UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
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ANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ________ to ________
Commission file number 000-28837
NEW JERSEY MINING COMPANY
(Name of small business issuer in its charter)
| Idaho | 82-0490295 |
| (State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) |
| organization) | |
| 89 Appleberg Road, Kellogg, Idaho | 83837 |
| (Address of principal executive offices) | (Zip code) |
Issuer’s telephone number, including area code: (208) 783-1032
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No par value per share
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ¨
The registrant’s revenues for its most recent fiscal year were $ nil.
The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the average of the bid and ask prices on March 3, 2004, as reported by the Over the Counter Bulletin Board was $7,560,270.
At March 3, 2004, the registrant had 19,604,390 outstanding shares of no par value common stock.
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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.
Bedrock- Solid rock underlying overburden.
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.
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.
Galena- A lead sulfide mineral. The most important lead mineral in the Coeur d'Alene Mining District.
Grade- A term used to assign the concentration of metals per unit weight of ore. An example - ounces of gold per ton of ore (opt). One ounce per ton is 34.28 parts per million.
Mineralization- The presence of minerals in a specific area or geologic formation.
Ore- A mineral or aggregate of minerals which can be mined and treated at a profit. A large quantity of ore which is surrounded by non-ore ore sub-ore material is called an orebody.
Production Stage- As defined by the SEC - includes all issuers engaged in the exploitation of a mineral deposit (reserve).
Pyrite- An iron sulfide. A common mineral associated with gold mineralization.
Quartz- Crystalline silica (SiO2). An important rock-forming and gangue material in gold veins.
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Quartzites- Metamorphic rock containing quartz.
Raise- An opening driven upward generally on the vein.
Reserves- That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are subcategorized as either proven (measured) reserves, for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes, and grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling, and measurement are spaced so closely and geologic character is so well defined that size, shape, depth, and mineral content are well-established; or probable(indicated) reserves, for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, yet the sites for inspection, sampling and measurement are farther apart.
Tetrahedrite- Sulfosalt mineral containing copper, antimony and silver.
Vein- A zone or body of mineralized rock lying within boundaries separating it from neighboring wallrock. A mineralized zone having a more or less regular development in length, width and depth to give it a tabular form and commonly inclined at a considerable angle to the horizontal.
Wallrock- Barren rock surrounding a vein.
PART I
ITEM 1.
DESCRIPTION OF THE BUSINESS
BUSINESS DEVELOPMENT
With the exception of historical matters, the matters discussed in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include statements regarding planned levels of exploration and other expenditures, anticipated mine lives, timing of production and schedules for development and permitting. Factors that could cause actual results to differ materially include, among others, metals price volatility and permitting delays. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made herein. Readers are cautioned not to put undue reliance on forward-looking statements.
Form and Year of Organization
New Jersey Mining Company (“the Company”) is a corporation organized under the laws of the State of Idaho on July 18, 1996. The Company was dormant until December 31,1996, when all of the assets and liabilities of the New Jersey Joint Venture (a partnership) were transferred to the Company in exchange for 10,000,000 shares of common stock. The New Jersey Joint Venture, a partnership, was formed in 1994 to develop the New Jersey mine. The partnership consisted of Mine Systems Design, Inc. [75%], Plainview Mining Company [13%], Silver Trend Mining Company [10%], Mark C. Brackebusch [1%], and Mascot Silver-Lead Mines, Inc. [1%]. The New Jersey Joint Venture brought the New Jersey mine into production by building a 100 tonne per day concentrator with a gravity circuit for gold recovery.
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Any Bankruptcy, Receivership or Similar Proceedings
There have been no bankruptcy, receivership or similar proceedings.
Any Material Reclassification, Merger, Consolidation, or Purchase or Sale of a Significant Amount of Assets Not in the Ordinary Course of Business.
There have been no material reclassifications or purchases or sales of a significant amount of assets not in the ordinary course of business for the past three years. However, on October 22, 2002, the Company completed a merger with Gold Run Gulch Mining Company (GRG). The Company exchanged 1,916,250 common shares for all the outstanding shares of GRG. The exchange ratio was 0.875 of a share of New Jersey Mining Co. for one share of (GRG). The shares issued to GRG were restricted by SEC Rule 144. GRG's primary asset was the New Jersey mine property which included 62 acres of patented mining claims, mineral rights to 108 acres of fee land, and approximately 130 acres of unpatented mining claims.
BUSINESS OF THE COMPANY
General Description of the Business
The Company is involved in exploring for and developing gold, silver and base metal ore resources in the Pacific Northwest of the USA. The Company has a portfolio of seven mineral properties: the New Jersey mine, the Silver Strand mine, the Golden Chest mine, the CAMP project, the Lost Eagle project, the Wisconsin-Teddy project and the Roughwater Project. The New Jersey mine and the Silver Strand mine are the Company's development stage properties while the other five properties are exploration stage properties.
The Company's New Jersey mine property has an area of approximately 430 acres and includes two mineral leases. The Company owns 5 patented claims containing 62 acres, 7 unpatented claims containing 130 acres surrounding the patented claims, and mineral rights to fee land containing 108 acres. The known orebody is located on the patented claims. A mineral lease from William Zanetti in the New Jersey mill area contains about 60 acres. This mineral lease carries a 5% Net Smelter Royalty (NSR). A second mineral lease of 68 acres was acquired from Mine Systems Design, Inc. in September of 2001. This lease carries a 3% NSR.
The Company's Silver Strand mine consists of fifteen unpatented lode claims on federal land administered by the U.S. Forest Service. The claims were acquired from Trend Mining Company pursuant to a purchase agreement dated July 14, 2000.
Effect of Existing or Probable Governmental Regulations on the Business
All operating plans have been made in consideration of existing governmental regulations. Regulations that would most affect operations are related to water quality. A plan of operation is usually required before exploration or mining activities can be conducted on public land that is administered by the Bureau of Land Management or US Forest Service. The New Jersey mine, the Silver Strand mine and the Golden Chest properties are part of the expanded Bunker Hill Superfund Site. Current plans for expanded cleanup do not include our mines. There is no known evidence that previous operations at the New Jersey mine prior to 1910 caused any ground water 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. No mineral processing operations were ever conducted
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at the Silver Strand mine and water sampling data has not indicated any pollution. There are no mineral processing tailings deposits at the Golden Chest mine, however, at least two old adits have small water discharges. The Company could conceivably be required to conduct cleanup operations at its own expense, however the Record of Decision does not include any cleanup activities at the Company’s mines. New Jersey Mining Company has not received any notifications that it could be liable for any environmental cleanup. The Bureau of Land Management is currently revising its regulations relative to exploration and mining operations, but the planned changes are not thought to have major effects on planned operations at the New Jersey mine.
The Company submitted a Plan of Operation to the US Forest Service (USFS) in April 2003 for a seasonal, underground mining operation at the Silver Strand mine. USFS is conducting an environmental assessment of the plan and a FONSI (Finding of No Significant Impact) document is expected this year. A 30 day appeal period would follow the issuance of a FONSI document. An appeal of a FONSI could delay the permitting for an unknown period of time.
Costs and Effects of Compliance with Environmental Laws (Federal, State and Local)
No major Federal permits [except EPA storm water permit which is a blanket state-wide permit] are required for the New Jersey mine because most operations are on private land and there are no process discharges to streams. Any exploration program conducted by the Company on unpatented mining claims, usually administered by the U.S. Bureau of Land Management (BLM), requires a Plan of Operation to be submitted. An approved plan of operations at the Silver Strand will most likely require water quality monitoring, a reclamation plan, and possibly treatment of the mine water discharge. A reclamation bond will be required before operations can begin at the Silver Strand. The amount of the reclamation bond is uncertain at this time. Water quality monitoring at the Silver Strand is expected to cost about $2,000 per year.
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 mine and Silver Strand mine operations. When a mine is operating, MSHA performs a series of inspections to verify compliance with mine safety laws.
With respect to the New Jersey mine, two important State of Idaho permits are necessary to perform the mining and milling operation, both of which are in hand. The first is an Idaho Cyanidation Permit and the second is a reclamation plan for surface mining operations. An Idaho cyanidation permit was applied for, and the permit was granted October 10, 1995 [No. CN-000027] The cyanidation process, CIL, has not been implemented at the New Jersey mine as of this date. The deposition of tailings using paste technology is a unique part of the permit. Tailings will be dewatered to a paste consistency using a high density thickener. Cyanide will be destroyed in the paste using bleach, and the tailings will be deposited on a sloped stack. Fred W. Brackebusch has received a U.S. patent (5,636,942) on this new tailings technology. Reclamation of the tailings stack will be done concurrently with mining. The Cyanidation permit requires quarterly surface and groundwater monitoring prior to startup of the CIL plant and monthly sampling once operations commence. The current water monitoring program costs the Company about $2,000 on an annual basis. The estimated annual cost for sampling if CIL operations begin is about $25,000.
A surface mining reclamation plan 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 $130 is paid to the Idaho Department of Lands for surface disturbance associated with the New Jersey mine open pit.
The Company complies with local building codes and ordinances as required by law.
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Number of Total Employees and Number of Full Time Employees
The Company's total number of employees is three including President Fred Brackebusch, Vice President Grant Brackebusch and Secretary Tina Brackebusch. Grant Brackebusch is the only full-time employee at this time. Fred W. Brackebusch and Tina C. Brackebusch work part-time for the Company. Exploration and development work is currently performed independent contractors hired by the Company. It is expected that about three full time employees will be hired once mill operations commence.
REPORTS TO SECURITY HOLDERS
The Company is not required to deliver an annual report to shareholders, however, it plans to deliver an annual report to shareholders in 2004. The annual report will contain audited financial statements. The Company may also rely on the Internet in the future to deliver annual reports to shareholders.
The Company filed a Form 10-SB with the Securities and Exchange Commission on January 11, 2000. The filing became effective on January 27, 2000. The Company has filed the required annual 10-KSB reports, quarterly 10-QSB reports, and occasional 8-K reports since that time.
The public may read a copy of any materials the Company files with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. 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 SEC.
The Company maintains a website where recent press releases and other information can be found. A link to the Company’s filings with the SEC is provided on the Company’s website - www.newjerseymining.com.
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ITEM 2.
DESCRIPTION OF PROPERTIES
NEW JERSEY MINE
Location
The New Jersey mine is located in the Gold Run Gulch area, comprising about 15 square miles in the Coeur d'Alene Mining District. Located 2 miles east of Kellogg, Idaho, the New Jersey property area includes the gold bearing Coleman vein system, a base metal Sullivan-type prospect known as the Enterprise and another gold prospect called the Scotch Thistle. The mine is adjacent to U.S. Interstate 90 and is easily accessed by local roads throughout the entire year. The area is underlain by argillites and quartzites of the Prichard formation [member of Belt Supergroup], which commonly hosts gold mineralization.
Mineral Property
The Company owns 62 acres of patented mining claims, mineral rights to 108 acres of fee land, and approximately 130 acres of unpatented mining claims. The unpatented claims are on federal land administered by the U.S. Bureau of Land Management. The known orebody is located on the patented mining claims.
Mineral Leases
A mineral lease from William Zanetti in the New Jersey mill area contains about 60 acres. Alliance Title and Escrow Corporation of Wallace, Idaho has issued a Commitment for Title Insurance for the fee simple property leased from William Zanetti. The lease provides for the Company's exploration, development and mining of minerals on fee land through October 2008 and thereafter as long as mining operations are deemed continuous. The lessor may terminate the lease upon the Company's failure to perform under the terms of the lease. The lease provides for royalties of 5% of net sales of ores or concentrates less transportation also know as a Net Smelter Return. Additional royalties of 1% to 5% are due if the gold price exceeds $612 per ounce as of December 31, 2003. This additional royalty gold price is indexed to the Consumer Price Index with the December 1988 CPI as the base. Also, annual advance royalties totaling $500 per year are required under the lease. The advance royalties are accumulated and will be credited against the royalty obligations.
A second mineral lease was acquired from Mine Systems Design, Inc. (MSD) in 2001 in exchange for 1,000,000 shares of the Company's Common Stock. The lease covers the mineral rights to 68 acres located north of the New Jersey mine area. The lease has a fifteen year term and thereafter so long as mining operations are deemed continuous. The lessors may terminate the leases upon the Company's failure to perform under the terms of the lease. A 3% Net Smelter Return (NSR) royalty will be paid to the lessors if production is achieved. However, the NSR shall not exceed 10% of the net proceeds, and except that the NSR shall not be less than 1%. No advance royalties are required by this lease.
History
There are at least 14 gold prospects in or near the New Jersey mine area. Most of the prospecting activity was completed before the turn of the century, and almost no work has been done for at least 50 years. Just after the turn of the century, at the New Jersey mine, more than 2,500 feet of development
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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. The amount of money spent from 1899 to 1910 appears to have been $500,000 to $1,000,000 in 1996 dollars. The operation was discontinued because of the difficulty in recovering fine gold without cyanidation technology, because of the lower price of gold relative to mining costs, and because of inadequate drilling and mining technology. For example, the Coleman vein, a hard quartz vein, was so difficult to drill using hand steel that drifts along the vein were not driven to any great lengths. A considerable portion of the gold is in free grains, so there is a strong nugget effect.
Present Condition and Work Completed on the Property
Presently, operations at the New Jersey mine are suspended, but construction has started on a flotation circuit at the mill. Operations were suspended in mid 1997 due to the low gold price. During the period from 1994 through the suspension of operations in 1997 many projects were completed on the property. Several of the historic underground workings, namely the 2400 level adit and the Keyhole tunnel, were opened up. This permitted personnel to sample, map and evaluate portions of the Coleman vein and associated gold bearing structures.
A 100 ton per day gravity mill has been built and commissioned. A crushing plant was built and commissioned in 1996. An open pit mining program on the Coleman vein was initiated in 1995. Approximately 5,000 tons of ore were processed at the mill during 1995 through 1996. A gravity concentrate was produced and sold to ASARCO in East Helena, Montana. Gold recovery from the ore using gravity methods of concentration was relatively low (approx. 60%) so the decision was made to upgrade the mill to a CIL (Carbon-In-Leach) process. Testwork using the CIL process on New Jersey ores indicated gold recoveries of up to 95% were achievable.
During 2001, the Company completed a diamond drilling exploration program at the New Jersey mine. Two holes were drilled to explore a geophysical anomaly detected in the autumn of 2000. One hole intercepted a broad zone of arsenopyrite mineralization, named the Grenfel zone, which contained two separate zones of anomalous gold content ( 0.70 grams per tonne gold over two separate 10 meter intervals) In 2002, 1,317 meters of diamond drilling was completed amongst 11 holes at the New Jersey mine. The drilling confirmed the continuity of the Coleman vein system as nine of the holes intercepted the vein system. Reserves were not increased as the drilling was too widely spaced. 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. Drilling was conducted at the Scotch Thistle prospect, Enterprise prospect and northern Coleman vein in 2003. Silver, lead and zinc mineralization was discovered at the Enterprise and a new zone of gold mineralization was found at the Scotch Thistle.
Exploration plans call for drifting from the 2400 Level north to explore for the downward projection of the DDH02-02 vein intercept. Follow-up drilling is also planned at for the Enterprise and Scotch Thistle prospects. In 2004, the Company started the construction of a flotation circuit at the New Jersey mill. Completion of the circuit is anticipated in August 2004.
Geology and Reserve/Resource
The description of the geology of the New Jersey mine and the calculation of mineral resources have been completed by the Company and not an independent third party. The description of the geology of the area can be verified from third party published reports by the U.S. Geological Survey and unpublished reports by Oscar Hershey, former Coeur d'Alene District geologist. The Company is solely responsible for the resource calculations.
