray #46

25-Jan-11

204099

461967

Murray #47

25-Jan-11

204100

461968

Murray #48

24-Jan-11

204101

461969

Murray #49

27-Jan-11


EXHIBIT A-1


TITLE EXCEPTIONS



NONE.






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EXHIBIT B


NET SMELTER ROYALTY


1. Production Royalty


1.1 LESSEE shall pay to OWNER a Production Royalty in the amount of a Two Percent (2%) Net Smelter Returns (as hereinafter described) from the sale or other disposition of all Minerals produced from the Premises, determined in accordance with the provisions of this Agreement (the “Production Royalty ”).  For purposes of this Agreement, the term “ Minerals ” shall mean any and all metals, minerals and mineral rights of whatever kind and nature in, under or upon the surface or subsurface of the Premises (including, without limitation metals, precious metals, base metals, industrial minerals, gems, diamonds, commercially valuable rock, aggregate, clays and diatomaceous earth, hydrocarbons, and oil and gas, and other minerals which are mined, excavated, extracted or otherwise recovered). The Production Royalty shall apply to 100% of the Premises.  For the purpose of clarity, OWNER’s acceptance of any Minimum Royalty Payment paid will be credited first before additional Production Royalties will be paid.

1.2 For Precious Metals .  “ Net Smelter Returns ”, in the case of gold, silver, and platinum group metals (" Precious Metals "), shall be determined by multiplying (a)  the gross number of troy ounces of Precious Metals recovered from production from the Premises during the preceding calendar month (" Monthly Production ") delivered to the smelter, refiner, processor, purchaser or other recipient of such production (collectively, " Payor "), by (b)  for gold, the average of the London Bullion Market, PM Fix, spot prices reported for the preceding calendar month (the " Applicable Spot Price "), and for all other Precious Metals, the average of the New York Commodities Exchange final spot prices reported for the preceding calendar month for the particular Mineral for which the price is being determined, and subtracting from the product of Subsections 1.2(a) and 1.2(b) only the following if actually incurred: (i) charges imposed by the Payor for refining bullion from doré or concentrates of Precious Metals (" Beneficiated Precious Metals ") produced by LESSEE's final mill or other final processing plant; however, charges imposed by the Payor for smelting or refining of raw or crushed ore containing Precious Metals or other preliminarily processed Precious Metals shall not be subtracted in determining Net Smelter Returns; (ii) penalty substance, assaying, and sampling charges imposed by the Payor for refining Beneficiated Precious Metals contained in such production; and (iii) charges and costs, if any, for transportation and insurance of Beneficiated Precious Metals from LESSEE's final mill or other final processing plant to places where such Beneficiated Precious Metals are smelted, refined and/or sold or otherwise disposed of.


1.3 In the event the refining of bullion from the Beneficiated Precious Metals contained in such production is carried out in custom toll facilities owned or controlled, in whole or in part, by LESSEE, which facilities were not constructed solely for the purpose of refining Beneficiated Precious Metals or Other Minerals from the Premises, then charges, costs and penalties for such refining shall mean the amount LESSEE would have incurred if such refining were carried out at facilities not owned or controlled by LESSEE then offering comparable services for comparable products on prevailing terms, but in no event greater than actual costs incurred by LESSEE with respect to such refining.  In the event LESSEE receives insurance proceeds for loss of production of Precious Metals, LESSEE shall pay to OWNER the Production Royalty percentage of any such insurance proceeds which are received by LESSEE for such loss of production.


1.4 For Other Minerals .  “ Net Smelter Returns ”, in the case of all Minerals other than Precious Metals and the beneficiated products thereof (" Other Minerals "), shall be determined by multiplying (a)  the gross




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27



amount of the particular Other Mineral contained in the Monthly Production delivered to the Payor during the preceding calendar month by (b)  the average of the New York Commodities Exchange final daily spot prices reported for the preceding calendar month of the appropriate Other Mineral, and subtracting from the product of Subsections 1.4(a) and 1.4(b) only the following if actually incurred: (i) charges imposed by the Payor for smelting, refining or processing Other Minerals contained in such production, but excluding any and all charges and costs related to LESSEE's mills or other processing plants constructed for the purpose of milling or processing Other Minerals, in whole or in part; (ii) penalty substance, assaying, and sampling charges imposed by the Payor for smelting, refining, or processing Other Minerals contained in such production, but excluding any and all charges and costs of or related to LESSEE's mills or other processing plants constructed for the purpose of milling or processing Other Minerals, in whole or in part; and (iii) charges and costs, if any, for transportation and insurance of Other Minerals and the beneficiated products thereof from LESSEE's final mill or other final processing plant to places where such Other Minerals are smelted, refined and/or sold or otherwise disposed of. If for any reason the New York Commodities Exchange does not report spot pricing for a particular Other Mineral, then the Parties shall mutually agree upon an appropriate pricing entity or mechanism that accurately reflects the market value of any such Other Mineral.


1.5 In the event smelting, refining, or processing of Other Minerals are carried out in custom toll facilities owned or controlled, in whole or in part, by LESSEE, which facilities were not constructed solely for the purpose of milling or processing Other Minerals from the Premises, then charges, costs and penalties for such smelting, refining or processing shall mean the amount LESSEE would have incurred if such smelting, refining or processing were carried out at facilities not owned or controlled by LESSEE then offering comparable services for comparable products on prevailing terms, but in no event greater than actual costs incurred by LESSEE with respect to such smelting and refining. In the event LESSEE receives insurance proceeds for loss of production of Other Minerals, LESSEE shall pay to OWNER the Production Royalty percentage of any such insurance proceeds which are received by LESSEE for such loss of production.


1.6 Payments of Production Royalty in Cash or In Kind .  Production Royalty payments shall be made to OWNER as follows:


(a) Production Royalty in Kind .  OWNER may elect to receive its Production Royalty on Precious Metals from the Premises "in cash" or "in kind" as refined bullion.  The elections may be exercised once per year on a calendar year basis during the life of production from the Premises.  Notice of election to receive the following year's Production Royalty for Precious Metals “in cash” or “in kind” shall be made in writing by OWNER and delivered to LESSEE on or before November 1 of each year.  In the event no written election is made, the Production Royalty for Precious Metals will continue to be paid to OWNER as it is then being paid.  As of the Effective Date of this Agreement, OWNER elects to receive its Production Royalty on Precious Metals “ in cash ”.  Royalties on Other Minerals shall not be payable "in kind". (i) If OWNER elects to receive its Production Royalty for Precious Metals "in kind", OWNER shall open a bullion storage account at each refinery or mint designated by LESSEE as a possible recipient of refined bullion in which OWNER owns an interest.  OWNER shall be solely responsible for all costs and liabilities associated with maintenance of such account or accounts, and LESSEE shall not be required to bear any additional expense with respect to such "in-kind" payments. (ii) Production Royalty will be paid by the deposit of refined bullion into OWNER’s account.  On or before the 25th day of each calendar month following a calendar month during which production and sale or other disposition occurred, LESSEE shall deliver written instructions to the mint or refinery, with a copy to OWNER directing the mint or refinery to deliver refined bullion due to OWNER in respect of the Production Royalty, by crediting to OWNER's




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account the number of ounces of refined bullion for which Production Royalty is due; provided, however, that the words "other disposition" as used in this Agreement shall not include processing, milling, beneficiation or refining losses of Precious Metals.  The number of ounces of refined bullion to be credited will be based upon OWNER’s share of the previous month's production and sale or other disposition as calculated pursuant to the commingling provisions of Section 1.9 . (iii) Production Royalty payable “in kind” on silver or platinum group metals shall be converted to the gold equivalent of such silver or platinum group metals by using the average monthly spot prices for Precious Metals described in Section 1.2 . (iv) Title to refined bullion delivered to OWNER under this Agreement shall pass to OWNER at the time such bullion is credited to OWNER at the mint or refinery. (v) OWNER agrees to hold harmless LESSEE from any liability imposed as a result of the election of OWNER to receive Production Royalty “in kind” and from any losses incurred as a result of OWNER’s trading and hedging activities.  OWNER assumes all responsibility for any shortages which occur as a result of OWNER’s anticipation of credits to its account in advance of an actual deposit or credit to its account by a refiner or mint. (vi) When royalties are paid "in kind", they will not reflect the costs deductible in calculating Net Smelter Returns under this Agreement.  Within thirty (30) days of the receipt of a statement showing charges incurred by LESSEE for transportation, smelting or other deductible costs, OWNER shall remit to LESSEE full payment for such charges.  If OWNER does not pay such charges when due, LESSEE shall have the right, at its election, provided OWNER does not dispute such charges, to deduct the gold equivalent of such charges from the ounces of gold bullion to be credited to OWNER in the following month.


