What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-04 · 49 added, 54 removed, 57 unchanged (64% of the section changed)

16 unchanged sentences

Critical Accounting Estimates

We have, besides our estimates of the amount of depreciation on our assets, two critical accounting estimates.

The ounces of gold contained in our process and concentrate inventory is based on assays taken at the time the ore is processed and the ounces of gold contained in shipped concentrate which is based upon assays taken prior to shipment however subject to final assays at the refinery, these shipments are also subject to the fluctuation in gold prices between our shipment date and estimated and actual final settlement date.

Also, the reclamation bond obligation on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations.

Our concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement.

However, we can reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes.

The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement.

The Company has, besides its estimates of the amount of depreciation on its assets, two critical accounting estimates.

The ounces of gold contained in process and concentrate inventory is based on assays taken at the time the ore is processed and the ounces of gold contained in shipped concentrate which is based upon assays taken prior to shipment, however, subject to final assays at the refinery, these shipments are also subject to the fluctuation in gold prices between shipment date and estimated and actual final settlement date.

Also, the reclamation bond obligation on the Company’s balance sheet is based on an estimate of the future cost to recover and remediate its properties as required by permits upon cessation of operations and may differ when operations are actually ceased.

The Company’s concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement.

However, the Company can reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes.

The embedded derivative contained in the Company’s concentrate sales is adjusted to fair value through earnings each period prior to final settlement.

It is unlikely a significant reversal of revenue for the concentrate receivable will occur upon final settlement of the lots.

As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known.

At September 30, 2024, metals that had been sold but not finally settled included 5,496 ounces of which 1,539 ounces were sold at a predetermined price with the remaining 3,957 exposed to future price changes until prices are locked in based on the month of settlement.

As such, the Company uses the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known.

At March 31, 2025, metals that had been sold but not finally settled included 6,768 ounces of which 1,543 ounces were sold at a predetermined price with the remaining 5,225 exposed to future price changes until prices are locked in based on the month of settlement.

The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable.

The asset retirement obligation and asset on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations.

At September 30, 2024 we reviewed our December 31, 2023 estimate that the cost of the machine and man hours probable to be needed to put our properties in the condition required by our permits once we cease operations.

The September 30, 2024 estimated costs would be $104,000 for the Golden Chest Mine property and $224,000 for the New Jersey Mine and Mill.

For purposes of the estimate, we evaluated the expected life in years and costs that, initially, are comparable to rates that we would incur at the present.

The asset retirement obligation and asset on the Company’s balance sheet is based on an estimate of the future cost to recover and remediate its properties as required by permits upon cessation of operations and may differ when operations are actually ceased.

At March 31, 2025 the Company reviewed its December 31, 2024 estimate that the cost of the machine and man hours probable to be needed to put its properties in the condition required by permits once operations are ceased.

The March 31, 2025 estimated costs would be $104,000 for the Golden Chest Mine property and $224,000 for the New Jersey Mine and Mill.

For purposes of the estimate, the Company evaluated the expected life in years and costs that, initially, are comparable to rates that it would incur at the present.

An expected present value technique is used to estimate the fair value of the liability.

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In addition, the asset retirement cost is amortized over the life of the related asset.

We are adding to the liability each year, and amortizing the asset over the estimated life, which decreases our net income in total each year.

The Company is adding to the liability each year, and amortizing the asset over the estimated life, which decreases net income in total each year.

Changes resulting from revisions to the timing or amount of the original estimate of undiscounted cash flows are recognized as either an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset.

3 unchanged sentences

Separately, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and able to be reasonably estimated.

Highlights during the third quarter of 2024 include:

Highlights during the first quarter of 2025 include:

REE Exploration

Attended the Adamas Rare Earth Mines, Magnets and Motors Conference in Toronto, Canada during the quarter.

Subsequent to quarter end, Idaho Strategic representatives attended the International Rare Earth Elements Conference in Washington DC.

During the quarter the Company announced its REE exploration plans for the 2025 field season.

Golden Chest/Operations

At the Golden Chest, ore mined from underground stopes totaled approximately 11,400 tonnes with all of the tonnage coming from H-Vein stopes.

A total of 3,820 cubic meters of cemented rockfill (“CRF”) were placed during the quarter which is a new quarterly record.

The Main Access Ramp (“MAR”) and associated attack ramps were advanced by approximately 154 meters during the quarter.

For the quarter ended September 30, 2024, a total of 10,470 dry metric tonnes (“dmt”) were processed at the Company’s New Jersey mill with a flotation feed head grade of 9.32 gpt gold and gold recovery of 93.1%.