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Geology
The Prichard formation, which is 25,000 feet in thickness, underlies the New Jersey mine area which is adjacent to and north of the major Osburn fault. The Osburn fault is in the center of a Proterozoic rifting basin. The Prichard formation is divided into nine rock units of alternating argillites and quartzites, and the units exposed in the New Jersey mine area appear to belong to the lower members. A broad domal structure with a series of tighter folds near the Osburn fault typifies the structure of the area. South of the Osburn fault, the Wallace formation is exposed on the north flank of the Big Creek anticline. A fault was discovered by the 2001 drilling program. The fault appears to be a fairly large east-west striking structure that may separate the Coleman veins from the Grenfel zone. However, more information is required to confirm that hypothesis.
Gold mineralization is associated with sulfide-bearing quartz veins which cut the bedding in Prichard argillite and quartzite. Associated sulfides are pyrite, arsenopyrite, chalcopyrite, low-silver tetrahedrite, galena, and sphalerite. Most commonly in the Coleman vein of the New Jersey mine visible gold is associated with the tetrahedrite. Gold prospects are concentrated in the New Jersey mine area possibly because of the presence of lower Prichard stratigraphic members, an anticlinal structure, and/or the existence of a gold source. Gold is associated with arsenic, copper, and antimony. Igneous dikes are relatively rare. Some wallrock alteration has been observed. The Coleman vein shows a characteristic brecciation The cumulative strike length of the veins on the property based on exposures in drifts, outcrops and float is about 460 meters.
Reserves
The reserves at the New Jersey mine as of this date are those contained within the open pit on the Coleman vein. Open pit reserves are from the planned pit which extends from the south portal north to the terminus of the Coleman Vein. The vertical extent of the pit is from the surface outcrop down to the Keyhole Tunnel level. Grade estimation for the blocks in the pit reserve is based upon calculated head grades from 5,000 short tons of gravity-mill production. Other sources include channel samples from the outcrop and also from the Keyhole Tunnel.
Open Pit Reserve (Proven & Probable)
| Ore Blocks |
Metric
Tonnes |
Gold Grade
(grams per tonne) |
Ounces (gold) |
| Coleman (17+00to 21+00) | 56,250 | 4.56 | 8,306 |
| Coleman Split (21+00 to 23+00 | 21,320 | 3.53 | 2,420 |
| North Vein (21+00) | 2,990 | 8.57 | 825 |
| Total | 80,560 | 4.45 | 11,551 |
The open pit reserve tonnages are diluted. That is, the expected dilution from open pit mining is accounted for in the grade and tonnage of the reserve blocks. The ounces stated in the above table are contained ounces. According to metallurgical testwork, approximately 95% of the gold contained in the open pit reserve will be recovered at the mill using the CIL process.
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SILVER STRAND MINE
Location
The Silver Strand mine is located in Kootenai County, Idaho about 12 miles east-northeast of Coeur d'Alene, Idaho. The property consists of 15 unpatented lode claims. It is situated on Lone Cabin Creek, a tributary of Burnt Cabin Creek and of the Little North Fork Coeur d'Alene River. Primary access is from Coeur d'Alene via paved and dirt roads from Fernan Lake to Lone Cabin Creek.
Mineral Property
The Company's Silver Strand mine consists of fifteen unpatented lode claims on federal land administered by the U.S. Forest Service. The claims were acquired from Trend Mining Company pursuant to a purchase agreement dated July 14, 2000. Mine Systems Design, Inc. assumed Trend’s royalty on the Silver Strand claims in July 2001. The royalty is a 1.5% Net Smelter Return (NSR) capped at $50,000 after which the NSR decreases to 0.5%.
History
The Silver Strand deposit was discovered during nearby logging activity during the 1960's and mined during the 1970's and 1980's for siliceous smelter flux. Production was 13,752 tons grading 0.093 ounces per ton gold, 9.6 ounces per ton silver and 87.1% silica. The mining operation was shut down when the ASARCO Tacoma smelter closed in the early 1980's. Previous owner/operators include Silver Strand Mining Company, Silver Trend Mining Company and Trend Mining Company. Mine Systems Design, Inc. (MSD) had an exploration agreement with Silver Trend Mining Company that was terminated in 1997. During the term of that lease, MSD made an agreement with U.S. Bureau of Mines, Spokane Research Center to conduct a mining research product at the Silver Strand mine. The USBM monitored water quality and flows from the mine, maintained the underground openings and conducted some diamond drilling.
Present Condition and Work Completed on the Property
The Silver Strand mine is an underground mine that was mined during the 1970's and early 1980's. No mining has taken place at the property since that time. Since mining was suspended only limited exploration has taken place at the Silver Strand including geochemical sampling and diamond drilling. In 1997, Silver Trend Mining Company completed a four hole surface diamond drilling program which totaled 795 meters. The mine is accessed by three horizontal openings called levels: the No. 2 Level, the No. 225 Level and the No. 3 Level which is the lowest level and is located at the creek bottom adjacent to forest road No. 411. All three levels are accessible from the surface via a network of dirt roads. The USBM installed a large culvert at the portal of the No. 3 Level in order to stabilize that entrance. No surface infrastructure presently exists at the Silver Strand. There is no energy available at the site. Any electrical energy requirements would have to be satisfied with an on-site generator.
During 2002, an exploration drilling program was completed at the Silver Strand. Also, rehabilitation of the 225 Level portal was started but not completed in 2002. The drilling was successful in extending the limits of the ore shoot below the No. 3 Level. In April 2003, the Company submitted a Plan of Operations (POO) to the USFS for a seasonal underground mining operation with a planned production rate of 1,000 tonnes per month. The USFS is currently evaluating the POO and a decision is expected in early 2004. The startup of mining at the Silver Stand is dependent on the timely receipt of a permit from the USFS and economic gold and silver prices.
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Geology and Reserve/Resource
Company geologists have completed the description of the geology of the Silver Strand mine. Reserve calculations were completed by the Company’s geologists and engineers. Verification of the area’s geology can be found from third party published reports by Alfred L. Anderson of the Idaho Bureau of Mines and Geology (Pamphlet 53).
Geology
The Silver Strand is located in the Belt Basin about 25 miles northwest of the Coeur d'Alene Mining District. The upper part of the Revett Formation outcrops at the mine. The upper Revett member contains alternating sequences of quartzite and siltite-argillite. Beds dip shallowly to moderately northerly (30 to 50 degrees). Alfred L. Anderson of the Idaho Bureau of Mines and Geology mapped the geology and discussed the mineral resources of Kootenai County in 1940 (Pamphlet 53). Anderson combined the Burke and Revett formations and estimated the combined thickness to be from 1,000 to 3000 feet. There are no major intrusive rocks near the Silver Strand mine. A major diabase dike has intruded the Silver Strand mineralized zone. The diabase dike is weathered and altered near the surface, but appears fresh in deeper drill hole intercepts. The Burnt Cabin fault is the major geologic structure near the Silver Strand mine.
The Silver Strand orebody consists of a nearly-vertical, silicified (quartz) replacement zone which cuts the flat to moderately dipping Revett beds. The zone is not a fissure-filling vein. The boundaries and shape of the silicified zone were determined to some extent by the 1997 diamond drilling program. The sulfide ore mined to date appears to be enclosed within the quartz zone. The ore is black and very fine-grained. Sulfide minerals are not easy to identify because of the fine-grained texture. Occasional euhedral crystals of pyrite can be observed, and tetrahedrite is visible in the higher grade ore. Minerals observed by microscopic study during metallurgical tests include: pyrite, tetrahedrite, tennatite, sphalerite, arsenopyrite and stibnite.
Reserves
Ore grades and dimensions of the reserve blocks are based on chip sampling of the vein underground and diamond drilling. Reserves were calculated using the standard practices of the Coeur d’Alene Mining District.
| Classification | Metric Tonnes | Gold Grade | Silver Grade | ||
| Grams Per Tonne | Ounces Per Ton | Grams Per Tonne | Ounces Per Ton | ||
| Proven & Probable | 6,903 | 5.43 | 0.158 | 361 | 10.5 |
The reserve tonnages are diluted. That is, the expected dilution from underground mining is accounted for in the grade and tonnage of the reserve blocks.
GOLDEN CHEST
Location
The Golden Chest project is located in Reader Gulch about 1.2 miles east of Murray, Idaho along Forest Highway 9. It is an exploration project without proven and probable ore reserves. The property consists of two exploration leases and unpatented claims covering approximately 490 acres. The site is
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accessible by unimproved dirt roads and no surface infrastructure is present at the site. Electrical power is available at the site at lower elevations near Forest Highway 9.
Mineral Lease
On September 5, 2003, the Company signed an exploration lease and option to lease with Paymaster Resources Incorporated on the Golden Chest mine covering about 230 acres. The exploration lease calls for a 2.5 year exploration period during which the Company will issue 10,000 shares of its common stock per six month period. If the mining lease is executed, the Company would pay 100,000 shares of its common stock and a sliding scale net smelter return (NSR) royalty which increases with the gold price. The royalty is 3% up to a gold price of $400/oz and then increases to a maximum of 6% at higher gold prices, but the trigger prices for higher royalties will be adjusted for inflation using the Consumer Price Index. Also, the Company would issue 50,000 shares of its common stock for each 10,000 ounces of gold produced at the Golden Chest. On February 24, 2004, Paymaster Resources notified the Company that it had assigned its interest in the Exploration Agreement and Option to Lease and Mining Lease and Agreement to Metaline Contact Mines of Murray, Idaho. The lease is attached as an exhibit to this 10-KSB filing.
On November 7, 2003, the Company signed and exploration agreement and option to lease with Prichard Creek Resource Partners , LLC which covers about 100 acres of unpatented lode claims. The lease agreement is attached as an exhibit to this 10-KSB filing.
History
The Golden Chest was the largest lode producer in the Murray district, producing 65,000 ounces of gold from narrow high grade veins primarily in the late 1800’s. Newmont Exploration Limited (NEL) spent over $500,000 on an exploration program at the Golden Chest in the late 1980s, which consisted of soil and rock sampling; surface and underground mapping; and 11,133 feet of drilling. Newmont’s work identified a potential open pit with an inferred geologic resource, not reserves, of 230,000 ounces of gold. Newmont dropped the property in 1990, apparently because it did not meet their criterion of a 1 million ounce open-pit resource.
Present Condition / Exploration Plans
The Company plans to drive a ramp to investigate a high grade drill-intercept thought to be the offset of the Katie Dora vein. If ore is encountered in the decline, it could be shipped to the New Jersey mill for processing. Interestingly, the deepest hole drilled on the property is only 140 meters vertically. The Company has evidence that more veins may be encountered at depth at the Golden Chest and a drilling program to explore this deep potential is being planned for 2004.
Geology
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.
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CAMP PROJECT
Location
The CAMP project is an underground exploration project without known ore reserves. It is located south of the City of Osburn, Idaho, in the approximate center of the silver belt of the Coeur d'Alene Mining District. The CAMP is accessed by the Mineral Point mine road otherwise known as the McFarren Gulch road. The CAMP project covers approximately 380 acres. The Company controls 17.75% of the land in the CAMP. Merger Mines and Coeur d'Alene Mines Corp. (CDE:NYSE) control the remainder. Coeur d'Alene Mines Corp. is the operator of the property. The CAMP area extends from the surface to 900 feet below sea level.
Mineral Lease
As part of a July 26, 1978 lease agreement with Coeur d'Alene Mines Corp. (Coeur), the Company will receive a 7.1% Net Profits Interest (NPI),if the property is put into production. However, according to the agreement, Coeur can retain 93.925% of the net profits until Coeur is reimbursed in total for its advance payments and expenditures. The term of the lease is 61 years. The Agreement also calls for Coeur to spend $50,000 annually on exploration. However, a December 18, 1992 Amendment to the Agreement allowed Coeur to fulfill the exploration work requirement until 2006 by applying past work in the amount of $1,436,243 towards the exploration work requirement.
History
Originally the CAMP project was leased to ASARCO during the period from 1969 through 1972. ASARCO developed an exploration drift on the 1400 level of the Coeur d'Alene mine (aka Mineral Point mine), before terminating the drift 1000 feet short of its planned termination. The drift extended 1,000 feet into the CAMP project area before terminating. A series of diamond drill holes were planned along the 1400 level drift, but ASARCO terminated the lease agreement before any drilling could take place.
In 1978, Coeur signed a new lease agreement with Merger Mines and Plainview Mining Co. Plainview Mining Co. was acquired by the Company in February 1998. Coeur began an exploration program soon thereafter consisting of geochemical soil sampling, trenching, an exploration tunnel and diamond drilling (surface & underground). The exploration program continued through 1982. Coeur spent a total of $1,436,243 on the project. The property has not received any more exploration activity since 1982 and to the best of our knowledge, Coeur d’Alene Mines has no plans for exploration.
Geology
The CAMP area lies astride the Silver Belt of the Coeur d'Alene Mining District east of the Sunshine mine and west of the Coeur and Galena mines. The north limb of the Big Creek anticline trends through the CAMP area. Most of the silver orebodies in adjacent properties are located in the north limb of the Big Creek anticline. Prospective fault structures that trend through the CAMP property include the Polaris fault, Silver Summit vein-fault, Chester fault, and other structures. Favorable rock types are located in the footwall of the Polaris fault including the St. Regis and Revett formation.
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LOST EAGLE PROJECT
Summary
The Lost Eagle is an exploration project without known ore reserves. It is located in the West Fork of Eagle Creek near Murray, Idaho. The outcrop of the Lost Eagle vein is located on the hillside above a USFS road. Access to the outcrop is by foot only. The Company's five lode claims cover 103 acres and are on federal land administered by the U.S. Forest Service. The project is a gold and silver exploration project. The Lost Eagle vein is a quartz vein carrying sulfides that outcrops in the Revett formation. The sulfide minerals found in the vein are galena, pyrite, hessite and petzite. Hessite is a silver telluride mineral and petzite is a gold-silver telluride mineral. The presence of tellurides is thought to be significant as tellurides are usually associated with high-grade gold deposits near alkaline-igneous bodies. However, no known igneous bodies are mapped in the area. Historical workings included two short adits, say 5 meters long, located along the strike of a quartz vein system. An upper adit established by the old-timers exposes the vein where it is mineralized. Work completed by the Company includes re-opening of the adit, channel sampling the vein, geochemical soil sampling, and a geophysical survey.
In 2003, the Company completed two diamond drillholes each about 185 meters in length. Both holes intercepted abundant alteration including carbonate enrichment, potassic alteration, and a halo of specular hematite and pyrite with occasional galena. Gold and silver values were only weakly anomalous. Exploration plans call for additional diamond drilling but the holes will be collared closer to the outcrop by using a helicopter to place the drill.
WISCONSIN-TEDDY PROJECT
Summary
The Wisconsin-Teddy is an exploration project without known ore reserves. The project area lies north of the New Jersey mine and is accessed by a local frontage road. The Company's claims cover 83 acres. The claims are unpatented and are on federal land administered by the U.S. Bureau of Land Management. The project is a base metal exploration project in the Prichard formation. Several tunnels with an aggregate length of 2,000 feet were driven on the property prior to 1930. This development was related to two veins systems - a copper-gold vein and a zinc-lead-silver vein. Work completed by the Company includes the opening of the Teddy underground workings, sampling on the surface and underground, and geologic mapping. Two exploration holes were drilled in the summer of 2003 and anomalous base metal mineralization was found.
ROUGHWATER PROJECT
Roughwater is an exploration project without known ore reserves. The Roughwater prospect is comprised of nine unpatented claims in the Clark Fork mining district about 60 miles north of Kellogg. The property is located near Bear Creek in the Lightening Creek drainage. To date, the work completed on the property includes sampling of surface outcrops and preliminary metallurgical testwork. The property is a copper-gold showing with minor platinum group metal content. The host rock is a quartz diorite sill which has intruded the Prichard formation. A wide area of disseminated copper mineralization has been observed which may be a cumulate layer in the sill. No work was completed on the property in 2003.
15
ITEM 3.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings and is not aware of any pending or potential legal actions.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth quarter of 2003.
PART II.
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's stock trades on the NASD's OTCBB under the symbol "NJMC". The Company began trading on the OTCBB on January 28, 1998 following its merger with Plainview Mining Company, Inc.