(b) In Cash .  If OWNER elects to receive its Production Royalty for Precious Metals in cash, and as to Production Royalty payable on Other Minerals, payments shall be payable on or before the later of ten (10) days after LESSEE receives payment from the Payor or the twenty-fifth (25th) day of the month following the calendar month in which the minerals subject to the Production Royalty were shipped to the Payor by LESSEE.  For purposes of calculating the cash amount due to OWNER, Precious Metals and Other Minerals will be deemed to have been sold or otherwise disposed of at the time refined production from the Premises is delivered, made available, or credited to LESSEE by a mint or refiner.  The price used for calculating the cash amount due for Production Royalty on Precious Metals or Other Minerals shall be determined in accordance with Section 1.2 and Section 1.4 as applicable.  LESSEE shall make each Production Royalty payment to be paid in cash by delivery of a check payable to OWNER and delivering such check to OWNER at the address listed in this Agreement, or to such other address as OWNER may direct or by direct bank deposit to OWNER’s account as OWNER shall designate. Should default be made in any cash payment when due for Production Royalty and such default exists ten (10) days following Notice of non-payment, then all unpaid amounts then due shall bear interest at the rate of five percent (5%) per annum commencing from and after such payment due date until paid.


(c) Detailed Statement .  All Production Royalty payments or credits shall be accompanied by a detailed statement explaining the calculation thereof together with any available settlement sheets from the Payor.




1.7 Hedging Transactions .  All profits and losses resulting from LESSEE's sales of Precious Metals or Other Minerals, or LESSEE's engaging in any commodity futures trading, option trading, or metals trading, or any combination thereof, and any other hedging transactions including trading transactions designed to avoid losses and obtain possible gains due to metal price fluctuations (collectively, " Hedging Transactions ") are specifically excluded from Royalty calculations pursuant to this Agreement.  All Hedging Transactions by LESSEE and all profits or losses associated therewith, if any, shall be solely for




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LESSEE's account.  The Royalty payable on Precious Metals or Other Minerals subject to Hedging Transactions shall be determined as follows: (a) Affecting Precious Metals .  The amount of Royalty to be paid on all Precious Metals subject to Hedging Transactions by LESSEE shall be determined in the same manner as provided in Subsection 1.2, with the understanding and agreement that the average monthly spot price shall be for the calendar month preceding the calendar month during which Precious Metals subject to Hedging Transactions are shipped by LESSEE to the Payor. (b) Affecting Other Minerals .  The amount of Royalty to be paid on all Other Minerals subject to Hedging Transactions by LESSEE shall be determined in the same manner as provided in Subsection 1.4, with the understanding and agreement that the average monthly spot price shall be for the calendar month preceding the calendar month during which Other Minerals subject to Hedging Transactions are shipped by LESSEE to the Payor.







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Exhibit 10.3




EXCHANGE AGREEMENT


Between


NEW JERSEY MINING COMPANY

An Idaho Corporation

(“NJMC”)


And


JOHN SWALLOW, MARTIN LANPHERE, LEW WALDE, AND ART GLOVER,

Collectively all the Members of:


IDAHO CHAMPION RESOURCES, LLC

An Idaho limited liability company

(“ICR”)





Dated: December 31, 2013






















EXCHANGE AGREEMENT



THIS EXCHANGE AGREEMENT (the " Agreement ") is entered into as of this 31 st day of December, 2013, by and between New Jersey Mining Company, an Idaho corporation (“ NJMC ”) and John Swallow, Martin Lanphere, Lew Walde, and Art Glover, (the “ Members ”) collectively all the members of Idaho Champion Resources, LLC, an Idaho limited liability company (" ICR ”), (collectively the NJMC and the Members are hereinafter referred to as the “ Parties ”) upon the following Premises:


PREMISES:


WHEREAS , NJMC, is a publicly held corporation organized under the laws of the State of Idaho;


WHEREAS , ICR is a privately-held limited liability company organized under the laws of State of Idaho, owned in its entirety by the Members (membership interests are sometimes referred to here as “units” or “ownership units” or the like);


WHEREAS , ICR has applied to the Internal Revenue Service and has received IRS approval to be taxed as a “C” corporation, rendering the membership interests or ownership units in  IRC the IRS tax-equivalent of “C” corporation stock, and the IRC Members the tax-equivalent of “C” corporation stockholders;


WHEREAS , management of the constituent entities have determined that it is in the best interest of the Parties that NJMC acquire 100% of the issued and outstanding membership units of ICR in exchange for Five Million (5,000,000) common shares of NJMC capital stock (the "Exchange"), of which 5,000,000 common shares will be issued at closing; and,


WHEREAS , the Parties desire to set forth the terms of the Exchange, which is intended to constitute a tax-free reorganization pursuant to the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.


NOW THEREFORE , on the stated Premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the Parties to be derived here from, it is hereby agreed as follows:







EXCHANGE AGREEMENT: 2 of 23







AGREEMENT


ARTICLE I

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF MEMBERS


As an inducement to, and to obtain the reliance of NJMC, except as set forth on the ICR Schedules (as hereinafter defined), the Members of ICR represent and warrant as follows:


Section 1.01

Organization .  ICR   is a limited liability company duly organized, validly existing, and in good standing under the laws of State of Idaho and has the limited liability company power and is duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets and to carry on its business in all material respects as it is now being conducted, including qualification to do business as a foreign corporation in the states or countries in which the character and location of the assets owned by  it or the nature of the business transacted by it requires qualification, except where failure to be so qualified would not have a material adverse effect on its business.  Filed with the Secretary of State of Idaho and available as a public record published within its website are complete and correct copies of the certificate of organization of ICR  as in effect on the date hereof.  The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of ICR’s certificate of organization or any operating agreement.  ICR has taken all actions required by law, its certificate of organization, or otherwise to authorize the execution and delivery of this Agreement.  ICR has full power, authority, and legal right and has taken all action required by law, its certificate of organization, and otherwise to consummate the transactions herein contemplated.


Section 1.02

Capitalization .  The authorized capitalization of ICR consists of membership units issued to the four Members, all of which membership units are currently issued and outstanding. All issued and outstanding units are legally issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person.  There membership units are in the following proportions:


Art Glover:           20.000%

Lew Walde:          26.666%

Martin Lanphere:  26.666%

John Swallow:      26.666%

TOTAL:   100.000%






EXCHANGE AGREEMENT: 3 of 23







There are no other membership interests of any class issued and outstanding.


            Section 1.03

Absence of Certain Changes or Events . Except as set forth in this Agreement or the ICR Schedules, since October 21, 2013 there has been no material change in the business and assets of ICR and to the best knowledge of ICR, ICR  has not become subject to any law or regulation which materially and adversely affects, or in the future may adversely affect the business, operations, properties, assets, or condition of ICR.


           Section 1.04

Litigation and Proceedings . There are no actions, suits, proceedings, or investigations pending or, to the knowledge of ICR  or the Members after reasonable investigation, threatened by or against ICR  or affecting ICR  or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind.  Neither ICR nor its Members have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality or of any circumstances that, after reasonable investigation, would result in the discovery of such a default. The Parties acknowledge that the Lessor of the Cox Mining Lease entered into on September 4, 2013, has been engaged in litigation for sometime related to the Sheep Gulch mining road and that if the Lessor is successful in litigating the matter the outcome will inure to the benefit of ICR. ICR has agreed, as part of that certain lease, to assist with the litigation if needed.


Section 1.05

Contracts .