The following table sets forth, for the respective periods indicated, the prices for the Company's Common Stock in the over-the-counter market according to the NASD's OTC Bulletin Board. These prices represent inter-dealer quotations, without adjustments for retail markups, markdowns or commissions and may not necessarily represent actual transactions. All prices in the following table have been rounded to the nearest whole cent.
Shareholders
As of March 3, 2004 there were approximately 600 shareholders of record of the Company's Common Stock. As of March 3, 2004 the Company had issued and outstanding 19,604,390 shares of Common Stock, and the Company had 2,214,375 warrants outstanding for a fully diluted total of 21,818,765.
16
Dividend Policy
The Company has not declared or paid cash dividends or made distributions in the past and the Company does not anticipate that it will pay cash dividends or make distributions in the foreseeable future. The Company currently intends to retain and reinvest future earnings, if any, to finance its operations.
Transfer Agent
The transfer agent for the Company's Common Stock is Columbia Stock Transfer Company, P.O. Box 2196, Coeur d'Alene, Idaho 83816-2196.
Recent Sales of Unregistered Securities
On May 5, 2003 the Company granted an accredited investor 460,000 warrants exercisable at $0.25 until May 1, 2005 in exchange for the early exercise of 460,000 warrants at $0.25 which had an expiration date of May 1, 2004. No underwriter was involved and no commission was paid on the transaction. The shares underlying the warrants are restricted as defined by Rule 144 of the Securities Act and the offer was made in reliance on exemptions from registration provided by Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933, as amended.
On February 19, 2004 the Company filed an 8-K report with the SEC announcing it had completed a non-brokered (i.e. no commissions were paid to an underwriter) private placement of 1,727,500 units for $0.40 per unit. Each unit consists of one share of common stock plus one-half of a warrant. Each full warrant is exercisable into one share of common stock at a price of $0.70. The warrant expires on April 1, 2005. The offering was made in reliance on exemptions from registration provided by Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933, as amended.
[The balance of this page has been intentionally left blank.]
17
ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation:
The Company is executing its plan to continue exploration for gold, silver and base metal deposits in the greater Coeur d’Alene Mining District of northern Idaho. One of the properties, the Silver Strand, owned by the Company is in the advanced permitting stage with the U.S. Forest Service (USFS) and will be readied for production once operating permits are received. Currently, the permitting schedule for the Silver Strand should allow pre-production work to commence in June or July, but interest groups that oppose all enterprises on public lands may attempt to delay the granting of permits by the USFS.
The Company is upgrading its mineral processing plant, the New Jersey mill, to add the flotation process which is needed to produce marketable concentrates for smelters. Included in the upgrade are eight new flotation cells, pumps, a filter press, a concentrate bin, and various fabricated assemblies. A coarse-ore bin is also planned so that ore can be received at the New Jersey mill from outlying properties. Other improvements are being made to improve the process control of the plant. A special mine car is being built to transport ore in narrow, trackless mine openings.
An exploration ramp at the Golden Chest is planned to expose an ore grade intercept drilled by Newmont Exploration Limited (NEL). If the mineralization exposed by the ramp is of sufficient size and grade, as indicated by the drilling, production may commence from development excavations which will be driven on the vein.
An exploration drilling program is also planned for 2004. Drilling will commence at the New Jersey mine area at the Enterprise and Scotch Thistle prospects. Drilling will also be done at the Golden Chest property to test for the presence of deep gold mineralization. Drilling at the Lost Eagle prospect is also planned. A surface geophysical program is planned at the Silver Strand mine to test for a potential westward extension of the mineral zone. Reconnaissance geological studies are planned in the greater Coeur d’Alene Mining District. Work will proceed to conduct a pre-feasibility study at the Golden Chest where previous drilling by NEL indicates a potential open-pittable resource of 230,000 ounces of gold.
The Company has sufficient funding to execute the above projects in 2004, as well as fund necessary management tasks such as auditing/accounting and SEC reporting. Should additional funding become available in 2004, such as by the exercising of outstanding warrants, the Company may expand its exploration plans.
It is likely that some production will be achieved in the next twelve months, which could generate additional cash flow. Production may be achieved from the New Jersey open pit mine or from the Silver Strand mine or Golden Chest project.
The Company currently has three employees and uses consultants or contractors for project tasks. Up to four additional employees may be hired if production commences.
18
ITEM 7.
FINANCIAL STATEMENTS
| D E C ORIA, | |
| M AICHEL | |
| & T EAGUE | |
| A PROFESSIONAL SERVICES FIRM |
Report of Independent Certified Public Accountants
Board of Directors
New Jersey Mining Company
We have audited the accompanying balance sheet of New Jersey Mining Company ( A Development Stage Company ) (“the Company”) as of December 31, 2003, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and for the period from inception on July 18, 1996 to December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the cumulative totals of the Company for the period from inception on July 18, 1996 to December 31, 2002, which totals reflect a deficit of $161,247 accumulated during the development stage. Those cumulative totals were audited by other auditors. Our opinion expressed herein, insofar as it relates to the amounts included for the cumulative totals for the period from inception on July 18, 1996 to December 31, 2002, is based solely on the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Jersey Mining Company as of December 31, 2003, and the results of its operations and its cash flows for the year then ended, and for the period from inception on July 18, 1996 to December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the financial statements, the Company changed its method of accounting for exploration costs in 2003.
DeCoria, Maichel & Teague P.S.
/s/ Decoria, Maichel & Teague P.S.
Spokane, Washington
February 19, 2004
19
W
NATHAN WENDT
Certified Public Accountant
Report of Independent Certified Public Accountants
Board of Directors
New Jersey Mining Company
We have audited the accompanying balance sheet of New Jersey Mining Company ( A Development Stage Company ) (“the Company”) as of December 31, 2002, and the related statements of operations, stockholders’ equity, and cash flows for the year then ended and from inception on July 18, 1996 through December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Jersey Mining Company as of December 31, 2002 and the results of its operations and its cash flows for the year then ended and from inception on July 18, 1996 through December 31, 2002 in conformity with auditing standards generally accepted in the United States of America.
Nathan Wendt
/s/ Nathan Wendt
Kellogg, Idaho
March 24, 2003
except for Note 2 as
to which date is
March 5, 2004
20
NEW JERSEY MINING COMPANY
(A Development Stage Company)
TABLE OF CONTENTS
| Page | ||
| Balance Sheets, December 31, 2003 and 2002 | 22 | |
| Statements of Operations for the years ended December 31, 2003 and 2002 and from the date of inception on July 18, 1996 through December 31, 2003 | 23 | |
| Statement of Changes in Stockholders’ Equity for the period from inception on July 18, 1996 through December 31, 2003 | 24 | |
| Statements of Cash Flows for the years ended December 31, 2003 and 2002 and from the date of inception on July 18, 1996 through December 31, 2003 | 26 | |
| Notes to Financial Statements | 27-41 |
21
New Jersey Mining Company
(A Development Stage Company)
Balance Sheets
December 31, 2003 and 2002
The accompanying notes are an integral part of these financial statements.
22
New Jersey Mining Company
(A Development Stage Company)
Statements of Operations
| From Inception | |||||||||
| Years Ended | (July 18, 1996) | ||||||||
| December 31, | Through | ||||||||
| 2003 | 2002 | December 31, 2003 | |||||||
| (As Restated | (As Restated | ||||||||
| See Note 2) | See Note 2) | ||||||||
| Operating expenses: | |||||||||
| Expenses paid with common stock: | |||||||||
| Management fees | $ | 137,126 | $ | 137,126 | |||||
| Directors fees | 7,200 | $ | 2,250 | 9,450 | |||||
| Services | 7,262 | 1,475 | 19,890 | ||||||
| Exploration | 8,000 | 8,000 | |||||||
| Exploration expense | 102,841 | 10,543 | 113,384 | ||||||
| General and administrative expenses | 85,657 | 27,035 | 190,875 | ||||||
| Total operating expenses | 348,086 | 41,303 | 478,725 | ||||||
| Other (income) expense: | |||||||||
| Royalty and other income | (2,762 | ) | (5,613 | ) | (59,154 | ) | |||
| Write-off of goodwill | 30,950 | 30,950 | |||||||
| Write-off of investment | 3,000 | 90,000 | |||||||
| Total other (income) expense | 31,188 | (5,613 | ) | 61,796 | |||||
| Net loss | $ | 379,274 | $ | 35,690 | $ | 540,521 | |||
| Net loss per common share-basic | $ | 0.02 | $ | Nil | $ | 0.04 | |||
| Weighted average common | |||||||||
| shares outstanding-basic | 17,196,258 | 14,305,169 | 12,709,951 | ||||||
The accompanying notes are an integral part of these financial statements.
23
New Jersey Mining Company
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
From Inception (July 18, 1996)
Through December 31, 2003
| Deficit | |||||||||||||||
| Accumulated | Total | ||||||||||||||
| Common Stock | During the | Treasury | Stockholders' | ||||||||||||
| Shares | Amount | Development Stage | Stock | Equity | |||||||||||
| Issuance of common stock for: | |||||||||||||||
| Assets and liabilities of New Jersey Joint Venture | 10,000,000 | $ | 207,968 | $ | 207,968 | ||||||||||
| Acquisition of Plainview Mining Company | 1,487,748 | 148,000 | 148,000 | ||||||||||||
| Cash from sales | 228,816 | 110,115 | 110,115 | ||||||||||||
| Services | 14,000 | - | - | ||||||||||||
| Net loss | $ | (44,174 | ) | (44,174 | ) | ||||||||||
| Balance, December 31, 1997 | 11,730,564 | 466,083 | (44,174 | ) | 421,909 | ||||||||||
| Issuance of common stock for: | |||||||||||||||
| Acquisition of Plainview Mining Company | 1,512,252 | 152,000 | 152,000 | ||||||||||||
| Cash from sales | 117,218 | 29,753 | 29,753 | ||||||||||||
| Services | 18,000 | - | - | ||||||||||||
| Treasury stock acquired with Plainview acquisition | $ | (136,300 | ) | (136,300 | ) | ||||||||||
| Net loss | (30,705 | ) | (30,705 | ) | |||||||||||
| Balance, December 31, 1998 | 13,378,034 | 647,836 | (74,879 | ) | (136,300 | ) | 436,657 | ||||||||
| Issuance of common stock for services | 79,300 | - | |||||||||||||
| Net loss | (23,738 | ) | (23,738 | ) | |||||||||||
| Balance, December 31, 1999 | 13,457,334 | 647,836 | (98,617 | ) | (136,300 | ) | 412,919 | ||||||||
| Issuance of common stock for: | |||||||||||||||
| Silver Strand property | 50,000 | 68,750 | 68,750 | ||||||||||||
| Services | 62,100 | 4,313 | 4,313 | ||||||||||||
| Net loss | (20,492 | ) | (20,492 | ) | |||||||||||
| Balance at December 31, 2000 | 13,569,434 | 720,899 | (119,109 | ) | (136,300 | ) | 465,490 | ||||||||
The accompanying notes are an integral part of these financial statements.
24
New Jersey Mining Company
(A Development Stage Company)
Statement of Changes in Stockholders' Equity, Continued:
From Inception (July 18, 1996) Through December 31, 2003
| Deficit | |||||||||||||||
| Accumulated | Total | ||||||||||||||
| Common Stock | During the | Treasury | Stockholders' | ||||||||||||
| Shares | Amount | Development Stage | Stock | Equity | |||||||||||
| 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 from sales | 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 | (25,200 | ) | 25,500 | ||||||||||||
| Balance, December 31, 2002, (As Restated, See Note 2) | 18,583,919 | 1,365,418 | (161,247 | ) | (136,300 | ) | 1,067,871 | ||||||||
| Issuance of common stock for: | |||||||||||||||
| Cash from exercise of stock purchase warrants | 810,000 | 200,750 | 200,750 | ||||||||||||
| Cash from sales, net of issuance costs | 795,000 | 318,000 | 318,000 | ||||||||||||
| Management fees | 363,200 | 137,126 | 137,126 | ||||||||||||
| Directors fees | 18,000 | 7,200 | 7,200 | ||||||||||||
| 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 | |||||
The accompanying notes are an integral part of these financial statements.
25
New Jersey Mining Company
(A Development Stage Company)
Statements of Cash Flows
| From Inception | |||||||||
| Years Ended | (July 18, 1996) | ||||||||
| December 31, | Through | ||||||||
| 2003 | 2002 | December 31, 2003 | |||||||
| (As Restated | (As Restated | ||||||||
| See Note 2) | See Note 2 ) | ||||||||
| Cash flows from operating activities: | |||||||||
| Net loss | $ | (379,274 | ) | $ | (35,690 | ) | $ | (540,521 | ) |
| Adjustments to reconcile net loss to net cash | |||||||||
| used by operating activities: | |||||||||
| Write-off of goodwill | 30,950 | 30,950 | |||||||
| Write-off of investment | 3,000 | 90,000 | |||||||
| Stock issued for: | |||||||||
| Management fees | 137,126 | 137,126 | |||||||
| Directors fees | 7,200 | 2,250 | 9,450 | ||||||
| Services | 7,262 | 1,475 | 19,891 | ||||||
| Exploration | 8,000 | 8,000 | |||||||
| Change in: | |||||||||
| Other assets | (44 | ) | (104 | ) | (624 | ) | |||
| Accounts payable | 3,683 | 7,356 | 8,640 | ||||||
| Accounts payable to related party | 2,000 | 2,000 | |||||||
| Accrued reclamation costs and other liabilities 12,500 | (5,921 | ) | 12,500 | ||||||
| Payable to officers | 11,519 | 11,519 | |||||||
| Net cash used by operating activities | (156,078 | ) | (30,634 | ) | (211,069 | ) | |||
| Cash flows from investing activities: | |||||||||
| Purchases of building and equipment | (16,839 | ) | (1,407 | ) | (74,134 | ) | |||
| Purchases of mineral property | (5,904 | ) | |||||||
| Deferral of development costs | (40,001 | ) | (166,188 | ) | (225,535 | ) | |||
| Net cash used by investing activities | (56,840 | ) | (167,595 | ) | (305,573 | ) | |||
| Cash flows from financing activities: | |||||||||
| Exercise of stock purchase warrants | 200,750 | 200,750 | |||||||
| Sales of common stock, net of issuance costs | 318,000 | 687,367 | |||||||
| Principal payments on capital lease | (43,476 | ) | |||||||
| Payments on note payable to bank | (20,000 | ) | |||||||
| Net cash provided by financing activities | 518,750 | 229,500 | 824,641 | ||||||
| Cash of acquired companies | - | 8,954 | 38,269 | ||||||
| Net change in cash | 305,832 | 40,225 | 346,268 | ||||||
| Cash, beginning of period | 40,436 | 211 | 0 | ||||||
| Cash, end of period | $ | 346,268 | $ | 40,436 | $ | 346,268 | |||
| Non-cash investing and financing activities: | |||||||||
| Common stock issued for: | |||||||||
| Equipment | $ | 3,000 | $ | 3,000 | |||||
| Mineral properties | $ | 199,300 | |||||||
| Acquisitions of companies, excluding cash | $ | 265,000 | $ | 743,653 | |||||
| Capital lease obligation for equipment acquired | $ | 18,275 | |||||||
The accompanying notes are an integral part of these financial statements.
26
New Jersey Mining Company
(A Development Stage Company)
| 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 mining resources in Idaho.
On December 31, 1996, the Company acquired all of the
assets and liabilities of a partnership known as New Jersey Joint Venture
(“NJJV”), including the New Jersey gold mine and mill located
near Kellogg, Idaho, in exchange for 10,000,000 shares of common stock.
NJJV was owned by various other individuals and mining companies including
Mine Systems Design, Inc. ("MSD"), an Idaho corporation owned by Fred
Brackebusch and his son, Grant Brackebusch, officers and directors of
the Company. The assets and liabilities of NJJV, as transferred, consisted
of:
|
| Assets acquired: | ||||
| Cash | $ | 16,565 | ||
| Building and equipment | 176,267 | |||
| Other assets | 63,306 | |||
| 256,138 | ||||
| Liabilities assumed: | ||||
| Accounts payable | 2,969 | |||
| Note payable to bank | 20,000 | |||
| Capitalized lease obligation | 25,201 | |||
| 48,170 | ||||
| Net assets acquired as of December 31, 1996 | $ | 207,968 |
| 2. |
Restated Financial Statements Change in Accounting Policy During the fourth quarter of 2003, the Company changed its accounting policy, retroactive to January 1, 2002, with respect to its accounting for exploration costs. The Company now records exploration costs as operating expenses in the period that they occur, and only capitalizes exploration costs on areas of interest that have proven reserves and are in development for production. The Company's previous policy was to capitalize all such expenditures as deferred development costs of the properties being explored. The change was made in order for the Company’s accounting practices to be consistent with prevailing mining industry accounting trends and securities regulations. |
27
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 2. |
Restated Financial Statements, Continued: Correction of Accounting Error During the year ended December 31, 2002, the Company incorrectly accounted for offering costs (commissions) paid in connection with a private placement of its common stock (see Note 8). The amount of the commission, $25,500, was charged to operations instead of being accounted for in stockholders' equity as a reduction of the proceeds received from stock sales. Accordingly, a correction has been made to adjust the December 31, 2002 financial statements for this amount. The effect on the December 31, 2002 financial statements for the change in accounting policy and for the correction of the accounting error is as follows: |
| Change in | |||||||||||||
| As Previously | Accounting for | Correction | As | ||||||||||
| Reported | Exploration Costs | of Error | Restated | ||||||||||
| Deferred development costs | $ | 256,952 | $ | (9,883 | ) | $ | 247,069 | ||||||
| Accumulated deficit | (176,864 | ) | (9,883 | ) | $ | 25,500 | (161,247 | ) | |||||
| Common stock | 1,390,918 | (25,500 | ) | 1,365,418 | |||||||||
| Net loss | 51,307 | 9,883 | (25,500 | ) | 35,690 | ||||||||
|
The effect of the restatements on the net loss per share of common
stock-basic is immaterial.
|
|
| 3. |
Summary of Significant Accounting Policies Development Stage Enterprise The Company's financial statements are prepared using the accrual method of accounting and according to the provisions of Statement of Financial Accounting Standards No. 7, “Accounting for Development Stage Enterprises,” 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 commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
28
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 3. |
Summary of Significant Accounting Policies, Continued: Income Taxes
Income taxes are recognized in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
whereby 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 actually paid or recovered. A valuation allowance is recognized on
deferred tax assets when it is more likely than not that some or all of
these deferred tax assets will not be realized.
Fair Values of Financial Instruments The carrying amounts of financial instruments including cash and cash equivalents, and accounts payable approximated their fair values as of December 31, 2003 and 2002. Net Loss Per Share Statement of Financial Accounting Standards No. 128, “Earnings per Share,” requires dual presentation of basic earnings per share (“EPS”) and diluted EPS on the face of all income statements, for all entities with complex capital structures. Cash Equivalents Highly liquid short-term investments with a remaining maturity when purchased of three months or less are classified as cash equivalents. The Company deposits its cash and cash equivalents in high quality financial institutions. The balances on deposits may at times exceed the federal insurance limit. Management believes that risk with respect to these balances in minimal due to the high credit quality of the depositories. Investments Marketable equity securities are categorized as available-for-sale and carried at quoted market value. Investments in securities of privately held entities are quoted at their estimated fair value. 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 or loss, net of related deferred income taxes, if applicable, unless a permanent impairment in value has occurred, which is then charged to operations. During 2003, the Company wrote-off its investment of $3,000 in a marketable equity security that had become permanently impaired. Comprehensive Income (Loss) Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," requires the disclosure of comprehensive income, which includes net income (loss), and unrealized gains and losses on marketable equity securities classified as available-for-sale. |
29
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 3. |
Summary of Significant Accounting Policies, Continued: Building and Equipment Building and equipment are stated at the lower of cost or estimated net realizable value. Depreciation and amortization is based on the estimated useful lives of the assets and is computed using straight-line and unit-of-production methods. 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 Development and Exploration Exploration costs are charged to operations as incurred (see Note 2). Mine development costs are capitalized after proven and probable reserves have been identified and classified as deferred development costs until production ensues. Amortization is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces. Property Evaluations The Company has adopted the provisions of Statement of Financial Accounting Standards No. 144, (“SFAS No. 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets.” The provisions of SFAS No. 144 require that an impairment loss be 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. Measurement of an impairment loss is based on the estimated fair value of the asset if the asset is expected to be held and used. Annually, or more frequently as circumstances require, the Company evaluates the carrying amounts of its mineral properties, including deferred development costs, to assess whether such amounts are recoverable. Estimated undiscounted future net cash flows from each mineral property are calculated using estimated future production, sales prices, operating capital and costs, and reclamations costs that will be in effect when the properties are in production. If it is determined that future cash flows from a mineral property are less than the carrying value, a write-down to the estimated fair value is made with a charge to operations. |
30
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 3. |
Summary of Significant Accounting Policies, Continued: Property Evaluations, Continued: 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 investment in mineral properties. Goodwill Acquisitions of entities are accounted for using the purchase method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition. The excess of the purchase price over such fair value is recorded as goodwill. Pursuant to SFAS No. 142 “Goodwill and Other Intangible Assets,” goodwill is assigned to assets acquired and is not amortized. Goodwill is subject to determination of fair value at least annually and at such times as events or circumstances indicate that an impairment has occurred. Reclamation and Remediation The Company’s mineral properties have been and are subject to standards for mine reclamation that have been established by various governmental agencies. Environmental costs relating to properties put into production are estimated based primarily upon environmental and regulatory requirements, and are accrued and charged to expense over the expected economic life of the operation using the units-of-production method. The liability for reclamation is classified as current or long-term based on the expected timing of the expenditures. The Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is performed and are measured on an undiscounted basis. Reclassifications Certain comparative balances for 2002 have been reclassified to conform with the 2003 presentation. The reclassifications have no effect on net loss or accumulated deficit as previously reported. |
31
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 3. |
Summary of Significant Accounting Policies, Continued: New Accounting Pronouncements
In April 2002, the FASB issued SFAS No. 145, "Rescission
of SFAS Statements No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical
Corrections." This statement culminates the current requirements that
gains and losses on debt extinguishment must be classified as extraordinary
items in the income statement. Instead, such gains and losses will be
classified as extraordinary items only if they are deemed to be unusual
and infrequent, in accordance with the current GAAP criteria for extraordinary
classifications. In addition, SFAS No. 145 eliminates an inconsistency
in lease accounting by requiring that modifications of capital leases
that result in reclassification as operating leases be accounted for consistent
with sales-leaseback accounting rules. The statement also contains other
nonsubstantive corrections to authoritative accounting literature. The
rescission of SFAS No. 4 is effective in fiscal years beginning after
May 15, 2002. The amendment and technical corrections of SFAS No. 13 are
effective for transactions occurring after May 15, 2002. All other provisions
of SFAS No. 145 are effective for financial statements issued on or after
May 15, 2002. SFAS No. 145 has no impact on the Company's financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amount recognized. The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. SFAS No. 146 has no impact on the Company's financial statements. In August 2002, the FASB issued SFAS No. 147, “Acquisitions of Certain Financial Institutions.” SFAS No. 147 removes acquisitions of financial institutions from the scope of SFAS No. 72 and FASB Interpretation No. 9, and requires that those transactions be accounted for in accordance with SFAS No. 141 and SFAS No. 142. In addition, SFAS No. 147 amends SFAS No. 144, to include in its scope long-term customer-relationship intangible assets of financial institutions. The provisions of SFAS No. 147 are generally effective October 1, 2002. SFAS No. 147 has no impact of the Company's financial statements. |
32
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 3. |
Summary of Significant Accounting Policies, Continued: New Accounting Pronouncements, Continued:
In November 2002, the FASB issued FASB Interpretation
No. 45, "Guarantor's Accounting for Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, an interpretation
of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation
No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others" ("FIN
45"). FIN 45 clarifies the requirements for a guarantor's accounting for
and disclosure of certain guarantees issued and outstanding. It also requires
a guarantor to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee.
This interpretation also incorporates without reconsideration the guidance
in FASB Interpretation No. 34, which is being superseded. The adoption
of FIN 45 has no material effect on the Company's financial statements.
In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on EITF 00-21, "Revenue Arrangements with Multiple Deliverables," related to the timing of revenue recognition for arrangements in which goods or services or both are delivered separately in a bundled sales arrangement. The EITF requires that when the deliverables included in this type of arrangement meet certain criteria they should be accounted for separately as separate units of accounting. This consensus is effective prospectively for arrangements entered into in fiscal periods beginning after June 15, 2003. EITF 00-21 will not have an impact upon initial adoption and is not expected to have a material impact on the Company's results of operations, financial position and cash flows. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and Disclosure, an amendment of FASB Statement No. 123." SFAS No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects of reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. Finally, this Statement amends APB Opinion No. 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. The amendments to SFAS No. 123, which provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation is effective for financial statements for fiscal years ending after December 15, 2002. The amendment to SFAS No. 123 relating to disclosures and the amendment to Opinion 28 is effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002. Management does not intend to adopt the fair value accounting provisions of SFAS No. 123 and currently believes that the adoption of SFAS No. 148 will not have a material impact on the Company's financial statements. |
33
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
|
3.
|
Summary of Significant Accounting
Policies, Continued:
New Accounting Pronouncements, Continued: In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This standard amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective prospectively for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. SFAS No. 149 will not have an impact upon initial adoption and is not expected to have a material effect on the Company's results of operations, financial position and cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and Equity." SFAS No. 150 establishes standards for the classification
and measurement of certain financial instruments with characteristics
of both liabilities and equity. The requirements of SFAS No. 150 become
effective for the Company for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company has evaluated
the impact of SFAS No. 150 to determine the effect it may have on its
results of operations, financial position or cash flows and has concluded
that the adoption of this statement is not expected to have a material
effect on the Company's financial position or results of operations.
|
|
4.
|
Acquisitions and Mergers
Plainview Mining Company
In October 1997, the Company made an exchange offer
for the outstanding common shares of Plainview Mining Company, Inc. (“Plainview”).
The offer allowed Plainview’s stockholders to exchange each one of
their shares of Plainview stock for two shares of the Company’s stock.
At the time of the exchange Plainview was a minority shareholder of the
Company holding 1,947,144 shares of the Company's common stock. Fred Brackebusch,
president and a director of the Company, was also a director of Plainview
at the time of the acquisition. In addition, the president of Plainview
at the time of the acquisition, Charles F. Asher, is currently a director
of the Company.
|
34
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 4. |
Acquisitions and Mergers, Continued: Plainview Mining Company, Continued: As a result of the exchange offer, a merger with Plainview was consummated through the exchange of 1,500,000 shares of Plainview (100%), for 3,000,000 shares of the Company’s stock. The Company accounted for the business combination using the purchase method prescribed in Accounting Principles Board Opinion No. 16, “Business Combinations,” whereby assets acquired and liabilities assumed are recorded at fair value at the date of acquisition. Allocation of the purchase price was based on an estimate of the fair value of the assets acquired at the purchase date. The estimated fair value of the Company’s shares issued in the exchange was determined to be $0.10 per share, or $300,000. The purchase price was allocated as follows: |
| Cash | $ | 12,750 | ||
| Mineral property-CAMP | 30,000 | |||
| Investment in ConSil Corporation | 90,000 | |||
| Investment in New Jersey Mining Company | ||||
| (1,947,144 shares at $0.07 per share) | 136,300 | |||
| Goodwill | 30,950 | |||
| Total purchase price | $ | 300,000 |
|
The shares of the Company’s stock owned by Plainview were recorded as treasury stock (see Note 8). During the third quarter of 2003, the Company's management determined that goodwill recorded as part of the Plainview merger was impaired in accordance with the tests of goodwill impairment set forth in SFAS 142, "Goodwill and Other Intangible Assets." As a result, all of the goodwill acquired in the Plainview merger was written off. Gold Run Gulch Mining Company
During 2002, the Company acquired all of the outstanding
shares of the Gold Run Gulch Mining Company (“Gold Run”). The
acquisition allowed Gold Run’s stockholders to exchange each one
of their shares of Gold Run stock for 0.875 shares of the Company’s
stock. A total of 1,916,250 of the Company’s shares were issued in
exchange for 100% of the outstanding shares of Gold Run. The Company accounted
for the business combination using the purchase method prescribed in SFAS
141, “Business Combinations,” which became effective for business
combinations initiated after June 30, 2001. Similar to APB 16, this statement
requires, among other things, that assets acquired and liabilities assumed
be recorded at their fair value at the date of acquisition. The shares
issued were valued at $273,954 based upon an estimate of fair value of
the assets received. The purchase price was allocated as follows:
|
| Cash | $ | 8,954 | ||
| Mineral Property–Coleman | 265,000 | |||
| Total purchase price | $ | 273,954 |
35
New Jersey Mining Company
(A Development Stage Company)
| 5. |
Building and Equipment
Building and equipment at December 31, 2003 and 2002 is comprised of
the following:
|
| 2003 | 2002 | ||||||
| Mill building | $ | 35,910 | $ | 35,910 | |||
| Milling equipment | 235,766 | 215,927 | |||||
| Total | $ | 271,676 | $ | 251,837 |
|
The Company's building and equipment are components of its New Jersey mill near Kellogg, Idaho.
No depreciation has been taken on the building and equipment as they
have not yet been placed in service.
|
|
| 5. |
Mineral Properties and Deferred Development Costs
Mineral properties and deferred development costs at December 31, 2003
and 2002, are as follows:
|
| 2003 | 2002 | ||||||||||||||||||
| Deferred | Deferred | ||||||||||||||||||
| Mineral | Development | Mineral | Development | ||||||||||||||||
| Properties | Costs | Total | Properties | Costs | Total | ||||||||||||||
| New Jersey Mine | |||||||||||||||||||
| Grenfel | $ | 100,000 | $ | 7,324 | $ | 107,324 | $ | 100,000 | $ | 100,000 | |||||||||
| Coleman | 265,000 | 221,446 | 486,446 | 265,000 | $ | 194,269 | 459,269 | ||||||||||||
| Silver Strand | 74,704 | 58,300 | 133,004 | 74,704 | 52,800 | 127,504 | |||||||||||||
| CAMP | 30,000 | 30,000 | 30,000 | 30,000 | |||||||||||||||
| Roughwater | 25,500 | 25,500 | 25,500 | 25,500 | |||||||||||||||
| Lost Eagle | 5,000 | 5,000 | 5,000 | 5,000 | |||||||||||||||
| Total | $ | 500,204 | $ | 287,070 | $ | 787,274 | $ | 500,204 | $ | 247,069 | $ | 747,273 | |||||||
Since the Company's mineral properties are not yet in production, no amortization or depreciation has been recognized.
Grenfel The Company's Grenfel property is a leasehold interest covering the mineral rights of 65 acres located at the New Jersey Mine. The lease was acquired from Mine Systems Design ("MSD") in 2001 in exchange for 1,000,000 shares of the Company’s common stock (see Note 1). The 1,000,000 shares issued were valued at $0.10 per share, which approximated the market price for the restricted common stock on the date of the lease. MSD is also a major shareholder of the Company and is owned by Fred Brackebusch and Grant Brackebusch, officers and directors of the Company. The lease has a fifteen year term, and includes a 3% Net Smelter Return ("NSR") royalty that will be paid to MSD on any production achieved from the property. Deferred development costs at December 31, 2003 and 2002 consist primarily of drilling and tunnel development expenditures.
36
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 6. |
Mineral Properties and Deferred Development Costs, Continued:
Coleman
The Coleman property is located at the
New Jersey Mine and consists of 62 acres of patented mining claims, mineral
rights to 108 acres of fee land, and approximately 130 acres of unpatented
mining claims. The Coleman property was acquired in October 2002 with
the acquisition of Gold Run Gulch Mining Company (see Note 4). Deferred
development costs at December 31, 2003 and 2002 consist primarily of drilling
and tunnel development expenditures.