(a)

Except as included or described in the ICR  Schedules, there are no "material" contracts, agreements, franchises, license agreements, debt instruments or other commitments to which ICR  is a party or by which it or any of its assets, products, technology, or properties are bound other than those incurred in the ordinary course of business (as used in this Agreement, a "material" contract, agreement, franchise, license agreement, debt instrument or commitment is one which (i) will remain in effect for more than six (6) months after the date of this Agreement or (ii) involves aggregate obligations of at least twenty-five thousand dollars ($25,000));


(b)

To the knowledge of ICR and its Members, all contracts, agreements, franchises, license agreements, and other commitments to which ICR is a party or by which its properties are bound and which are material to the operations of ICR taken as a whole are valid and enforceable by ICR in all respects, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally;







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(c)

Except as set forth in the ICR Schedules, to the knowledge of ICR and its Members ICR is not a party to or bound by, and the properties of ICR are not subject to any contract, agreement, other commitment or instrument; any charter or other corporate restriction; or any judgment, order, writ, injunction, decree, or award which materially and adversely affects, the business operations, properties, assets, or condition of ICR; and


(d)

Except as included or described in the ICR  Schedules or reflected in the most recent ICR  balance sheet, ICR  is not a party to any oral or written (i) contract for the employment of any officer or employee which is not terminable on 30 days, or less notice; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation, other than one on which ICR  is a primary obligor, for the borrowing of money or otherwise, excluding endorsements made for collection and other guaranties of obligations which, in the aggregate do not exceed more than one year or providing for payments in excess of $25,000 in the aggregate; (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of ICR .


Section 1.06

Material Contract Defaults .  ICR is not in default in any material respect under the terms of any outstanding contract, agreement, lease, or other commitment which is material to the business, operations, properties, assets or condition of ICR and there is no event of default in any material respect under any such contract, agreement, lease, or other commitment in respect of which ICR  has not taken adequate steps to prevent such a default from occurring.


Section 1.07

No Conflict With Other Instruments .  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute an event of default under, or terminate, accelerate or modify the terms of any material indenture, mortgage, deed of trust, or other material contract, agreement, or instrument to which ICR is a party or to which any of its properties or operations are subject.


Section 1.08

Governmental Authorizations .  Except as set forth in the ICR  Schedules, ICR  has all licenses, franchises, permits, and other governmental authorizations that are legally required to enable it to conduct its business in all material respects as conducted on the date hereof.  Except for compliance with federal and state securities and corporation laws, as hereinafter provided, no authorization, approval, consent, or order of, or registration, declaration, or filing with, any court or other governmental body is required in connection with the execution






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and delivery by ICR or the Members of this Agreement and the consummation by ICR or the Members of the transactions contemplated hereby.


Section 1.09

Compliance With Laws and Regulations .  Except as set forth in the ICR Schedules, to the best of its knowledge ICR has complied with all applicable statutes and regulations of any federal, state, or other governmental entity or agency thereof, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets, or condition of ICR , or except to the extent that noncompliance would not result in the occurrence of any material liability for ICR .


Section 1.10

Approval of Agreement .  ICR and all of the Members  have authorized the execution and delivery of this Agreement  and have approved this Agreement and the transactions contemplated hereby..


Section 1.11

Material Transactions or Affiliations .  Set forth in the ICR  Schedules is a description of every contract, agreement, or arrangement between ICR  and any predecessor and any person who was at the time of such contract, agreement, or arrangement an officer, director, or person owning of record, or known by ICR  to own beneficially, 5% or more of the issued and outstanding membership units of ICR  and which is to be performed in whole or in part after the date hereof or which was entered into not more than three years prior to the date hereof.  Except as disclosed in the ICR  Schedules or otherwise disclosed herein, no officer, director, or 5% unit holder of ICR  has, or has had since inception of ICR, any known interest, direct or indirect, in any transaction with ICR  which was material to the business of ICR.  There are no commitments by ICR, whether written or oral, to lend any funds, or to borrow any money from, or enter into any other transaction with, any such affiliated person.


Section 1.12

ICR Schedules .  ICR  has delivered to NJMC the following schedules, which are collectively referred to as the "ICR  Schedules" and which consist of separate schedules dated as of the date of execution of this Agreement, all hereby certified by the  Members of ICR  as complete, true, and correct as of the date of this Agreement in all material respects:


(a)

A schedule containing complete and correct copies of the certificate of organization, of ICR in effect as of the date of this Agreement;


(b)

Schedule containing unaudited financial statements since the inception of ICR.






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Section 1.13

Payroll Taxes and Corporate Taxes .  All of the payroll taxes and corporate taxes owed by ICR up to the date of Closing will remain the responsibility of ICR or the Members.


Section 1.14

Valid Obligation .  This Agreement and all agreements and other documents executed by the Members   in connection herewith constitute the valid and binding obligation of the Members , enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.


ARTICLE II

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF NJMC


As an inducement to, and to obtain the reliance of the Members , except as set forth in the NJMC Schedules (as hereinafter defined), NJMC represents and warrants as follows:


Section 2.01

Organization .  NJMC is a corporation duly organized, validly existing, and in good standing under the laws of the State of Idaho and has the corporate power and is duly authorized, qualified, franchised, and licensed under all applicable laws, regulations, ordinances, and orders of public authorities to own all of its properties and assets, to carry on its business in all material respects as it is now being conducted, and except where failure to be so qualified would not have a material adverse effect on its business, there is no jurisdiction in which it is not qualified in which the character and location of the assets owned by it or the nature of the business transacted by it requires qualification.  Included in the NJMC Schedules are complete and correct copies of the Articles of Incorporation, Amendments and Bylaws as in effect on the date hereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of NJMC Articles of Incorporation or Bylaws.   NJMC has taken all action required by law, its Articles of Incorporation, or otherwise to authorize the execution and delivery of this Agreement, and NJMC has full power, authority, and legal right and has taken all action required by law, its Articles of Incorporation, or otherwise to consummate the transactions herein contemplated.


Section 2.02

Capitalization .  NJMC’s authorized capitalization consists of 200,000,000 shares of common stock, no par value of which 73,560,148 shares are currently outstanding and






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1,000,000 shares of Preferred stock, no par value.  All issued and outstanding shares are legally issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person.


Section 2.03

Filings; Financial Statements.


(a)

NJMC will provide unaudited financial statements to the Members within 90 days of closing.


(b)

NJMC has no liabilities with respect to the payment of any federal, state, county, local or other taxes (including any deficiencies, interest or penalties), except for taxes accrued but not yet due and payable.


(c)

NJMC has timely filed all state, federal or local income and/or franchise tax returns required to be filed by it from inception to the date hereof.  Each of such income tax returns reflects the taxes due for the period covered thereby, except for amounts that, in the aggregate, are immaterial.


(d)

The books and records, financial and otherwise, of NJMC are in all material aspects complete and correct and have been maintained in accordance with good business and accounting practices.


(e)

All of NJMC assets will be reflected on its financial statements, and, except as set forth in the NJMC Schedules or the financial statements of NJMC or the notes thereto, NJMC will have no material liabilities, direct or indirect, matured or unmatured, contingent or otherwise.


Section 2.04

Filings: Books and Records.  The books and records, financial and otherwise, of NJMC are in all material aspects complete and correct and have been maintained in accordance with good business and accounting practices.


Section 2.05

Environmental Liability.   NJMC has not received notice from any governmental agency pertaining to the violation of any law or regulation of toxic hazardous substances or dangerous wastes and affecting any of its Property, and NJMC has no knowledge of any facts which might be a basis for any such notice. To NJMC'S knowledge, it has not caused or permitted any Property to be used as a site for the generation, manufacture, refining, transportation, treatment, storage, handling, disposing, transfer, producing or processing of






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hazardous substances, or other dangerous or toxic substances, or solid waste, except in compliance with all applicable federal, state, and local laws or regulations, and has not caused or permitted and has no knowledge of the release of any hazardous substances on or off-site of the Property.


Section 2.06

Options or Warrants.  There are existing options, warrants, calls, or commitments relating to the authorized and unissued stock of NJMC.


Section 2.07

Absence of Certain Changes or Events.  Except as disclosed in the NJMC Schedules, or otherwise disclosed in writing to ICR, since October 21, 2013:


(a)

there has not been (i) any material adverse change in the business, operations, properties, assets or condition of NJMC or (ii) any damage, destruction or loss to NJMC(whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets or condition of NJMC;


(b)

NJMC has not (i) amended its certificate of incorporation or bylaws; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are outside of the ordinary course of business or material considering the business of NJMC; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any transactions or agreements other than in the ordinary course of business; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or  termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its salaried employees whose monthly compensation exceed $1,000; or  (viii) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for or with its officers, directors, or employees;


(c)

NJMC has not (i) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (ii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the most recent NJMC balance sheet and current liabilities






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incurred since that date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iii) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $1000), or canceled, or agreed to cancel, any debts or claims (except debts or claims which in the aggregate are of a value less than $1000); (iv) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of NJMC; or (v) issued, delivered or agreed to issue or deliver, any stock, bonds, or other corporate securities including debentures (whether authorized and unissued or held as treasury stock), except in connection with this Agreement; and


(d)

To the best knowledge of NJMC, it has not become subject to any law or regulation which materially and adversely affects, or in the future, may adversely affect, the business, operations, properties, assets or condition of NJMC.