Silver Strand The Silver Strand mine consists of 15 unpatented claims and was acquired from Trend Mining Company (“Trend”) in 2000. The property was purchased in exchange for 50,000 shares of the Company’s common stock and a 1.5% NSR royalty initially capped at $50,000 and then decreasing to 0.5%. In July of 2001, MSD assumed Trend’s position in the agreement, and retained the NSR royalty interest. The Company valued the property at $74,704 which represented the estimated market value of the property at the date of acquisition. Deferred development costs at December 31, 2003 and 2002 consist primarily of drilling and permitting expenditures. CAMP The CAMP property was acquired as part of the Company’s acquisition of Plainview in 1997 (see Note 4). The CAMP property covers approximately 380 acres and is an underground exploration project. The Company holds a 17.75% interest in the CAMP property; the remaining ownership is held by various other mining companies, including Coeur d’Alene Mines Corporation, which acts as the operator. The Company receives a $100 monthly advance royalty payment and will receive a 7.1% net profits interest if the property is put into production. Roughwater The Roughwater property is an exploration project consisting of 180 acres in nine unpatented lode claims. 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. At the time of the acquisition, Fred Brackebusch, the Company's president and a director, was the president of Roughwater Mining Company and MSD was its majority stockholder. Lost Eagle Lost Eagle is a gold and silver exploration project consisting of five claims covering 100 acres of federal land administered by the U.S. Forest Service. In 2001, the Company issued 50,000 shares of stock to an individual to acquire the property. The shares were valued at $0.10 for a total acquisition cost of $5,000. Wisconsin Teddy The Wisconsin Teddy is an exploration project that lies north of the New Jersey Mine and covers 83 acres of unpatented claims on federal land administered by the U.S. Bureau of Land Management. The project has no carrying value. |
37
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
|
6.
|
Mineral Properties and Deferred Development
Costs, Continued:
Zanetti Mining Lease The Company has been assigned a mining lease with William Zanetti. The lease provides for the Company's exploration, development and mining of minerals on fee land through October 2008 and thereafter, as long as mining operations are deemed continuous. The lease provides for production royalties of 5% of net sales of ores or concentrates. Additional production royalties of 1% to 5% are due if gold exceeds a certain price per troy ounce as adjusted annually by the Consumer Price Index. At December 31, 2003, the gold price that would cause additional production royalties to be payable was $612 per troy ounce. Also, advance royalties of $500 are required annually under the lease. These advance royalties are charged to expense as incurred, but are still accumulated and will be credited against production royalty obligations if and when production ensues. The lessors may terminate the lease upon the Company's failure to perform under the terms of the lease; the Company has the right to terminate the lease at any time. Golden Chest Exploration Leases On September 5, 2003, the Company entered into an exploration agreement and lease option with Paymaster Resources, Inc. (“Paymaster”) to explore Paymaster’s Golden Chest property. The term of the exploration agreement is 2½ years, commencing June 13, 2003. Pursuant to the terms of the agreement, the Company will conduct an economic study of the Golden Chest property. As consideration for the agreement, the Company will issue Paymaster 10,000 shares of its common stock during every six-month period of the agreement's term. A total of 20,000 shares were issued under the agreement during 2003. The Company recorded $8,000 of exploration expense in connection with these issuances based upon its estimate of the fair value of the shares of common stock issued. The Company's option to lease the property may be exercised anytime before the expiration of the exploration agreement, at an option price of 100,000 shares of the Company’s common stock.
On November 7, 2003, the Company signed an exploration
agreement and lease option with Prichard Creek Resource Partners LLC (“Prichard”)
to explore Prichard’s property, which is adjacent to the Golden Chest.
The term of the exploration agreement is 2½ years commencing June
13, 2003. The Company's option to lease the property may be exercised
anytime before expiration of the exploration agreement, at an option price
of 30,000 shares of the Company’s common stock.
|
|
7.
|
Income Taxes
The Company has not recorded an income tax provision
for the years ended December 31, 2003 and 2002, as it had no taxable income.
At December 31, 2003 and 2002, the Company has net operating loss carryforwards
available for income tax purposes of approximately $525,000 and $177,000,
respectively, which will expire through 2023, and an associated deferred
tax asset of approximately $218,500 and $26,500, respectively. The deferred
tax assets have been fully reserved for as management believes it is more
likely than not that the deferred tax assets will not be utilized.
|
38
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 8. |
Common Stock At December 31, 2002 and during all prior periods, the Company had one class of no par value common stock with 20,000,000 shares authorized. Effective September 25, 2003, the Company amended its articles of incorporation to increase the number of authorized shares to 50,000,000. In addition, the Company has authorized 1,000,000 shares of no par preferred stock, none of which had been issued at December 31, 2003 and 2002. Private Placements In May 2002, the Company completed a brokered private placement pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended (“Rule 506”). A total of 1,700,000 units at a price of $0.15 per unit were sold, yielding net proceeds of $229,500. Each unit consisted of one share of restricted common stock plus a common stock purchase warrant exercisable at $0.25 per share until May 1, 2004. In November 2003, the Company began offering for sale units consisting of shares of its common stock and common stock purchase warrants, in a non-brokered private placement, and only to certain investors pursuant to Rule 506. The offering was for the sale of 2,000,000 units at $0.40 per unit. Each unit consisted of one share of the Company's restricted common stock and a one-half stock purchase warrant whereby each one whole warrant may purchase one share of the Company's restricted common stock at $0.70 per share until April 1, 2005. Through December 31, 2003, 795,000 units had been sold generating net proceeds of $318,000. On February 19, 2004, the Company completed this placement, resulting in the sale of an additional 932,500 units that generated additional proceeds of approximately $372,000. Exercise of Warrants During 2003, common stock purchase warrants were exercised by warrant holders that had purchased units of common stock and common stock purchase warrants during the Company's 2002 private placement offering. The Company issued 810,000 shares of its restricted common stock at a price of $0.25 per share, generating net proceeds of $200,750, pursuant to the exercise of these warrants. Common Stock Issued for Equipment During 2003, the Company issued 5,000 shares of its restricted common stock to vendors for equipment purchased. The Company recorded the issue at $3,000 based upon the value of the equipment purchased and shares issued. Common Stock Issued for Services During 2003, the Company issued 21,915 shares of its restricted common stock to vendors for services rendered the Company. The Company recorded $7,262 based upon the value of the services rendered and the shares issued. |
39
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
| 8. |
Common Stock, Continued: Cancellation of Treasury Stock Effective December 31, 2003, the Company's board of directors resolved to cancel 1,947,144 shares of treasury stock the Company had acquired during its merger with Plainview Mining Company (see Note 4). As a result, the treasury shares were added to the Company's authorized common stock for issue at December 31, 2003. Stock Purchase Warrants Outstanding
Transactions in common stock purchase warrants are as follows:
|
| Number of | Exercise | Expiration | ||||
| Warrants | Prices | Dates | ||||
| Warrants issued in connection with 2002 | ||||||
| private placement | 1,700,000 | $ | 0.25 | (A) | ||
| Balance, December 31, 2002 | 1,700,000 | 0.25 | ||||
| Warrants issued in connection with warrants exercised (1) | 460,000 | 0.25 | (B) | |||
| Warrants issued in connection with 2003 | ||||||
| private placement | 397,500 | 0.70 | (C) | |||
| Warrants exercised during 2003 | (810,000 | ) | 0.25 | |||
| Balance, December 31, 2003 | 1,747,500 | $ | 0.25-0.70 | |||
| (A) | Warrants are exercisable on or before May 1, 2004. | |
| (B) | Warrants are exercisable on or before May 1, 2005. | |
| (C) | Warrants are exercisable on or before April 1, 2005. |
(1) During 2003 the Company issued 460,000 stock purchase warrants to an investor as an inducement for him to exercise warrants previously granted him in connection with the 2002 private placement of the Company's common stock. The Company recorded no value for the warrants issued as their fair value was not determinable at the date of issue.
|
9. |
Related Party Transactions Fred Brackebusch is president, treasurer, and a director of the Company. Grant Brackebusch, Fred Brackebusch's son, is the vice-president and a director of the Company. Grant Brackebusch's wife, Tina Brackebusch, is the Company's corporate secretary. Fred Brackebusch and Grant Brackebusch own 89.6% and 10.4%, respectively of Mine Systems Design, Inc. ("MSD"), a firm that has various related party transactions with the Company. |
40
New Jersey Mining Company
(A Development Stage Company)
Notes to Financial Statements
|
9.
|
Related Party Transactions, Continued: In addition to the related party transactions described in notes 1, 4 and 6, the Company had the following transactions with related parties:
|
|
|
10.
|
Environmental Matters During 2003, the Company accrued $12,500 relating to a reclamation liability at the New Jersey Mine site based on management's estimate of the disturbed area existing at the property and the related costs to reclaim the area. It is likely that in the near-term the Company will become responsible for additional reclamation liabilities as it continues in the development of its properties and eventually begins commercial production. The Company owns or leases several mineral properties located in the Coeur d’Alene River Basin. In recent years, certain other companies involved in mining activities on property interests upland of the Coeur d' Alene River Basin have been identified as potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and have entered into consent decrees with the Environmental Protection Agency and the state of Idaho, concerning environmental remediation obligations and damages to or loss of natural resources in the Coeur d' Alene River Basin. The Company has not received any notification of a pending action or proceeding against the Company relating to environmental damages it may be responsible for. As of December 31, 2003, the Company has not accrued any amounts for potential liability associated with unasserted environmental claims or assessments as the amounts, if any, are not estimable. It is possible, however, that the |
|
41
Company’s obligation could change in the near or longer term, and the resultant liability or claim for damages could have a material adverse effect on the Company.
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On December 10, 2003, the Company filed an 8-K report concerning a Change in Certifying Accountant. An amended 8-K/A concerning the same topic was filed on February 2, 2004.
ITEM 8A.
CONTROLS AND PROCEDURES
The Registrant's President and Principal Accounting Officer have evaluated the Registrant's disclosure controls and procedures within 90 days of the filing date of this annual report. Based upon this evaluation, the Registrant's President and Principal Accounting Officer concluded that the Registrant's disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission.
There were no significant changes in the Registrant's internal controls or, to the knowledge of the management of the Registrant, in other factors that could significantly affect these controls subsequent to the evaluation date.
[The balance of this page has been intentionally left blank.]
42
PART III
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
| Name & Address | Age | Position | Date First Elected |
|
Fred W. Brackebusch
P.O. Box 1019 Kellogg, Idaho 83837 |
59 | President, Director & Treasurer | 7/18/1996 |
|
Grant A. Brackebusch
P.O. Box 131 Silverton, ID 83867 |
34 | Vice President & Director | 7/18/1996 |
|
Charles F. Asher
P.O. Box Pinehurst, ID 83850 |
80 | Director | 1/1/1997 |
|
Tina C. Brackebusch
P.O. Box 131 Silverton, ID 83867 |
34 | Secretary | 1/1/1997 |
|
Ronald Eggart (1)
HC-01 Box 187 Kellogg, ID 83837 |
82 | Director | 1/1/1997 |
|
M. Kathleen Sims (1)
2745 Seltice Way Coeur d’Alene, ID 83814 |
59 | Director | 9/25/2003 |
Directors are elected by shareholders at each annual shareholders meeting to hold office until the next annual meeting of shareholders or until their respective successors are elected and qualified.
Fred W. Brackebusch, P.E. is the President and a Director of the Company. He has a B.S. and an M.S. in Geological Engineering both from the University of Idaho. He is a consulting engineer with extensive experience in mine development, mine backfill, mine management, permitting, process control and mine feasibility studies. He has over 25 years of experience in the Coeur d'Alene Mining District principally with Hecla Mining Co. He has been the principal owner of Mine Systems Design, Inc., a mining consulting business, since 1987. Mr. Brackebusch is also on the Board of Directors of Mascot Silver-Lead Mines, Inc.
Grant A. Brackebusch, P.E. is the Vice President and a Director of the Company. He holds a B.S. in Mining Engineering from the University of Idaho. He worked for Newmont Gold Co. in open pit mine planning and pit supervision for 3 years. Since that time he as worked with Mine Systems Design performing various engineering and geotechnical tasks. He supervises the daily operations of New Jersey Mining Co. which include management of drilling programs, construction, engineering, and is also responsible for the Company’s SEC reporting and environmental monitoring.
Charles Asher is a Director of the Company. He is also President and a Director of Mascot Silver-Lead Mines Inc. He was formerly President of Plainview Mining Co. and Silver Trend Mining Co. Mr. Asher has extensive experience as an underground mine operator in the Coeur d'Alene Mining District.
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Tina C. Brackebusch is Secretary of the Company. She has served as Office Manager for the Company. She holds a B.S. in Secondary Education from the University of Idaho.
Ronald Eggart is a Director of the Company. He is a retired CPA with a long record of experience with Coeur d'Alene Mining District mining ventures. He is also a Director and Secretary for Mascot Silver-Lead Mines Inc.
M. Kathleen Sims is a Director of the Company. She is a successful businesswoman who is majority owner of a car dealership. She is a former State Senator in the Idaho Legislature. She is a former member of the State of Idaho Human Rights Commission and is active in the Idaho Republican Party. She has extensive experience in starting a business with all the necessary experience in financing, business plans and management.
Family Relationships
Fred W. Brackebusch is the father of Grant A. Brackebusch. Tina C. Brackebusch is the wife of Grant A. Brackebusch.
Legal Proceedings
No Director or Officer has been involved in any legal action involving the Company for the past five years.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of forms 3 and 4 and amendments thereto furnished to the Registrant pursuant to Section 240.16a-3 during the most recent fiscal year, and Form 5 and amendments thereto furnished to the Registrant with respect to the most recent fiscal year, no person who at any time during the fiscal year was a director, officer, or beneficial owner or more than ten percent of any class of equity securities of the Registrant registered pursuant to Section 12 of the Exchange Act, or any other person subject to Section 16 of the Exchange Act with respect to the Registrant because of the requirements of Section 30 of the Investment Company Act or Section 17 of the Public Utility Holding Company Act (A reporting person) failed to file on a timely basis, as disclosed in the above Forms, reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years, except Fred W. Brackebusch (one report, 5 transactions), Grant A. Brackebusch (one report, 4 transactions), Tina C. Brackebusch (one report, 4 transactions), Ronald Eggart (one report, 4 transactions), Charles F. Asher (one report, 4 transactions) and M. Kathleen Sims (one report, 1 transaction).
Code Of Ethics
The Company adopted a Code of Ethics at a Board of Directors meeting on December 9, 2003, that applies to the Company's executive officers. It is attached to this filing as an exhibit and can be found at the Company’s website.
Board Committee
At a Board of Directors meeting on December 9, 2003, the Directors approved an audit committee comprised of Ronald Eggart and M. Kathleen Sims. Each member of the audit committee is deemed to be an independent director as that term is defined in Rule 4200(a)(14) of the NASD’s listing standards.
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Mr. Eggart is considered to be an “audit committee financial expert” as the term is defined under applicable SEC rules. The Board adopted an audit committee pre-approval policy. The audit committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.
ITEM 10.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
| Name & Principal Position | Year |
Salary
($) |
Bonus
($) |
Other Annual Comp.
($) |
Restricted Stock Awards
($) |
Securities Underlying Options
(#) |
LTIP Payouts
($) |
All Other Compensation
($) |
|
Fred Brackebusch
President |
2001 | 0 | 0 | 0 | 300 | 0 | 0 | 0 |
| 2002 | 0 | 0 | 0 | 450 | 0 | 0 | 0 | |
| 2003 | 0 | 0 | 0 | 68,701 | 0 | 0 | 0 | |
|
Grant Brackebusch
Vice President |
2001 | 0 | 0 | 0 | 300 | 0 | 0 | 0 |
| 2002 | 0 | 0 | 0 | 450 | 0 | 0 | 0 | |
| 2003 | 0 | 0 | 0 | 70,825 | 0 | 0 | 0 | |
|
Charles. F. Asher
Director |
2001 | 0 | 0 | 0 | 300 | 0 | 0 | 0 |
| 2002 | 0 | 0 | 0 | 450 | 0 | 0 | 0 | |
| 2003 | 0 | 0 | 0 | 1,200 | 0 | 0 | 0 | |
|
Tina Brackebusch
Secretary |
2001 | 0 | 0 | 0 | 300 | 0 | 0 | 0 |
| 2002 | 0 | 0 | 0 | 450 | 0 | 0 | 0 | |
| 2003 | 0 | 0 | 0 | 1,200 | 0 | 0 | 0 | |
|
Ronald Eggart
Director |
2001 | 0 | 0 | 0 | 300 | 0 | 0 | 0 |
| 2002 | 0 | 0 | 0 | 450 | 0 | 0 | 0 | |
| 2003 | 0 | 0 | 0 | 1,200 | 0 | 0 | 0 | |
|
M. Kathleen Sims
Director |
2001 | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| 2002 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2003 | 0 | 0 | 0 | 1,200 | 0 | 0 | 0 |
At a Board of Directors meeting on December 9, 2003, the Directors approved a compensation plan for the Board of Directors and Management. For the Directors and the Secretary it was approved to increase the annual compensation to 10,000 common shares of restricted stock, commencing in 2004. Also, as a result of the need for full time management the following salaries were approved for 2004 by the Directors: Fred W. Brackebusch, $3,000 per month for management, Grant A. Brackebusch, $6,000 per month for management and Tina C. Brackebusch, $12 per hour for secretarial work.
Officers and Directors were paid for their services with 3,000 shares of restricted common stock per year for the years 2001, 2002 and 2003. A value of $0.10 per share was ascribed to the shares in 2001 , $0.15 per share in 2002 and $0.40 per share in 2003.
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ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information on the ownership of the Company's voting securities by Officers, Directors and major shareholders as those who own beneficially more than five percent of the Company's common stock through the most current date - March 3, 2004.
Security Ownership of Certain Beneficial Owners and Management| Title of Class | Name and Address Of Beneficial Owner | Amount and Nature of Beneficial Owner | Percent of Class (1) |
| Common |
Fred W. Brackebusch
P.O. Box 1019 Kellogg, Idaho 83837 |
7,891,072 indirect (a)
207,100 direct |
41.31% |
| Common |
Grant A. Brackebusch
P.O. Box 131 Silverton, ID 83837 |
915,928 indirect (b)
231,276 direct |
5.85% |
| Common |
Terry & Marguerite Tyson
County Road U Lipscomb, TX 79056 |
1,259,500 | 6.43% |
| Common |
Charles F. Asher
P.O. Box 444 Pinehurst, ID 83850 |
64,000 | 0.33% |
| Common |
Tina C. Brackebusch
P.O. Box 131 Silverton, ID 83867 |
18,000 | 0.09% |
| Common |
Ronald Eggart
HC-01 Box 187 Kellogg, ID 83837 |
57,332 | 0.29% |
| Common |
M. Kathleen Sims
2745 Seltice Way Coeur d’Alene, ID 83814 |
3,000 | 0.02% |
| Common | All Directors and Officers as a group (6 individuals) | 9,387,708 | 47.89% |
(1)Based upon 19,604,390 outstanding shares of common stock at March 3, 2004.
(a) Fred Brackebusch owns 89.6% of Mine Systems Design, Inc.(MSD) which is a Subchapter S corporation that owns 8,807,000 common shares of the Company. Neither MSD nor Fred Brackebusch have the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.
(b) Grant Brackebusch owns 10.4% of Mine Systems Design, Inc.(MSD) which is a Subchapter S corporation that owns 8,807,000 common shares of the Company. Neither MSD nor Grant Brackebusch have the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.
None of the directors or officers have the right to acquire any securities pursuant to options, warrants, conversion privileges or other rights.
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ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the years ended December 31, 2003 and 2002, the Company issued 18,000 and 15,000 shares, respectively, of its restricted common stock to members of the Board of Directors for their services as directors. These stock awards were recorded as directors' fees of $7,200 and $2,250, respectively, based upon the estimated value of the shares issued and services rendered.
During the year ended December 31, 2003, the Company issued 179,133 shares of its restricted common stock valued at $67,501 to Fred Brackebusch, and 184,067 shares of its restricted common stock valued at $69,625 to Grant Brackebusch for management services.
At December 31, 2003, the Company has accrued non-current liabilities due to Fred and Grant Brackebusch of $6,863 and $4,656, respectively, for management services rendered. These amounts are anticipated to be paid in shares of the Company's stock during the first quarter of 2004.
During the years ended December 31, 2003 and 2002, the Company paid MSD $20,000 and $9,688, respectively, for engineering services. At December 31, 2003, the Company had an account payable due MSD of $2,000
ITEM 13.
EXHIBITS AND REPORTS ON FORM 8-K
| (3)(i) | Articles of Incorporation - Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (3)(ii) | Bylaws - Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (10)(1) | Lease Agreement with William Zanetti - Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (10)(2) | Articles of Merger For Plainview Mining Company Inc. and New Jersey Mining Co. - Filed as an exhibit to the registrant's registration statement on Form 10-SB (Commission File No. 000-28837) and incorporated by reference herein. |
| (10)(3) | Lease Agreement with Mine Systems Design, Inc. - Filed as an exhibit to the registrant's annual report on Form 10-KSB for the year ended December 31, 2001 and incorporated by reference herein. |
| (10)(4) | Articles of Merger for Gold Run Gulch Mining Company and New Jersey Mining Co. Filed as an exhibit to the registrant's annual report on Form 10-KSB for the year ended December 31, 2002 and incorporated by reference herein. |
| (10)(5) | Exploration Agreement and Option to Lease between Paymaster Resources, Inc. and New Jersey Mining Company with the approval of J.W. Beasley Interests LLC. Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003. |
| (10)(6) | Exploration Agreement and Option to Lease between Prichard Creek Resource PartnersLLC and New Jersey Mining Company. Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003. |
| (14) | Code of Ethics. Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003. |
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| (16) | Letter on Change in Certifying Accountant. Filed as an 8-K report on December 10, 2003 and later filed as an 8-K/A on February 2, 2004, and incorporated by reference herein. |
| (18) | Letter on Change in Accounting Principle. |
| (31) | Rule 13a-14(a)/15d-14(a) Certifications |
| (31)(i) | Certification of Fred W. Brackebusch |
| (32) | Section 1350 Certifications |
| (32)(i) | Certification of Fred W. Brackebusch |
| (99)(i) | Audit Committee Pre-Approval Policies |
Reports on Form 8-K
On December 10, 2003, the Company filed an 8-K report concerning a Change in Certifying Accountant. An amended 8-K/A concerning the same topic was filed on February 2, 2004.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Board of Directors has adopted an audit committee pre-approval policy. The audit committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.
Audit Fees
The aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2003 and 2002 and the review for the financial statements included in the Company’s quarterly reports on Form 10-QSB during those fiscal years were $14,500 and $2,080 respectively.
Audit Related Fees
The Company incurred no fees during the last two fiscal years for assurance and related services by the Company’s principal accountant that were reasonably related to the performance of the audit or review of the Company’s financial statements, and not reported under “Audit Fees” above.
Tax Fees
The Company incurred no fees during the last two fiscal years for professional services rendered by the Company’s principal accountant for tax compliance, tax advice and tax planning.
All Other Fees
The Company incurred other no fees during the last two fiscal years for products and services rendered by the Company’s principal accountant.
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SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| New Jersey Mining Company | |
| Date: March 26, 2004 | By /s/ FRED W. BRACKEBUSCH |
| Fred W. Brackebusch, President, Treasurer & Director | |
| Date: March 26, 2004 | By /s/ GRANT A. BRACKEBUSCH |
| Grant A. Brackebusch, Vice President & Director | |
| Date: March 26, 2004 | By /s/ RONALD EGGART |
| Ronald Eggart, Director | |
| Date: March 26, 2004 | By /s/ CHARLES F. ASHER |
| Charles F. Asher, Director | |
| Date: March 26, 2004 | By /s/ M. KATHLEEN SIMS |
| M. Kathleen Sims, Director | |
[The balance of this page has been intentionally left blank.]
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EXHIBIT 10.5
EXPLORATION AGREEMENT AND OPTION TO LEASE
THIS EXPLORATION AGREEMENT AND OPTION TO LEASE dated as of September 5, 2003, is between PAYMASTER RESOURCES INCORPORATED ("Grantor"), and NEW JERSEY MINING COMPANY . ("Grantee") with the approval of J. W. BEASLEY INTERESTS LLC (“Owner”).
RECITALS
|
A.
|
Grantor leases certain real property
more particularly described in Exhibit A attached hereto and by this reference
made a part hereof ("Premises"). Grantor warrants and represents that
it has a valid mining lease and agreement dated December 1, 2001, as amended,
with Owner of which Exhibit B is a copy.
|
|
|
B.
|
The parties agree for the purposes of
this Agreement that the Premises shall be deemed to include, without limitation,
the surface and subsurface of the Premises, all mines, ores, metals, mineral
rights and minerals thereon and thereunder, all veins, lodes, extralateral
rights and mineral deposits now controlled or hereafter acquired by Grantor
extending from or onto or contained in the Premises; and all water and
water rights therein, thereon or thereunder.
|
|
|
C.
|
Grantor and Grantee desire to enter
into this Agreement covering the Premises.
|
|
| D. |
Grantor also desires to grant to Grantee
an option to lease the Premises.
|
AGREEMENT
IN CONSIDERATION of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the promises and covenants contained herein, the parties agree as follows:
1. GRANT . Subject to Paragraph 8 below, Grantor grants exclusively to Grantee, its successors or assigns, the right to enter upon the Premises for the purpose of conducting a mineral evaluation of the Premises, including, without limitation, the right to drill and excavate holes, pits, shafts, and other excavations, construct roads and conduct surveys, explorations, sampling, investigations, and other operations in such a manner and to the extent that Grantee, in its sole judgment and discretion, may deem advisable for the purpose of ascertaining any and all facts related to the occurrence of Minerals (hereinafter defined) in and under the Premises and the metallurgical and physical properties of any Minerals discovered. The term "Minerals" shall mean all metallic and nonmetallic substances, whether now or at any time hereafter during the term of this Agreement, known as or considered minerals, including, without limitation, all base and precious metals, iron, and coal but excluding oil, gas and other liquid and gaseous hydrocarbons.
2. OPTION TO LEASE . Grantor hereby grants to Grantee the irrevocable and exclusive option ("Option to Lease") during the term hereof to enter into a lease of the Premises, which lease shall be in the form of Exhibit C, attached hereto and by this reference made a part hereof, and herein referred to as "Said Lease," subject to the terms and conditions herein set forth.
1
Lessee may exercise the Option to Lease from time to time at any time prior to the expiration of this Agreement. If and when Grantee shall elect to enter into Said Lease, it shall forward to Grantor executable copies of Said Lease together with 100,000 shares of Grantee’s common stock and within fifteen (15) days of receipt, Grantor shall execute and deliver Said Lease to Grantee together with a recordable short form thereof.
3. PAYMENTS . Grantee agrees to pay Grantor 10,000 shares of its common stock every six months, during the term of this Agreement, starting June 13, 2003. Grantor acknowledges that the first payment has been made.
4. TERM . This Agreement is granted for a two and one half [2 1/2] year term, commencing on June 13, 2003, unless sooner terminated under any of the provisions herein.
5. WORK COMMITMENT DURING EXPLORATION AGREEMENT . During the term of this Agreement, Grantee agrees to conduct an economic study of the resource identified by Newmont Exploration Limited on the Premises. Grantee agrees to calculate resources and produce an ultimate open pit design using Newmont’s drilling data with Gemcom software. Grantee agrees to conduct bench scale metallurgical tests, produce a conceptual engineering design of the mine, mineral processing plant, and tailings management system, and to construct an economic model with study quality capital and operating cost estimates using Lotus software.
6. PRODUCTION DURING TERM OF EXPLORATION AGREEMENT . During the term of this Agreement, Grantee may produce and sell Minerals derived from ores produced during exploration activities, including underground drifting and ramping. In addition, Grantee may produce and sell minerals from existing mine dumps which are more than 500 feet from the residence at 8601 Prichard Creek Road. Grantee shall pay Grantor a production royalty of 5% of the Net Smelter Return from such limited production.
7. TITLE TO PREMISES . This Agreement is executed and delivered expressly without warranty of any nature whatsoever on the part of Grantor, either expressed or implied, not even to the return of the consideration paid herefor. If Grantor controls less interest than the entire fee mineral estate, amounts to be paid Grantor may be reduced proportionately.
8. CONDUCT OF OPERATIONS .
8.1 Use of Premises . Grantee may use only so much of the surface of the Premises as shall be reasonably necessary for the exploration and evaluation contemplated in this Agreement. Grantee recognizes the surface of the Premises has many uses, including mining, exploration, timber cultivation and production, and other activities. Owner expressly reserves the right to use and manage the Premises for all uses except exploration for, development and mining of Minerals as provided herein, provided Owner shall not conduct or permit others to conduct any activities on the Premises which unreasonably interfere with Grantee's rights hereunder. Grantee shall, wherever practicable, minimize interference to Owner's activities as a result of Grantee's activities. Owner reserves the right to (i) harvest timber on the Premises, (ii) and occupy the surface of that portion of the Premises commonly known as 8601 Prichard Creek Road during the term of this Agreement.
2
8.2 Use of Roads . Grantee shall have the right to use Owner's existing road networks, whether currently existing or subsequently constructed, as are necessary to its exercise of the rights conveyed hereunder. The foregoing grant of rights is subject to any restriction or prohibition contained in any easements, permits or licenses granting Owner the right to utilize such roadways, including but not limited to absolute prohibitions against assignment, if any, hauling fees, traffic regulations, maintenance costs, construction costs, or other restrictions. Grantee in its use of roads, whether currently existing or hereafter constructed by either party, shall comply with all reasonable regulations promulgated by Grantor or Owner. Nothing contained herein shall prohibit Owner from modifying or terminating any easement, license, or permit granting Owner a right to use any road.
8.3 Caretakers. Caretakers retained by Grantor and Owner shall have the right to conduct recreational-type placer mining and metal detecting activities on the lower portion of Reeder Gulch below 3,050 feet elevation on the Premises, but such activities shall not involve any mechanized earthmoving equipment such as dozers, excavators or other mechanized equipment. In addition, this right is subject to and shall not conflict with exploration and mining operations conducted by Grantee.
8.4 Exclusion of Residential Area . Grantee shall not conduct any exploration or mining operations in the Residential Area without the written permission of Grantor. The Residential Area is part of the Premises and is described as 8601 Prichard Creek Road, and includes the residence, all outbuildings and any property on the Premises within 500 feet to the west, south, east, and north of the structures, except the north boundary shall not extend past the Newmont Road which lies to the north of the structures.
8.5 Exclusion of Trespassers. The Individuals listed in Exhibit D attached hereto shall not be allowed on the Premises under any circumstances. In the event any of the Individuals are seen or known to have been on the Premises by Grantee, Grantee shall request that the Sheriff file criminal trespass charges against those Individuals. If Grantee knowingly allows said Individuals to trespass on the Premises, this Exploration Agreement and Option to Lease shall be in default and Grantor can terminate this Agreement immediately.
9. TECHNICAL DATA . Grantee shall furnish Grantor, on a quarterly basis, with copies of all technical data pertaining to its operations hereunder, including but not limited to all geological, geophysical, geochemical, mapping, drilling, sampling, assay, and other data or information pertaining to Grantee's exploration operations hereunder. Such data shall be treated as confidential. Notwithstanding the foregoing, Grantee shall not be obligated to disclose to Grantor any interpretive data or information nor shall Grantee be obligated to disclose any information obtained from Newmont Exploration which might conflict with a confidentiality agreement between Newmont and Grantee dated June 17, 2003.