Section 2.08

Litigation and Proceedings.  There are no actions, suits, proceedings or investigations pending or, to the knowledge NJMC after reasonable investigation, threatened by or against NJMC or affecting  NJMC or  its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind except as disclosed in NJMC Schedules.  NJMC has no knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality or any circumstance that after reasonable investigation would result in the discovery of such default.


Section 2.9

Material Contract Defaults .  NJMC is not in default in any material respect under the terms of any outstanding contract, agreement, lease, or other commitment which is material to the business, operations, properties, assets or condition of NJMC and there is no event of default in any material respect under any such contract, agreement, lease, or other commitment in respect of which NJMC has not taken adequate steps to prevent such a default from occurring.


Section 2.10

No Conflict With Other Instruments.  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to






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which NJMC is a party or to which any of its assets or operations are subject.


Section 2.11

Governmental Authorizations.  NJMC has all licenses, franchises, permits, and other governmental authorizations, that are legally required to enable it to conduct its business operations in all material respects as conducted on the date hereof.  Except for compliance with federal and state securities or corporation laws, as hereinafter provided, no authorization, approval, consent or order of, of registration, declaration or filing with, any court or other governmental body is required in connection with the execution and delivery by NJMC of this Agreement and the consummation by NJMC of the transactions contemplated hereby.


Section 2.12

Compliance With Laws and Regulations.  To the best of its knowledge, NJMC has complied with all applicable statutes and regulations of any federal, state, or other applicable governmental entity or agency thereof, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets or condition of NJMC or except to the extent that noncompliance would not result in the occurrence of any material liability.  This compliance includes, but is not limited to, the filing of all reports to date with federal and state securities authorities.


Section 2.13

Material Transactions or Affiliations.  Except as disclosed herein and in NJMC's  filed Securities and Exchange Commission reports, there exists no contract, agreement or arrangement between NJMC and any predecessor and any person who was at the time of such contract, agreement or arrangement an officer, director, or person owning of record or known by NJMC to own beneficially, 5% or more of the issued and outstanding common stock of NJMC and which is to be performed in whole or in part after the date hereof or was entered into not more than three years prior to the date hereof.  Neither any officer, director, nor 5% shareholder of NJMC has, or has had since inception of NJMC, any known interest, direct or indirect, in any such transaction with NJMC which was material to the business of NJMC.  NJMC has no commitment, whether written or oral, to lend any funds to, borrow any money from, or enter into any other transaction with, any such affiliated person.


Section 2.14

Approval of Agreement.  The board of directors of NJMC have authorized the execution and delivery of this Agreement and have approved this Agreement and the transactions contemplated hereby.


Section 2.15

NJMC Schedules.  NJMC has delivered to NJMC the following schedules, which are collectively referred to as the "NJMC Schedules" and which consist of separate schedules, which are dated the date of this Agreement, all certified by the chief executive officer






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of NJMC to be complete, true, and accurate in all material respects as of the date of this Agreement:


(a)

a schedule containing complete and accurate copies of the certificate of incorporation and bylaws of NJMC as in effect as of the date of this Agreement;


(b)

a schedule setting forth any other information, together with any required copies of documents, required to be disclosed in the NJMC Schedules by Sections 2.01 through 2.14.


NJMC will cause the NJMC Schedules and the instruments and data delivered to ICR hereunder to be promptly updated after the date hereof up to and including the Closing Date.


Section 2.16

Valid Obligation .  This Agreement and all agreements and other documents executed by NJMC in connection herewith constitute the valid and binding obligation of NJMC, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.


ARTICLE III

PLAN OF EXCHANGE AND REORGANIZATION


Section 3.01

The Exchange.  


(a)

Exchange of Common Stock.


On the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined in Section 3.02), each Member the "Exchanging Unit Holders"), will assign, transfer and deliver, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, the number of percentage membership units of ICR set forth herein,  in the aggregate constituting 100% of the issued and outstanding membership units of ICR;  the objective of such Exchange being the acquisition by NJMC  of 100% of the issued and outstanding membership units of ICR.   


 In exchange for the transfer of such securities by the ICR Unit Holders, ICR Unit Holders will be issued 5,000,000 shares (the " Shares ") at the closing. At the Closing, each ICR






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Unit Holder will, on surrender of his certificate or documentation representing such ICR membership units to NJMC, be entitled to receive a certificate or certificates evidencing his proportionate interest in the Shares, corresponding to that Member’s proportionate interest in ICR. 


Upon consummation of the transactions contemplated herein all of the membership units of ICR will be owned by NJMC.


Section 3.02

Closing.  The closing ("Closing") of the transactions contemplated by this Agreement will take place on December 31, 2013, or on other such time as the Parties agree.


Section 3.03

Closing Events.  At the Closing, NJMC and each of the Exchanging Unit Holders will execute, acknowledge, and deliver (or will ensure to be executed, acknowledged, and delivered) any and all certificates, opinions, financial statements, schedules, agreements, resolutions, rulings or other instruments required by this Agreement to be so delivered at or prior to the Closing, together with such other items as may be reasonably requested by the parties hereto and their respective legal counsel in order to effectuate or evidence the transactions contemplated hereby.  This Agreement will become effective as of Closing on, or about December 31, 2013.


Section 3.4

Termination.


(a)

This Agreement may be terminated by either the board of directors of NJMC or by the Members at any time prior to the Closing if:


(i)

there will be any actual or threatened action or proceeding before any court or any governmental body which will seek to restrain, prohibit, or invalidate the transactions contemplated by this Agreement and which, in the judgment of such board of directors, made in good faith and based upon the advice of its legal counsel, makes it inadvisable to proceed with the Exchange; or


(ii)

any of the transactions contemplated hereby are disapproved by any regulatory authority whose approval is required to consummate such transactions (which does not include the Securities and Exchange Commission) or in the judgment of such board of directors, made in good faith and based on the advice of counsel, there is substantial likelihood that any such approval will not be obtained or will be obtained only on a condition or conditions which would be






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unduly burdensome, making it inadvisable to proceed with the Exchange.


Section 3.5

Due Diligence Review Period .   Prior to closing, each Party will be entitled to conduct its own "due diligence" investigation and review of the other Parties business.  The Parties will complete their reviews on, or before December 31, 2013.  


In the event of termination pursuant to this paragraph (a) of Section 3.04, no obligation, right or liability will arise hereunder, and each party will bear its own costs and expenses incurred by it in connection with the negotiation, drafting, and execution of this Agreement and the transactions herein contemplated.


ARTICLE IV

SPECIAL COVENANTS


Section 4.01

Access to Properties and Records.  Each of the Parties will each afford to the officers and authorized representatives of the other Parties full access to their properties, books and records, in order that each may have a full opportunity to make such reasonable investigation as they will desire to make of the affairs of the other, and each will furnish the other with such additional financial and operating data and other information reasonably requested.


Section 4.02

Delivery of Books and Records.  At the Closing, ICR will deliver to NJMC, the copies of the corporate minute books, books of account, contracts, records, and all other books or documents of ICR now in the possession of ICR or its officers and directors.


Section 4.03

Third Party Consents and Certificates.  All Parties agree to cooperate with each other in order to obtain any required third party consents to this Agreement and the transactions herein contemplated.


Section 4.04

Indemnification.


(a)

The Members  hereby agree to indemnify NJMC  and each of the officers, agents and directors of NJMC  as of the date of execution of this Agreement against any loss, liability, claim, damage, or expense (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever), to which it or they may become subject arising out of or based on any inaccuracy appearing in or






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misrepresentations made under Article I of this Agreement.  The indemnification provided for in this paragraph will survive the Closing and consummation of the transactions contemplated hereby and termination of this Agreement.


(b)

NJMC  hereby agrees to indemnify the Members  and each of the officers and  agents  of ICR as of the date following the execution of this Agreement against any loss, liability, claim, damage, or expense (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating,  preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever), to which it or they may become subject arising out of or based on any inaccuracy appearing in or misrepresentation made under Article II of this Agreement.  The indemnification provided for in this paragraph will survive the Closing and consummation of the transactions contemplated hereby and termination of this Agreement.


ARTICLE V

CONDITIONS PRECEDENT TO OBLIGATIONS OF ICR


The obligations of the Members of ICR under this Agreement are subject to the satisfaction, at or before the Closing, of the following conditions:


Section 5.01

Accuracy of Representations and Performance of Covenants.  The representations and warranties made by ICR in this Agreement were true when made and will be true at the Closing with the same force and effect as if such representations and warranties were made at and as of the Closing (except for changes therein permitted by this Agreement).  ICR will have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by ICR prior to or at the Closing.  


Section 5.02

Manager's Certification.  Upon the Closing Date the Members  of ICR will certify to the effect that no litigation, proceeding, investigation, or inquiry is pending, or to the best knowledge of ICR or its Members is threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Agreement, or, to the extent not disclosed in the ICR Schedules, by or against ICR, which might result in any material adverse change in any of the assets, properties, business, or operations of ICR.


Section 5.03

No Material Adverse Change.  Prior to the Closing, there will not have occurred any change in the financial condition, business, or operations of ICR  nor will any event have occurred which, with the lapse of time or the giving of notice, is determined to be






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unacceptable using the criteria set forth in Section 2.07.


Section 5.04

Approval by Unit Holders.  The Exchange will have been approved, and units delivered in accordance with Section 3.01, by the holders of not less than one hundred percent (100%) of the outstanding membership units of ICR.


Section 5.05

No Governmental Prohibition.  No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order will have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.


Section 5.06

Consents.  All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of ICR  after the Closing on the basis as presently operated will have been obtained.


Section 5.07

Other Items.


(a)

NJMC  will have received a list of ICR  Unit Holders containing the name, address, and number of units held by each ICR Unit Holder as of the date of Closing, certified by the Members of  ICR  as being true, complete and accurate; and


(b)

NJMC will have received such further opinions, documents, certificates or instruments relating to the transactions contemplated hereby it may reasonably request.


ARTICLE VI

CONDITIONS PRECEDENT TO OBLIGATIONS OF NJMC


The obligations of NJMC under this Agreement are subject to the satisfaction, at or before the Closing, of the following conditions:


Section 6.01

Accuracy of Representations and Performance of Covenants.  The representations and warranties made by NJMC in this Agreement were true when made and will be true as of the Closing (except for changes therein permitted by this Agreement) with the same force and effect as if such representations and warranties were made at and as of the Closing.  Additionally, NJMC will have performed and complied with all covenants and conditions required by this Agreement to be performed or complied will have approved the Exchange and






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the related transactions described herein. NJMC will have been furnished with certificates, signed by duly authorized executive officers of NJMC and dated the Closing, to the foregoing effect.


Section 6.02

Officer's Certificate.  Upon the Closing Date the Chief Executive Officer will certify to the effect that no litigation, proceeding, investigation or inquiry is pending, or to the best knowledge of NJMC threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Agreement or, to the extent not disclosed in the NJMC Schedules, by or against NJMC, which might result in any material adverse change in any of the assets, properties or operations of NJMC.


Section 6.03

No Governmental Prohibition.  No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order will have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.


Section 6.04

Consents.  All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of each party after the Closing on the basis as presently operated will have been obtained.


Section 6.05

Other Items.  ICR will have received further opinions, documents, certificates, or instruments relating to the transactions contemplated hereby as ICR may reasonably request.


ARTICLE VII

MISCELLANEOUS


Section 7.01

Brokers.   The Parties agree that there were no finders or brokers involved in bringing the parties together or who were instrumental in the negotiation, execution or consummation of this Agreement.  The Parties each agree to indemnify the other against any claim by any third person other than those described above for any commission, brokerage, or finder's fee arising from the transactions contemplated hereby based on any alleged agreement or understanding between the indemnifying party and such third person, whether express or implied from the actions of the indemnifying party.


Section 7.02

Governing Law.  This Agreement will be governed by, enforced, and






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construed under and in accordance with the laws of the United States of America and, with respect to the matters of state law, with the laws of the State of Idaho without giving effect to principles of conflicts of law thereunder.  Each of the parties (a) irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement will be brought exclusively in the federal courts of the United States, State of Idaho, County of Kootenai.


Section 7.03

Notices.  Any notice or other communications required or permitted hereunder will  be in writing and will be sufficiently given if personally delivered to it or sent by telecopy, overnight courier or registered mail or certified mail, postage prepaid, addressed as follows:


If to NJMC:

New Jersey Mining Company

Del Steiner, CEO

201 N. 3 rd Street

Coeur d’Alene, ID 83814


With copies to:

Tyler B. Wilson, Esq.

18610 E. 32 nd Avenue

Greenacres, WA 99016

 


If to ICR:

Idaho Champion Resources, LLC

201 N. 3 rd Street

Coeur d’Alene, ID 83814


           

With copies to:

Ron T. Blewett, Esq.

Bollinger Financial Center, Ste. C

301 “D” Street

P.O. Box 1990

Lewiston, ID 83501



or such other addresses as will be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication will be deemed to have been given (i) upon receipt, if personally delivered, (ii) on the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3) days after mailing, if sent by registered or certified mail.






EXCHANGE AGREEMENT: 18 of 23








Section 7.04

Attorney's Fees.  In the event that either party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the prevailing party will be reimbursed by the losing party for all costs, including reasonable attorney's fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.


Section 7.05

Confidentiality.  Each party hereto agrees with the other that, unless and until the transactions contemplated by this Agreement have been consummated, it and its representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and will not use such data or information or disclose the same to others, except (i) to the extent such data or information is published, is a matter of public knowledge, or is required by law to be published; or (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement.  In the event of the termination of this Agreement, each party will return to the other party all documents and other materials obtained by it or on its behalf and will destroy all copies, digests, work papers, abstracts or other materials relating thereto, and each party will continue to comply with the confidentiality provisions set forth herein.


Section 7.06

Schedules; Knowledge.  Each party is presumed to have full knowledge of all information set forth in the other party's schedules delivered pursuant to this Agreement.


Section 7.07

Third Party Beneficiaries.  This contract is strictly between  NJMC and  ICR, and, except as specifically provided, no director, officer, stockholder, employee, agent, independent contractor or any other person or entity will be deemed to be a third party beneficiary of this Agreement.


Section 7.08

Expenses.  Whether or not the Exchange is consummated, each Party hereto will bear their own respective expenses, including legal, accounting and professional fees, incurred in connection with the Exchange or any of the other transactions contemplated hereby.


Section 7.9

Entire Agreement.  This Agreement represents the entire agreement between the parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter.







EXCHANGE AGREEMENT: 19 of 23







Section 7.10

Survival; Termination.  The representations, warranties, and covenants of the respective parties will survive the Closing and the consummation of the transactions herein contemplated for a period of two years with the exception of Section 2.05 which will survive indefinitely.


Section 7.11

Counterparts.  This Agreement may be executed in multiple counterparts, each of which will be deemed an original and all of which taken together will be but a single instrument.


Section 7.12

Amendment or Waiver.  Every right and remedy provided herein will be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other will be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing.  At any time prior to the Closing, this Agreement may by amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance may be extended by a writing signed by the party or parties for whose benefit the provision is intended.


Section 7.13

Best Efforts.  Subject to the terms and conditions herein provided, each party will use its best efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by it under this Agreement so that the transactions contemplated hereby will be consummated as soon as practicable.  Each party also agrees that it will use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective this Agreement and the transactions contemplated herein.


Section 7.14

Severability.

If any provision in this Agreement shall be found or be held to be invalid or unenforceable, then the meaning of said provision shall be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement which shall remain in full force and effect unless the severed provision is essential and material to the rights or benefits received by any party.  In such event, the Parties shall use best efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly affects the Parties’ intent in entering into this Agreement .








EXCHANGE AGREEMENT: 20 of 23







IN WITNESS WHEREOF , the corporate Parties hereto have caused this Agreement to be executed by their respective officers or managers, hereunto duly authorized, as of the date first-above written.