10. CONTROL OF EXPLORATION . Grantee shall have full discretion in the exploration of the Premises and shall in no event be obliged to pursue a specific schedule to explore for, develop, drill, mine, mill, or concentrate Minerals.
11. LESSER INTEREST . If Grantor controls less than the entire undivided interest in the Minerals, or in any tract included in the Premises, then any payments due Grantor under this Agreement shall be due Grantor only in the proportion that its interest bears to the whole undivided fee mineral interest. Any interest in the Premises and/or Minerals hereafter acquired by Grantor shall be automatically subject to this Agreement. If any such acquisition changes Grantor's interest in the Premises or Minerals, an appropriate adjustment will be made after Grantee receives written notice thereof from Grantor.
3
12. INDEMNITY . Grantee shall assume all liability in connection with its operations on the Premises and shall hold Grantor and Owner harmless from any and all liability which may arise out of Grantee's operations on the Premises. Grantee shall use its best efforts to ensure that the work performed by Grantee hereunder shall be in compliance with applicable environmental, safety and health requirements of federal, state and local governments. Upon the termination of this Agreement, Grantee shall return the Premises to Grantor free and clear of liens for labor done or work performed upon the Premises or materials furnished to it for the exploration thereof under this Agreement, but Grantee shall have the right to dispute or contest the validity of such liens. Grantee's liability under this Section shall terminate upon termination of this Agreement except for obligations incurred before the date of termination.
13. INSURANCE . Grantee will maintain general liability insurance, subject to availability at reasonable cost, during the term of this agreement in the amount of $2,000,000. Grantee will instruct its insurance agent to issue certificates showing Grantor and Owner as additional insured parties. Grantee will require all subcontractors, including drillers and mining contractors, to supply evidence of insurance and name Grantee, Grantor, and Owner as additional insured parties.
14. FORCE MAJEURE . Grantee shall not be liable or in default under any provisions of this Agreement for failure to perform any of its obligations hereunder during periods in which performance is prevented by any cause reasonably beyond Grantee's control, which causes hereinafter are called "force majeure." For the purposes of this Agreement the term "force majeure" shall include, but not be limited to, fires, floods, windstorms and other damage from the elements; strikes, war, insurrection, mob violence and riots; unavailability of materials, labor and transportation; unavailability of smelting or refining facilities; interference, action, legislation or regulation by governmental or military authority, including a requirement by such authority that an environmental impact statement, plan of operation or similar statement or document be prepared or approved; litigation; and acts of God or acts of the public enemy. The duration of this Agreement and of the time for completion of performance by Grantee of its rights and obligations hereunder shall be extended for a period equal to the period of disability as a result of the event of force majeure, provided Grantee gives Grantor written notice of the existence of the event of force majeure. All periods of force majeure shall be deemed to begin at the time Grantee stops performance hereunder by reason of force majeure. Notwithstanding the foregoing, the parties understand that an event of force majeure shall not excuse any obligation to make a payment of common stock required by this Agreement.
15. FIRST RIGHT OF REFUSAL . If, at any time during the term of this Agreement, Grantor shall, in response to a bona fide offer to purchase all or part of its interest in the Premises from a third party, desire to sell or otherwise dispose of such interest, it shall notify Grantee in writing of the party to whom it desires to sell such interest and the price at which and the terms upon which it desires to sell the same, and Grantee shall, within 30 days of receipt of the notice, notify Grantor in writing whether it wishes to purchase such interest at the price and on the terms set forth in the notice. If Grantee elects to purchase such interest, Grantor shall be bound to convey, assign, or otherwise transfer such interest to Grantee promptly thereafter at such price and on such terms. If Grantee elects not to purchase such interest or fails to give notice of its intention within the 30-day period, Grantor shall be
4
free to convey, assign, or otherwise transfer such interest to the third party at a price not less than stated in the notice or on terms more favorable than those stated in the notice. Any conveyance by Grantor to a third party shall be subject to the terms of this Agreement, including without limitation Grantee's right to lease the Premises. If Grantor shall not have so disposed of such interest to said third party within 90 days after receipt of notice that Grantee elects not to exercise its right of first refusal or after expiration of that party's 30 day period within which to give notice, the provisions of this Section shall again apply to the disposition by Grantor of any such interest.
16. ASSIGNMENT . Subject to the provisions of Section 15 above, Grantor may assign this Agreement whether or not Grantee’s consent is given. Grantee may not assign this Agreement without the consent of Grantor, which consent shall not be unreasonably withheld, except Grantee may assign this Agreement to an affiliate without Grantor’s consent. In the event of any assignment, the rights of either party hereunder and the provisions hereof shall extend to their successors and assigns, but no change or division in ownership of the Premises, however accomplished, shall operate to enlarge the obligations or diminish the rights of either party under this Agreement, and neither Grantee nor its successors or assigns shall ever be required to make payments or to render reports or notices to more than one party. In the event Grantor's interest in the Premises is now or hereafter owned by more than one party, Grantee may withhold further payments until all such owners have designated a single party to act for all of them hereunder in all respects, including but not limited to the giving and receiving of all notices and the receipt of all payments and reports. No such change or division in the ownership of the Premises shall be binding upon Grantee for any purpose until such person acquiring any interest has further furnished Grantee with the instrument or instruments, or certified copies thereof, constituting his claim of title from the original Grantor. Grantee shall have the right to subcontract with others for the performance of exploration work hereunder, subject to all of the terms of this Agreement, but no such subcontract shall relieve Grantee of its obligations to Grantor hereunder. Grantee hereby discloses to Grantor, which disclosure shall be kept confidential, that it has entered into a confidentiality agreement with Newmont North America Exploration Limited [Newmont] that requires Grantee to allow Newmont the right of first offer if Grantee proposes to dispose of its interest in this Agreement.
17. TERMINATION OF AGREEMENT .
17.1 By Grantor . If Grantee fails to keep and perform all of the terms and conditions of this Agreement on its part to be kept and performed, then Grantor may notify Grantee of the default in writing specifying the default. If within ten days after Grantee's receipt of such notice, in case of default arising through failure to make any payments required by this Agreement, and within 30 days in the case of any other default, except as provided in Paragraph 8.5, Grantee shall make such payments, or commence and diligently thereafter proceed to correct such other default, this Agreement shall continue in good standing. However, upon failure of Grantee to make such payment within ten days or to commence within 30 days to cure any other default and diligently thereafter proceed to correct the same, Grantor may then, by written notice or demand, forthwith terminate this Agreement and fully repossess itself of the Premises, and without prejudice to any other rights which might otherwise accrue to Grantor for the violation of the terms hereof. After such default and termination of this Agreement, Grantee shall have no further rights in or right to the possession of the Premises or any part thereof or to exercise the Option to Lease.
5
17.2 By Grantee . Grantee may terminate this Agreement in whole or in part at any time following the completion of the economic study set forth in Section 5 of this Agreement upon delivering written notice to Grantor. Said notice shall be effective upon delivery. Upon such termination, all right, title and interest of Grantee under this Agreement shall terminate as to that part of the Premises covered by the notice, and Grantee shall not be required to make any further payments, or to perform any further obligations hereunder as to said portion of the Premises, except payments or obligations which then have accrued under the express provisions of this Agreement and which have not been paid or performed.
18. RECORDING OF SHORT-FORM NOTICE . The parties hereby agree to execute a short-form counterpart of this Agreement contemporaneous herewith for the sole purpose of recordation in the real property records sufficient to give record notice, pursuant to the laws of the state where the Premises are located of the existence of this Agreement. This Agreement shall not be recorded without the consent of Grantee.
19. NOTICES . Any notice required or permitted to be given hereunder shall be in writing and shall be delivered in person or sent by regular mail. Notices so mailed shall be deemed effective on the third business day after mailing. Until change of address is communicated, all notices shall be addressed to:
| Grantor: | Paymaster Resources Incorporated | |
| P. O. Box 387 | ||
| Murray, Idaho 83874 | ||
| Grantee: | New Jersey Mining Company | |
| P.O. Box 1019 | ||
| Kellogg, Idaho 83837 |
20. GENERAL .
20.1 Modification . The parties hereto by mutual written agreement may, at any time and from time to time, amend this Agreement and any of the terms hereof.
20.2 Further Documents . The parties hereto further agree to execute all such further documents and do all such further things as may be necessary to give full effect to these presents.
20.3 Entire Agreement . This is the entire agreement between the parties and no modification shall be effective unless in writing and executed by the parties hereto.
20.4 Law . The terms and provisions of this Agreement shall be interpreted in accordance with the laws of the state where the Premises are located.
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20.5 Signing. Each party may rely upon the signature of each other party on this Agreement, which is transmitted by facsimile as constituting a duly authorized, irrevocable, actual, current delivery of this Agreement with the original ink signature of the transmitting party.
IN WITNESS WHEREOF, this instrument is executed as of the date above written.
| GRANTOR: | GRANTEE: | ||
| PAYMASTER RESOURCES INCORPORATED | NEW JERSEY MINING COMPANY | ||
| By: | /s/ John W. Beasley | By: | /s/ Fred W. Brackebusch |
| John W. Beasley, President | Fred W. Brackebusch, President | ||
| OWNER: | |||
| J. W. BEASLEY INTERESTS LLC | |||
| By: | /s/ John W. Beasley | ||
| John W. Beasley, President/Manager | |||
[The balance of this page has been intentionally left blank.]
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| STATE OF WISCONSIN | ) |
| )ss. | |
| COUNTY OF Waushara | ) |
On this 8 th day of September , 2003, before me, the undersigned, a Notary Public in and for the State of Wisconsin, personally appeared John W. Beasley , known to me and to me known to be the President of PAYMASTER RESOURCES INCORPORATED, a corporation whose name is subscribed to the foregoing instrument and acknowledged to me that said individual executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day in this certificate first above written.
| /s/ Judy Berglund | |
| Notary Public for the State of Wisconsin | |
| Residing at Waushara County, Poy Sippi, WI | |
| My commission expires: 05/06/07 |
| STATE OF IDAHO | ) |
| ) ss. | |
| COUNTY OF SHOSHONE | ) |
On this 5 th day of September , 2003, before me, the undersigned, a Notary Public in and for the State of Idaho, personally appeared Fred W. Brackebusch , known to me and to me known to be the President of NEW JERSEY MINING COMPANY, a corporation whose name is subscribed to the foregoing instrument and acknowledged to me that said officer executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day in this certificate first above written.
| Debra L. Hammerberg | |
| Notary Public for the State of Idaho | |
| Residing at Mullan, Idaho | |
| My commission expires: 09/17/07 |
8
| STATE OF WISCONSIN | ) |
| )ss. | |
| COUNTY OF Waushara | ) |
On this 8 th day of September , 2003, before me, the undersigned, a Notary Public in and for the State of Wisconsin, personally appeared John W. Beasley , known to me and to me known to be the President/Manager of J.W. BEASLEY INTERESTS LLC, a corporation whose name is subscribed to the foregoing instrument and acknowledged to me that said individual executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day in this certificate first above written.
| /s/ Judy Berglund | |
| Notary Public for the State of Wisconsin | |
| Residing at Waushara County, Poy Sippi, WI | |
| My commission expires: 05/06/07 |
[The balance of this page has been intentionally left blank.]
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EXHIBIT A
GOLDEN CHEST MINE PROPERTIES
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:
Euphernia 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 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 31° 53" West, 465.91 feet; thence
South 62° 42" West, 240.25 Feet; thence
South 46° 18" West, 251.9 feet; thence
South 31° 02" East, 373.88 feet; thence
North 27° 50" East, 434.47 feet to the place of beginning.
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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.
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.
EXHIBIT B
Mining Lease between Paymaster Resources Incorporated and J. W. Beasley Interests LLC
EXHIBIT C
Mining Lease Form.
EXHIBIT D
List of Individuals Not Allowed on the Premises
| 1. | Christopher Nick Kalatzes |
| 2. | Nick Kalatzes |
| 3. | Brenda Migliaccio Kalatzes |
| 4. | Jack Riddle |
| 5. | Dale Miller |
| 6. | David Miller |
| 7. | Sadie Miller |
| 8. | Warren Yeager |
| 9. | Sabrina Yeager |
11
EXHIBIT 10.6
EXPLORATION AGREEMENT AND OPTION TO LEASE
THIS EXPLORATION AGREEMENT AND OPTION TO LEASE dated as of November 7 , 2003, is between PRICHARD CREEK RESOURCE PARTNERS LLC ("Grantor"), and NEW JERSEY MINING COMPANY . ("Grantee").
RECITALS
|
A.
|
Grantor owns certain unpatented lode
claims more particularly described in Exhibit A attached hereto and by
this reference made a part hereof ("Premises")
|
|
|
B.
|
The parties agree for the purposes of
this Agreement that, subject to the paramount title of the United States,
the Premises shall be deemed to include, without limitation, the surface
and subsurface of the Premises, all mines, ores, metals, mineral rights
and minerals thereon and thereunder, all veins, lodes, extralateral rights
and mineral deposits now controlled or hereafter acquired by Grantor extending
from or onto or contained in the Premises; and all water and water rights
therein, thereon or thereunder.
|
|
|
C.
|
Grantor and Grantee desire to enter
into this Agreement covering the Premises.
|
|
| D. |
Grantor also desires to grant to Grantee
an option to lease the Premises.
|
AGREEMENT
IN CONSIDERATION of the sum of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and the promises and covenants contained herein, the parties agree as follows:
1. GRANT . Grantor grants exclusively to Grantee, its successors or assigns, the right to enter upon the Premises, subject to Bureau of Land Management rules, for the purpose of conducting a mineral evaluation of the Premises, including, without limitation, the right to drill and excavate holes, pits, shafts, and other excavations, construct roads and conduct surveys, explorations, sampling, investigations, and other operations in such a manner and to the extent that Grantee, in its sole judgment and discretion, may deem advisable for the purpose of ascertaining any and all facts related to the occurrence of Minerals (hereinafter defined) in and under the Premises and the metallurgical and physical properties of any Minerals discovered. The term "Minerals" shall mean all metallic and nonmetallic substances, whether now or at any time hereafter during the term of this Agreement, known as or considered minerals, including, without limitation, all base and precious metals, iron, and coal but excluding oil, gas and other liquid and gaseous hydrocarbons.
1
2. OPTION TO LEASE . Grantor hereby grants to Grantee the irrevocable and exclusive option ("Option to Lease") during the term hereof to enter into a lease of the Premises, which lease shall be in the form of Exhibit B, attached hereto and by this reference made a part hereof, and herein referred to as "Said Lease," subject to the terms and conditions herein set forth.
Lessee may exercise the Option to Lease from time to time at any time prior to the expiration of this Agreement. If and when Grantee shall elect to enter into Said Lease, it shall forward to Grantor executable copies of Said Lease together with 30,000 shares of Grantee’s common stock and within fifteen (15) days of receipt, Grantor shall execute and deliver Said Lease to Grantee together with a recordable short form thereof.
3. TERM . This Agreement is granted for a two and one half [2 1/2] year term, commencing on June 13, 2003, unless sooner terminated under any of the provisions herein.
4. WORK COMMITMENT AND CLAIM FEES . Grantee agrees to pay all maintenance fees and perform all required work including filing of required forms on a timely schedule to keep the unpatented claims in good standing. Grantee shall provide to Grantor copies of all forms filed with the Bureau of Land Management and Shoshone County. In addition, Grantee agrees to perform an assessment to assure that the unpatented claims of the Premises are properly laid out and monumented, according to BLM rules, and will correct any deficiences in the name of Grantor.
5. PRODUCTION DURING TERM OF EXPLORATION AGREEMENT . During the term of this Agreement, Grantee may produce and sell Minerals derived from ores produced during exploration activities, including underground drifting and ramping. Grantee shall pay Grantor a production royalty of 5% of the Net Smelter Return from such limited production.
6. TITLE TO PREMISES . This Agreement is executed and delivered expressly without warranty of any nature whatsoever on the part of Grantor, either expressed or implied, not even to the return of the consideration paid herefor. If Grantor controls less interest than the entire fee mineral estate, amounts to be paid Grantor may be reduced proportionately.