NEW JERSEY MINING COMPANY


BY:

/s/ Delbert Steiner

       Delbert Steiner, Chief Executive Officer






IDAHO CHAMPION RESOURCES, LLC MEMBERSHIP UNIT HOLDERS:




  /s/  John Swallow

  /s/  Lew Walde

John Swallow, Member

Lew Walde, Member




  /s/  Martin Lanphere

 /s/  Art Glover

Martin Lanphere, Member

Art Glover, Member














EXCHANGE AGREEMENT: 21 of 23







NJMC SCHEDULES

1.

Articles of Incorporation and Amendments

2.

Bylaws



























EXCHANGE AGREEMENT: 22 of 23







ICR SCHEDULES

1.

Certificate of Organization. The Certificate of Organization is of public record with the Idaho Secretary of State, and deemed to be attached here.


2.

Material Agreements: The following Agreements have been previously exchanged, and are deemed to be attached here.


a.

A lease dated May 3 rd , 2013 by and between ICR and Jim Rupp and Rachael Rupp.

b.

 A memorandum of understanding dated November 18, 2013, by and between IRC and Garold L. Haskin Testamentary Trust.

c.

An Agreement dated September 4, 2013 by and between ICR and Darrel E. and Shirley Cox.


3.

Membership Unit Holder List with percentage ownership. As provided in contract section 1.02 above, incorporated here by reference.


4.

Corporate Records/book. The Certificate of Organization is of public record as indicated above. No Operating Agreement exists. Membership interests are in the proportion specified here.


5.

Financial Statements (since inception). Financial Statements have been separately exchanged, and are deemed incorporated here.







EXCHANGE AGREEMENT: 23 of 23




Exhibit 10.4

SECOND AMENDMENT

TO

SALE AGREEMENT



This Agreement is made effective this 15th _ day of October, 2013, between Metaline Contact Mines, a Washington corporation, and J.W. Beasley Interests, LLC , an Idaho limited liability company, together as “Sellers”, and Golden Chest LLC , a limited liability company organized and existing under the laws of the State of Idaho, as “Buyer”.

WITNESSETH:

In consideration of the mutual promises and covenants herein contained to be kept and performed by the parties hereto, the parties agree to these second amendments to that certain Sale Agreement made between them effective December 15, 2010, with Amendment To Sale Agreement being made on the ___ day of October, 2013, for the purchase and sale of certain real property located in Shoshone County, Idaho, which second amendments are as follows:

Duties Of Closing Agent . The duties of the Closing Agent as itemized in section 2. of the Amendments To Sale Agreement dated October  15th , 2013, shall be expanded as follows:

A. The Memorandum Of Contract which is attached hereto as Attachment G shall be executed by the parties as a part of the



1




Closing, and as a part of the Closing shall be recorded by the Closing Agent with the Shoshone County Recorder.

B. The Quitclaim Deed which is attached hereto as Attachment H shall be executed by the Buyer as a part of the Closing, and shall be held in long term escrow with the Escrow Agent to be recorded and delivered to the Seller in the event of completion of default as set out in paragraph 2.d. of the Amendments To Sale Agreement of October   15th , 2013.

In Witness Whereof the parties hereto set their hands effective the day and year first written above.

Sellers:


Metaline Contact Mines




By  /s/ John W. Beasley _____________________

  John W. Beasley, Secretary/Treasurer/

  Chief Financial Officer


J.W. Beasley Interests, LLC



By  /s/ John W. Beasley

  John W. Beasley, President/Manager



Buyer:


Golden Chest LLC




By  /s/ Grant A. Brackebusch

   Grant A. Brackebusch,  Vice

   President of New Jersey Mining

   Company, Manager of Golden Chest LLC



2




ATTACHMENT G


MEMORANDUM OF AGREEMENT


This Memorandum Of Agreement is made this 15th day of October, 2013, pursuant to section 55-818 Idaho Code, to give notice of:

A written agreement between the parties dated December 15, 2010, written amendments made effective October   15 th , 2013 and written second amendments made effective October   15 th , 2013.

The names of the parties to said agreements are the signatories hereto, shown below.

The mailing addresses of the parties are:

If to the Sellers:


J.W. Beasley Interests, LLC

Metaline Contact Mines

W. 3848 Turtle Patch Road

P.O. Box 187

Pine River, Wisconsin 54965



If to the Buyer:


Golden Chest LLC

P.O. Box 1019

89 Appleberg Road

Kellogg, Idaho 83837


and


Marathon Gold USA Corp.

Suite 800, 357 Bay Street

Toronto, Ontario MSH 2T7


The agreements reference above set forth the terms of sale of the real property described in Attachment A attached hereto from the Seller to the Buyer.


This Memorandum Of Agreement is not intended to, and it shall not, change the agreements made between the parties in any way whatsoever.

IN WITNESS WHEREOF the parties hereto set their hands effective the date first written above.






3




Sellers:


Metaline Contact Mines


By  /s/ John W. Beasley

  John W. Beasley, Secretary/Treasurer/

  Chief Financial Officer


J.W. Beasley Interests, LLC



By /s/ John W. Beasley

  John W. Beasley, President/Manager


Buyer:


Golden Chest LLC


By   /s/ Grant A. Brackebusch

   Grant A. Brackebusch,  Vice

   President of New Jersey Mining

   Company, Manager of Golden Chest LLC






State    of    Idaho     )

) ss.

County of Shoshone       )


On this  15 th  day of October, 2013, before me, the undersigned, a Notary Public in and for the State of Idaho, personally appeared, GRANT A. BRACKEBUSCH, known or identified to me to be the Vice PRESIDENT of NEW JERSEY MINING COMPANY, the corporation that executed the within instrument, and acknowledged to me that he executed the same on behalf of said corporation as Manager of Golden Chest LLC.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.


  /s/ Kari A. Hill

Notary Public

Residing at Wallace, Idaho

Commission Expires July 14, 2017  




4






STATE  OF  WISCONSIN    )

 

         )  ss.

County     of   Waushara )


On this   9 th    day of October, 2013, before me, the undersigned, a Notary Public in and for the State of Wisconsin, personally appeared JOHN W. BEASLEY, known or identified to me to be the PRESIDENT/MANAGER of J.W. BEASLEY INTERESTS, LLC, the limited liability company that executed the within and foregoing instrument, and acknowledged to me that he executed the same on behalf of said limited liability company.


IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

  /s/ Tracie Young

        Notary Public in and for the

State of Wisconsin


                         Residing at:  Waushara County

 

Commission Expires: August 21, 2016



STATE  OF  WISCONSIN    )

 

         )  ss.

County     of Waushara )


On this   9 th  day of October, 2013, before me, the undersigned, a Notary Public in and for the State of Wisconsin, personally appeared JOHN W. BEASLEY, known or identified to me to be the SECRETARY/TREASURER/CHIEF FINANCIAL OFFICER of METALINE CONTACT MINES the corporation that executed the within and foregoing instrument, and acknowledged to me that he executed the same on behalf of said corporation.


IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

  /s/ Tracie Young

Notary Public in and for the

State of Wisconsin

Residing at:  Waushara County


Commission Expires: August 21, 2016



5




ATTACHMENT A

Property

PARCEL 1 :

Golden Chest Patented Mining Claim, M.S. 4 (sometimes referred to as Lot 40) situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book X, Deeds, at page 278.


PARCEL 2 :

Euphemia Patented Mining Claim, M.S. 994 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 4, Deeds, at page 530.


PARCEL 3 :

A.D. Coplen, No. 2, Thomas Kearn and Brile Placer Mining Claims, M.S. 995 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M. Shoshone County, State of Idaho. Patent recorded in Book 4, Deeds, at page 533.


PARCEL 4 :

Dora Patented Mining Claim, M.S. 996 situated in the Summit Mining District in Section 5, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 61.


PARCEL 5 ;

Katie Burnett Patented Mining Claim, M.S. 997 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 58.


PARCEL 6 :

Littlefield Bar Placer Patented Mining Claim, M.S. 1062 situated in the Summit Mining District in Sections 4 and 9, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 10, Deeds, at page 72.


PARCEL 7 :

Paymaster Patented Mining Claim, M.S. 1078 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 1.


PARCEL 8 :

Coumerilh Fraction Patented Mining Claim, M.S. 1162 situated in



6




the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 7.


PARCEL 9 :

Red Star Patented Mining Claim, M.S. 1745 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 364.