7. TECHNICAL DATA . Grantee shall furnish Grantor, on a quarterly basis, with copies of all technical data pertaining to its operations hereunder, including but not limited to all geological, geophysical, geochemical, mapping, drilling, sampling, assay, and other data or information pertaining to Grantee's exploration operations hereunder. Such data shall be treated as confidential. Notwithstanding the foregoing, Grantee shall not be obligated to disclose to Grantor any interpretive data or information nor shall Grantee be obligated to disclose any information obtained from Newmont Exploration which might conflict with a confidentiality agreement between Newmont and Grantee dated June 17, 2003.
8. CONTROL OF EXPLORATION . Grantee shall have full discretion in the exploration of the Premises and shall in no event be obliged to pursue a specific schedule to explore for, develop, drill, mine, mill, or concentrate Minerals.
2
9. LESSER INTEREST . If Grantor controls less than the entire undivided interest in the Minerals, or in any tract included in the Premises, then any payments due Grantor under this Agreement shall be due Grantor only in the proportion that its interest bears to the whole undivided fee mineral interest. Any interest in the Premises and/or Minerals hereafter acquired by Grantor shall be automatically subject to this Agreement. If any such acquisition changes Grantor's interest in the Premises or Minerals, an appropriate adjustment will be made after Grantee receives written notice thereof from Grantor.
10. INDEMNITY . Grantee shall assume all liability in connection with its operations on the Premises and shall hold Grantor and Owner harmless from any and all liability which may arise out of Grantee's operations on the Premises. Grantee shall use its best efforts to ensure that the work performed by Grantee hereunder shall be in compliance with applicable environmental, safety and health requirements of federal, state and local governments. Upon the termination of this Agreement, Grantee shall return the Premises to Grantor free and clear of liens for labor done or work performed upon the Premises or materials furnished to it for the exploration thereof under this Agreement, but Grantee shall have the right to dispute or contest the validity of such liens. Grantee's liability under this Section shall terminate upon termination of this Agreement except for obligations incurred before the date of termination.
11. INSURANCE . Grantee will maintain general liability insurance, subject to availability at reasonable cost, during the term of this agreement in the amount of $2,000,000. Grantee will instruct its insurance agent to issue certificates showing Grantor as an additional insured party. Grantee will require all subcontractors, including drillers and mining contractors, to supply evidence of insurance and name Grantee and Grantor as additional insured parties.
12. FORCE MAJEURE . Grantee shall not be liable or in default under any provisions of this Agreement for failure to perform any of its obligations hereunder during periods in which performance is prevented by any cause reasonably beyond Grantee's control, which causes hereinafter are called "force majeure." For the purposes of this Agreement the term "force majeure" shall include, but not be limited to, fires, floods, windstorms and other damage from the elements; strikes, war, insurrection, mob violence and riots; unavailability of materials, labor and transportation; unavailability of smelting or refining facilities; interference, action, legislation or regulation by governmental or military authority, including a requirement by such authority that an environmental impact statement, plan of operation or similar statement or document be prepared or approved; litigation; and acts of God or acts of the public enemy. The duration of this Agreement and of the time for completion of performance by Grantee of its rights and obligations hereunder shall be extended for a period equal to the period of disability as a result of the event of force majeure, provided Grantee gives Grantor written notice of the existence of the event of force majeure. All periods of force majeure shall be deemed to begin at the time Grantee stops performance hereunder by reason of force majeure. Notwithstanding the foregoing, the parties understand that an event of force majeure shall not excuse any obligation to make a payment of common stock required by this Agreement.
13. FIRST RIGHT OF REFUSAL . If, at any time during the term of this Agreement, Grantor shall, in response to a bona fide offer to purchase all or part of its interest in the Premises from a third party, desire to sell or otherwise dispose of such interest, it shall notify Grantee in writing of the party to whom it desires to sell such interest and the price at which and the terms upon which it desires
3
to sell the same, and Grantee shall, within 30 days of receipt of the notice, notify Grantor in writing whether it wishes to purchase such interest at the price and on the terms set forth in the notice. If Grantee elects to purchase such interest, Grantor shall be bound to convey, assign, or otherwise transfer such interest to Grantee promptly thereafter at such price and on such terms. If Grantee elects not to purchase such interest or fails to give notice of its intention within the 30-day period, Grantor shall be free to convey, assign, or otherwise transfer such interest to the third party at a price not less than stated in the notice or on terms more favorable than those stated in the notice. Any conveyance by Grantor to a third party shall be subject to the terms of this Agreement, including without limitation Grantee's right to lease the Premises. If Grantor shall not have so disposed of such interest to said third party within 90 days after receipt of notice that Grantee elects not to exercise its right of first refusal or after expiration of that party's 30 day period within which to give notice, the provisions of this Section shall again apply to the disposition by Grantor of any such interest.
14. ASSIGNMENT . Subject to the provisions of Section 13 above, Grantor may assign this Agreement whether or not Grantee’s consent is given. Grantee may not assign this Agreement without the consent of Grantor, which consent shall not be unreasonably withheld, except Grantee may assign this Agreement to an affiliate without Grantor’s consent. In the event of any assignment, the rights of either party hereunder and the provisions hereof shall extend to their successors and assigns, but no change or division in ownership of the Premises, however accomplished, shall operate to enlarge the obligations or diminish the rights of either party under this Agreement, and neither Grantee nor its successors or assigns shall ever be required to make payments or to render reports or notices to more than one party. In the event Grantor's interest in the Premises is now or hereafter owned by more than one party, Grantee may withhold further payments until all such owners have designated a single party to act for all of them hereunder in all respects, including but not limited to the giving and receiving of all notices and the receipt of all payments and reports. No such change or division in the ownership of the Premises shall be binding upon Grantee for any purpose until such person acquiring any interest has further furnished Grantee with the instrument or instruments, or certified copies thereof, constituting his claim of title from the original Grantor. Grantee shall have the right to subcontract with others for the performance of exploration work hereunder, subject to all of the terms of this Agreement, but no such subcontract shall relieve Grantee of its obligations to Grantor hereunder. Grantee hereby discloses to Grantor, which disclosure shall be kept confidential, that it has entered into a confidentiality agreement with Newmont North America Exploration Limited [Newmont] that requires Grantee to allow Newmont the right of first offer if Grantee proposes to dispose of its interest in this Agreement.
15. TERMINATION OF AGREEMENT .
15.1 By Grantor . If Grantee fails to keep and perform all of the terms and conditions of this Agreement on its part to be kept and performed, then Grantor may notify Grantee of the default in writing specifying the default. If within ten days after Grantee's receipt of such notice, in case of default arising through failure to make any payments required by this Agreement, and within 30 days in the case of any other default, Grantee shall make such payments, or commence and diligently thereafter proceed to correct such other default, this Agreement shall continue in good standing. However, upon failure of Grantee to make such payment within ten days or to commence within 30 days to cure any other default and diligently thereafter proceed to correct the same, Grantor may then, by written notice or demand, forthwith terminate this Agreement and fully repossess itself of the Premises, and without prejudice to
4
any other rights which might otherwise accrue to Grantor for the violation of the terms hereof. After such default and termination of this Agreement, Grantee shall have no further rights in or right to the possession of the Premises or any part thereof or to exercise the Option to Lease.
15.2 By Grantee . Grantee may terminate this Agreement in whole or in part at any time upon delivering written notice to Grantor. Said notice shall be effective upon delivery. Upon such termination, all right, title and interest of Grantee under this Agreement shall terminate as to that part of the Premises covered by the notice, and Grantee shall not be required to make any further payments, or to perform any further obligations hereunder as to said portion of the Premises, except payments or obligations which then have accrued under the express provisions of this Agreement and which have not been paid or performed.
16. RECORDING OF SHORT-FORM NOTICE . The parties hereby agree to execute a short-form counterpart of this Agreement contemporaneous herewith for the sole purpose of recordation in the real property records sufficient to give record notice, pursuant to the laws of the state where the Premises are located of the existence of this Agreement. This Agreement shall not be recorded without the consent of Grantee.
17. NOTICES . Any notice required or permitted to be given hereunder shall be in writing and shall be delivered in person or sent by regular mail. Notices so mailed shall be deemed effective on the third business day after mailing. Until change of address is communicated, all notices shall be addressed to:
| Grantor: | Prichard Creek Resource Partners LLC | |
| P. O. Box 387 | ||
| Murray, Idaho 83874 | ||
| Grantee: | New Jersey Mining Company | |
| P.O. Box 1019 | ||
| Kellogg, Idaho 83837 |
18. GENERAL.
18.1 Modification . The parties hereto by mutual written agreement may, at any time and from time to time, amend this Agreement and any of the terms hereof.
18.2 Further Documents . The parties hereto further agree to execute all such further documents and do all such further things as may be necessary to give full effect to these presents.
18.3 Entire Agreement . This is the entire agreement between the parties and no modification shall be effective unless in writing and executed by the parties hereto.
18.4 Law . The terms and provisions of this Agreement shall be interpreted in accordance with the laws of the state where the Premises are located.
5
18.5 Signing. Each party may rely upon the signature of each other party on this Agreement, which is transmitted by facsimile as constituting a duly authorized, irrevocable, actual, current delivery of this Agreement with the original ink signature of the transmitting party.
IN WITNESS WHEREOF, this instrument is executed as of the date above written.
| GRANTOR: | GRANTEE: |
| PRICHARD CREEK RESOURCE | NEW JERSEY MINING COMPANY |
| PARTNERS LLC | |
| By: /s/ John W. Beasley | By: /s/ Fred W. Brackebusch |
| John W. Beasley, Secretary | Fred W. Brackebusch, President |
[The balance of this page has been intentionally left blank.]
6
| STATE OF WISCONSIN | ) | ||
| ) ss. | |||
| COUNTY OF Waushara | ) | ||
On this 13 th day of November , 2003, before me, the undersigned, a Notary Public in and for the State of Wisconsin, personally appeared John W. Beasley , known to me and to me known to be the Secretary of PRICHARD CREEK RESOURCE PARTNERS LLC, a corporation whose name is subscribed to the foregoing instrument and acknowledged to me that said individual executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day in this certificate first above written.
| Pamela Strey | |
| Notary Public for the State of Wisconsin | |
| Residing at Fremont, WI | |
| My commission expires: 09/19/04 |
| STATE OF IDAHO | ) |
| ) ss. | |
| COUNTY OF SHOSHONE | ) |
On this 7 th day of November , 2003, before me, the undersigned, a Notary Public in and for the State of Idaho, personally appeared Fred W. Brackebusch , known to me and to me known to be the President of NEW JERSEY MINING COMPANY, a corporation whose name is subscribed to the foregoing instrument and acknowledged to me that said officer executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal the day in this certificate first above written.
| Debra L. Hammerberg | |
| Notary Public for the State of Idaho | |
| Residing at Mullan, Idaho | |
| My commission expires: 9/17/07 | |
[The balance of this page has been intentionally left blank.]
8
Exhibit 14
NEW JERSEY MINING COMPANY
CODE OF ETHICS FOR CEO AND SENIOR FINANCIAL OFFICERS
1. The CEO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the SEC. Accordingly, it is the responsibility of the CEO and each senior financial officer promptly to bring to the attention of the Disclosure Committee (or in the event that the Company has not established a Disclosure Committee, to the Board of Directors) any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Disclosure Committee in fulfilling its responsibilities.
2. The CEO and each senior financial officer shall promptly bring to the attention of the Disclosure Committee and the Audit Committee (or in the event that the Company has not established an audit committee, to the Board of Directors) any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.
3. The CEO and each senior financial officer shall promptly bring to the attention of the General Counsel or the CEO and to the Audit Committee any information he or she may have concerning any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.
4. The CEO and each senior financial officer shall promptly bring to the attention of the General Counsel or the CEO and to the Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of these procedures.
5. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of these procedures by the CEO and the Company’s senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to these procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual’s employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in questions had committed other violations in the past.
Exhibit 18
|
D
ECORIA,
M AICHEL & T EAGUE A PROFESSIONAL SERVICES FIRM |
1105 W. Francis Suite A | |
| Spokane, Washington 99205 | ||
| jeff@dm-t.com | ||
| Facsimile (509) 535-9391 | ||
| Telephone (509) 535-3503 | ||
February 19, 2004
Board of Directors
New Jersey Mining Company
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to your Form 10-KSB filing pursuant to Item 601 (18) of Regulation S-B.
We have audited the financial statements included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2003 and issued our report thereon dated February 19, 2004. Note 2 to the financial statements describes a change in accounting principle from capitalizing mining exploration costs to expensing such costs as incurred during the exploration stage of specific projects. It should be understood that the preferability of one acceptable method of accounting over another for mining exploration costs has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management’s determination that this change in accounting principle is preferable. Based on our reading of management’s stated reasons and justification for this change in accounting principle in the Form 10-KSB, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company’s circumstances, the adoption of a preferable accounting principle in conformity with Accounting Principles Board Opinion No. 20.
Very truly yours,
DeCoria, Maichel and Teague P.S.
Exhibit 31.1
Certification
I, Fred W. Brackebusch, certify that:
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(1)
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I have reviewed this annual
report on Form 10-KSB of New Jersey Mining Company.
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(2)
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Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
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(3)
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Based on my knowledge, the
financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the small business issuer as of,
and for, the periods presented in this report;
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(4)
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I am responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the small business issuer and have:
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(a)
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Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to
the small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
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(b)
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Designed such internal control over
financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles;
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(c)
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Evaluated the effectiveness of the small
business issuer's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
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(d)
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Disclosed in this report any change
in the small business issuer's internal control over financial reporting
that occurred during the small business issuer's most recent fiscal quarter
(the small business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the small business issuer's internal control over financial reporting;
and
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(5)
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I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the small business issuer's auditors and the audit committee of the
small business issuer's board of directors (or persons performing the
equivalent functions):
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(a)
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All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial information;
and
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Any fraud, whether or not material,
that involves management or other employees who have a significant role
in the small business issuer's internal control over financial reporting.
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Date: March 26, 2004
By /s/ FRED W. BRACKEBUSCH
Fred W. Brackebusch, President, Treasurer & Director
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of New Jersey Mining Company, (the "Company") on Form 10-KSB for the period ending December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Fred W. Brackebusch, President, Treasurer and Director of New Jersey Mining Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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(1)
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The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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The information contained in the Report
fairly presents, in all material respects, the financial condition and
results of operations of the Company.
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Date: March 26, 2004
By /s/ FRED W. BRACKEBUSCH
Fred W. Brackebusch, President, Treasurer & Director
[The balance of this page has been intentionally left blank.]
Exhibit 99.1
AUDIT COMMITTEE PRE-APPROVAL POLICY
I. STATEMENT OF PRINCIPLES
The Audit Committee (or if no Audit Committee has been appointed, the entire Board of Directors performing the function of the Audit Committee) is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.
The appendices to this Policy, which are for illustrative purposes only, describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will annually review and pre-approve the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent auditor to management.
II. DELEGATION
The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
III. AUDIT SERVICES
The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other matters.
In addition to the annual Audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other Audit services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved the Audit services listed in Appendix A. All other Audit services not listed in Appendix A must be specifically pre-approved by the Audit Committee.
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IV. AUDIT-RELATED SERVICES
Audit-related services are assurances and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has pre-approved the Audit-related services listed in Appendix B. All other Audit-related services not listed in Appendix B must be specifically pre-approved by the Audit Committee.
V. TAX SERVICES
The Audit Committee believes that the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved the Tax services listed in Appendix C. All Tax services involving large and complex transactions not listed in Appendix C must be specifically pre-approved by the Audit Committee.
VI. ALL OTHER SERVICES
The Audit Committee may grant general pre-approval to those permissible non-audit service classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the auditor. The Audit Committee has pre-approved the All Other services listed in Appendix D. Permissible All Other services not listed in Appendix D must be specifically pre-approved by the Audit Committee.
VII. PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.
VIII. PROCEDURES
Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Chief Financial Officer, or the person performing such function for the Company, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
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