EXCEPT:

That portion of Red Star Patented Mining Claim conveyed to C.E. Kingman by deed recorded in Book 22, Deeds, at page 312 described as follows:


Beginning at a point where Corner No. 6 Red Star Lode, M.S. 1745 bears South 21° 55’ West, 465.91 feet; thence

North 62° 42’ West, 240.25 Feet; thence

South 46° 18’ West, 251.9 feet to Corner No. 1 of the Red Star Lode; thence

South 31° 02’ East, 373.88 feet; thence

North 27° 50’ East, 434.47 feet to the place of beginning, containing an area of 2.253 acres.


PARCEL 10 :

Stevens Fraction, Jim and Timberking Patented Mining Claims, M.S. 1732 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 391.


PARCEL 11 :

Stevens Bar Patented Mining Claim, M.S. 1735 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 26, Deeds, at page 481.


PARCEL 12 :

Hot Stuff Group consisting of Hot Stuff, Empire, Montana, Utah, Blister and Skookum Patented Mining Claims, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho.  Patent recorded in Book 38, Deeds, at page 200.


EXCEPTION:

Except that portion of Hot Stuff Group consisting of the Empire and Montana Patented Mining Claims, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, Patent recorded in Book 38, Deeds, at page 200 and except that



7




portion of the Hot Stuff Group consisting of that portion of Utah Patented Mining Claim, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, Patent recorded in Book 38, Deeds, at page 200 with the said excepted portion of Utah, described more particularly at that portion of Utah Patented Mining Claim lying to the South and East of a straight line from the Northeast corner of Utah to the Southwest corner of Utah, a portion of M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, patent recorded in Book 38, Deeds, at page 200.


PARCEL 13 :

Golden Bricks Patented Mining Claim, M.S. 2247 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 43, Deeds, at page 493.


PARCEL 14 :

That 30’ wide road way currently existing and commonly known as the Newmont Road which is located in the Southwest corner of the Ivy claim in Section 9, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho which initiates on the Shoshone County road right-of-way and runs Westerly into the Littlefield Bar, M.S. 1062 Patented Mining Claim.




















ATTACHMENT H



8





QUITCLAIM DEED



THIS INDENTURE, made effective this  15 th   day of October, 2013, by and between Golden Chest LLC, an Idaho limited liability company, the Grantor, and Metaline Contact Mines, a Washington corporation, and J.W. Beasley Interests, LLC an Idaho limited liability company, the Grantees, whose address is, for the purpose of real property tax notices, bills and information from county government elected officials, P.O. Box 1019, Kellogg, Idaho 83837

WITNESSETH:

The Grantor, for and in consideration of the sum of One Dollar ($1.00), lawful money of the United States of America, and other good and valuable consideration to it in hand paid by the said Grantee, the receipt whereof is hereby acknowledged, does hereby remise, release, convey and forever quitclaim unto the Grantee, and to its successors and assigns, all of Grantor’s right, title and interest, including after acquired title, in and to the following described real property situated in the County of Shoshone, State of Idaho, to-wit:

See Attachment A hereto, which is incorporated herein

by this reference.

 

TOGETHER with all of the lodes, ledges, veins and mineral-bearing rock, both known and unknown, intralimital and



9




extralateral, lying within or extending beyond the boundaries of the above-referenced property, and all dips, spurs and angles, and all the ores, mineral bearing-quartz, rock and earth or other mineral deposits therein or theron, and together with all and singular the tenements, hereditaments, and appurtenances thereunto belonging or in anywise appertaining, the reversion and reversions, remainder and remainders, rents, issues, and profits thereof; and all estate, right, title, and interest in and to the property, as well in law as in equity, of the Grantor.

TO HAVE AND TO HOLD, all and singular the above-mentioned and described premises together with the appurtenances unto the Grantee, and to its successors and assigns forever.

IN WITNESS WHEREOF, the Grantor has hereunto set its hand the day and year first above written.


Golden Chest LLC




By   /s/ Grant A. Brackebusch

   Grant A. Brackebusch,  Vice

   President of New Jersey Mining

   Company, Manager of Golden Chest LLC











10




State    of    Idaho     )

) ss.

County of Shoshone       )


On this  15 th  day of October, 2013, before me, the undersigned, a Notary Public in and for the State of Idaho, personally appeared, GRANT A. BRACKEBUSCH, known or identified to me to be the Vice PRESIDENT of NEW JERSEY MINING COMPANY, the corporation that executed the within instrument, and acknowledged to me that he executed the same on behalf of said corporation as Manager of Golden Chest LLC.


IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.




  Kari A. Hill

Notary Public

Residing at   Wallace, Idaho

Commission Expires  July 14,2017

    















11




ATTACHMENT A

Property

PARCEL 1 :

Golden Chest Patented Mining Claim, M.S. 4 (sometimes referred to as Lot 40) situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book X, Deeds, at page 278.


PARCEL 2 :

Euphemia Patented Mining Claim, M.S. 994 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 4, Deeds, at page 530.


PARCEL 3 :

A.D. Coplen, No. 2, Thomas Kearn and Brile Placer Mining Claims, M.S. 995 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M. Shoshone County, State of Idaho. Patent recorded in Book 4, Deeds, at page 533.


PARCEL 4 :

Dora Patented Mining Claim, M.S. 996 situated in the Summit Mining District in Section 5, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 61.


PARCEL 5 ;

Katie Burnett Patented Mining Claim, M.S. 997 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 58.


PARCEL 6 :

Littlefield Bar Placer Patented Mining Claim, M.S. 1062 situated in the Summit Mining District in Sections 4 and 9, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 10, Deeds, at page 72.


PARCEL 7 :

Paymaster Patented Mining Claim, M.S. 1078 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 1.


PARCEL 8 :

Coumerilh Fraction Patented Mining Claim, M.S. 1162 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 7.


PARCEL 9 :

Red Star Patented Mining Claim, M.S. 1745 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in



12




Book A, Patents, at page 364.


EXCEPT:

That portion of Red Star Patented Mining Claim conveyed to C.E. Kingman by deed recorded in Book 22, Deeds, at page 312 described as follows:


Beginning at a point where Corner No. 6 Red Star Lode, M.S. 1745 bears South 21° 55’ West, 465.91 feet; thence

North 62° 42’ West, 240.25 Feet; thence

South 46° 18’ West, 251.9 feet to Corner No. 1 of the Red Star Lode; thence

South 31° 02’ East, 373.88 feet; thence

North 27° 50’ East, 434.47 feet to the place of beginning, containing an area of 2.253 acres.


PARCEL 10 :

Stevens Fraction, Jim and Timberking Patented Mining Claims, M.S. 1732 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book A, Patents, at page 391.


PARCEL 11 :

Stevens Bar Patented Mining Claim, M.S. 1735 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 26, Deeds, at page 481.


PARCEL 12 :

Hot Stuff Group consisting of Hot Stuff, Empire, Montana, Utah, Blister and Skookum Patented Mining Claims, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho.  Patent recorded in Book 38, Deeds, at page 200.


EXCEPTION:

Except that portion of Hot Stuff Group consisting of the Empire and Montana Patented Mining Claims, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, Patent recorded in Book 38, Deeds, at page 200 and except that portion of the Hot Stuff Group consisting of that portion of Utah Patented Mining Claim, M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, Patent recorded in Book 38, Deeds, at page 200 with the said excepted portion of Utah, described more particularly at that portion of Utah Patented Mining Claim lying to the South and East of a straight line from the Northeast corner of Utah to the Southwest corner of Utah, a portion of M.S. 1826 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho, patent recorded in Book 38, Deeds, at page 200.


PARCEL 13 :

Golden Bricks Patented Mining Claim, M.S. 2247 situated in the Summit Mining District in Section 4, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho. Patent recorded in Book 43, Deeds, at page 493.




13




PARCEL 14 :

That 30’ wide road way currently existing and commonly known as the Newmont Road which is located in the Southwest corner of the Ivy claim in Section 9, Township 49 North, Range 5 East, B.M., Shoshone County, State of Idaho which initiates on the Shoshone County road right-of-way and runs Westerly into the Littlefield Bar, M.S. 1062 Patented Mining Claim.













14



Exhibit 10.5

Agreement


Agreement made and entered this   4 th   day of   September 2013    between Idaho Champion Resources, LLC., hereinafter ICR, 201 N. 3 rd St. Coeur d’Alene, ID 83814, and Darrel E. and Shirley Cox, husband and wife, hereinafter Cox, 56 Sleepy Hollow, Grangeville, ID 83530



1.

This agreement shall constitute up to a two percent (2%), but no less than one percent (1%), Net Smelter Royalty (NSR) on annual production from the McKinley Mine property.  The NSR shall be graduated based on the price per ounce of gold based on the average price received, based on annual production.  Upon reaching production, this NSR shall be reduced to a Royalty Contract based on the American Law of Mining Contract language and made a part hereof by reference.


The NSR shall be adjusted to a 1.5% NSR at $1,500/oz gold and to a 2% NSR at $2,000/oz gold, based on average price received through annual production.   If applicable, the NSR payment is to be adjusted at January 1 st , based on the prior years’ numbers.  Upon determination of a minable resource ICR shall pay to Cox an advanced royalty of an amount to be determined at the time a minable resource is determined.


2.

Upon signing this agreement, Cox agrees to waive his first right of refusal contained within the Mining Lease between Darrel E. and Shirley Cox and Garold and Ellen Haskin dated the 1 st day of February, 1995.


3.

Upon signing this agreement, Cox also waives any right that he had under the aforementioned lease and terminates any rights pursuant to said lease including any interest in the Sheep Gulch mining road right-of-way currently being litigated in Idaho County Court.  Litigation is ongoing at time of this agreement.  ICR agrees to assist Cox to complete said litigation and shall be responsible for all costs and monetary outlays to accomplish a conclusion to the suit.  Any favorable judgment shall transfer the benefit to ICR as purchaser of the McKinley Mine property.  Cox shall sign any necessary agreements to accomplish this transfer.


4.

Cox agrees to clean up and rectify all environmental, regulatory and encroachment (surface and mineral) problems described in the attached independent engineer report by January 1 st , 2014.  In the event that Cox fails or chooses not to rectify and cure the aforementioned conditions within the allotted time period then ICR, at their discretion, will rectify conditions not completed to their satisfaction.  ICR will document the costs




and that amount will be reflected in reduced future NSR payments owed to Cox – per American Law of Mining Contract language.


5.

Cox will also perform reclamation and rehabilitation of any disturbed Rupp land per acceptance of Rupp and ICR as surface and mineral owners including the removal of the explosives magazines and their contents now present.  If Cox fails to complete such work prior to January 1 st , 2014, ICR shall perform the work on Rupp land and will then decrease the amount owed to Cox from the NSR.


6.

ICR will not assume any of Cox’s unsatisfied responsibilities contained within the aforementioned lease or any of its amendments.  Those conditions remain the sole responsibility of Cox.


7.

The Net Smelter Royalty payments shall only apply to the McKinley Mine property as described “Survey 2427 Simpson Mining District, Sections 1 and 12, T.S. 25N, R1E, Boise Meridian, Idaho County, Idaho, covering 62.115 acres in size.”  There shall be no payment made to Cox relating to mining on adjacent lands even if that mining is contiguous with the McKinley Mine property.


8.

Upon the signing of this agreement, Cox will conduct only work approved by ICR.  No other work, mining, or other related activities can be conducted by Cox on the McKinley Mine or adjacent properties.  Cox’s activities will be constrained to only clean-up and reclamation.


9.

The total cumulative NSR payments plus penalty reductions and ICR’s initial due diligence costs of approximately $60,000 shall not exceed $500,000.  Upon that amount being reached by payment or penalty reduction this agreement will terminate and Cox will no longer be party to the McKinley Mine property.


Signed this   4 th    day of   September    , 2013.



Current Lessee

Purchaser



   /s/ Darrel E. Cox                                

  /s/ Art Glover                        

Darrel E. Cox

ICR

Representative

  /s/ Shirley Cox                                    

Shirley Cox





Exhibit 10.6


Memorandum of Understanding and Offer to Purchase


This Memorandum of Understanding and Offer to Purchase (MOU) entered into this   18 th    day of   November , 2013, by and between the Garold L. Haskin Testamentary Trust, hereinafter Haskin Trust of 10 Balsom Drive., Grangeville, Id. 83530,  and Idaho Champion Resources, hereinafter ICR, of 201 N. 3 rd St., Coeur d’Alene, Id. 83814.


Whereas the Haskin Trust is the current owner of certain patented lode mining claims hereinafter the McKinley Mine and described “Survey 2427 Simpson Mining District, Sections 1 and 12, T.S. 25N, R1E, Boise Meridian, Idaho County, Idaho.”


Whereas ICR desires to acquire said McKinley Mine and therefore the parties enter this MOU as a means of establishing terms of such an agreement defining rights and responsibilities between the parties.


1.

Recognition of Current Status


A)

The Haskin Trust and Darrel E and Shirley Cox, hereinafter known as Cox,  have been and are currently involved in a lease agreement entered into February 1 st , 1995, to develop a mine on said property, for approximately 18 years.  


B)

Access to the Mine via the original Sheep Gulch mine road has been in dispute and litigation for some time.  ICR is aware that the litigation is near conclusion.  In the event Plaintiff Cox prevails, said right-of-way will inure to the benefit of ICR.


C)

The McKinley Mine project was within and interrupted by an area-wide fire in 2012 that destroyed Cox’s mill facility.  There has been no operation since that date, however the mill was of poor design and inoperable prior to the fire and no records have been provided demonstrating that the mill ever produced gold.


D)

The mill was constructed and site work conducted without developing a mineral resource or reserves prior to commencement of mining activity.


E)

Various environmental problems were evident upon initial examination of the property and appear to have been compounded as a result of the fire.  Said environmental problems and other violations are the responsibility of Cox.




 

F)

ICR had an independent engineer examine the site and prepare a report of the problems along with cost of mitigation estimates, a copy of which is attached hereto and made a part hereof.


G)

Along with said environmental problems, it would appear there are several encroachments by Cox’s operation onto adjacent property not owned by the Haskin Trust,  including both surface and underground activity.


H)

In addition to said environmental problems, the potential exists for regulatory compliance problems yet to be identified.  If any exist, they would be the responsibility of Cox.  Mitigation of these problems are the responsibility of Cox.


I)

All parties recognize there are no official mineral reserves on the property, nor has there been any prior drilling conducted on the property.  Additionally, ICR has not completed enough work to adequately develop resource estimates.


J)

The parties recognize that in consideration, and to advance the property, that over $60,000  has been spent and ICR anticipates spending additional due diligence funds as required to determine the viability of moving forward with the contemplated transaction.  Should the Haskin Trust or Cox or any other party desire the information developed during the due diligence process or after, the information would be made available for payment of half the cost incurred by ICR.  All information obtained, paid for, and developed by ICR is considered the property of ICR.


2.

Proposal By ICR


A)

The parties agree that upon signing of the MOU, certain preliminary work can start to implement a definitive agreement based upon the American Law of Mining form for said agreement, standard to the industry clauses definitions and interpretation.


B)

ICR desires to conduct a preliminary drill program and other work as part of its due diligence on the property prior to entering into any formal agreement, at the expense of ICR.  Results of said drill program and/or other work would be provided to the Haskin Trust and Cox under the above mentioned terms listed in Section 1, Paragraph J.    Should the drilling process result in any environmental or mine safety issues, ICR will be responsible for correction of the issues.  Following satisfactory results from said drilling program and other due




diligence, ICR contemplates entering into the formal purchase agreement.


C)

Pursuant to paragraph 35 of the lease between the Haskin Trust and Cox, and to the intent of that lease and previous negotiations between the parties,  Cox was given first right of refusal on an option to purchase the subject property.  By separate agreement between Cox and ICR, Cox has assigned his right of purchase to ICR and this agreement now authorizes Haskin Trust to negotiate with ICR.  ICR now hereby makes a good faith written offer to purchase the property subject to satisfactory due diligence and drilling.


D)

ICR would pay the Haskin Trust, as agreed previously and following satisfactory due diligence and drill program, a total of $285,000, with 10% down and the balance amortized over 15 years.  Payments will then be made quarterly for  5 years from the purchase date, at which time a balloon payment shall be due for any remaining balance with no prepayment penalty.


E)

ICR’s possession and responsibility would commence once environmental clearance was reviewed and agreed to by ICR’s environmental engineer.


F)

The parties agree that ICR shall have no more than one year from the date of this agreement  to complete their due diligence efforts and to execute a Purchase Agreement between the parties providing they receive favorable results.






Signed this   18 th     day of   November , 20 13,



Owner

Purchaser



  /s/  Ruby E. Sargent          

 /s/ Art Glover                         

Garold L Haskin

ICR

    Testamentary Trust