An exploration program consisting of both underground and surface core drilling was continued during the third quarter.

Underground drilling was focused on exploring the Klondike area and targeting the newly found Red Star zone and northerly projections of the H-vein.

Surface drilling was completed in Butte Gulch and this rig was moved to the northern area of the Golden Chest.

A third drill rig was moved to Wesp Gulch to drill down-dip on the Idaho fault and associated veining during the quarter.

A total of 176 meters of exploration drifting were completed during the first quarter.

Once that was complete, the development crews moved to the Main Access Ramp (“MAR”) and completed 77 meters of ramping and started a ventilation/escapeway raise.

A total of 3,430 cubic meters of backfilling was also completed during the quarter.

For the quarter ended March 31, 2025, a total of 11,337 dry metric tonnes (“dmt”) were processed at the Company’s New Jersey Mill with a flotation feed head grade of 8.67 gpt gold and gold recovery of 91.7%.

Significant progress was made at the New Jersey Mill in the construction of the new tailings filtration circuit which was 80% complete at the end of the first quarter.

Commissioning of the tailings filtration circuit will take place in the second quarter.

An exploration program consisting of primarily surface core drilling was continued during the first quarter.

A total of 4,230 meters of drilling was completed on various targets including the Paymaster, the Jumbo, and the H-vein..

Underground drilling was restarted near the end of quarter with drilling focused on exploring the Klondike area and targeting the newly found Red Star zone and northerly projections of the H-vein.

Results of Operations

Our financial performance during the quarter is summarized below:

Revenue increased 86.4% from $3,301,221 to $6,153,287 for the three-month periods ended September 30, 2023 and 2024, respectively, Year to date revenue increased 84% from $9,879,332 to $18,177,607 for the nine-month periods ended September 30, 2023 and 2024, respectively.

The increase in revenue is largely due to the increased gold production compared to previous periods as well as a higher average gold price recognized on ounces produced.

Gold production is expected to remain at approximately this level for the remainder of the year.

Gross profit as a percentage of sales increased from 33.5% in the third quarter of 2023 to 48.7% in the third quarter of 2024.

For the nine-month periods ending September 30, 2024 and 2023 gross profit as a percentage of sales increased to 49% from 28%.

Exploration expense increased in both the three-month and nine-month periods ending September 30, 2024, when compared to the same periods in 2023, due to an increase in surface and underground drilling activity at the Company’s Golden Chest Mine.

Drilling is expected to continue throughout the fourth quarter which may result in an increased exploration expense when compared to prior periods.

Operating income for the three-month period ended September 30, 2024 was $1,439,534 which is an increase of $1,026,073 from operating income of $413,461 in the third quarter of 2023.

For the nine-month period ending September 30, 2024, operating income of $5,677,103 increased by $4,960,632 over the same period in 2023.

Other income increased $559,452 from an expense of $9,478 in the third quarter of 2023, to income of $549,974 in the same period in 2024.

Other income increased $575,621 from $27,520 in the nine months ending September 30, 2023, to $603,141 in the same period in 2024.The increase was from increased interest income and gains on treasuries from the company’s short term investment account due to having a higher cash balance as well as government grant income of $418,000 for an electrical upgrade at the Golden Chest Mine in 2024.

Net income increased $1,585,525 from net income of $403,983 for the three-month period ended September 30, 2023 to net income of $1,989,508 for the three-month period ending September 30, 2024.

Net income increased $5,536,253 from net income of $743,991 in the nine-month period ending September 30, 2023, to net income of $6,280,244 in the same period in 2024.

The consolidated net income for the nine-month periods ending September 30, 2024 and 2023 included non-cash charges as follows:

depreciation and amortization of $1,443,232 ($1,034,521 in 2023), loss on disposal of equipment of $1,431 (gain of $224 in 2023), accretion of asset retirement obligation of $13,954 ($11,874 in 2023), loss on investment in equity securities of $453 ($4,423 in 2023), equity income on investment in Buckskin of $1,579 ($2,965 in 2023), and write down of reclamation bond of $300 (none in 2023).

Cash cost per ounce for the three-month period ending September 30, 2024 remained relatively flat compared to the same period in 2023.

For the nine-month period ending September 30, 2024, cash cost per ounce decreased due to a 53.7% increase in ounces produced compared to the nine-month period ending September 30, 2023.

All in sustaining cost per ounce increased during the three-month period ending September 30, 2024 compared to the same period in 2023 due to an increase in exploration costs from underground and surface drilling at the Golden Chest Mine.

For the nine-month period ending September 30, 2024, all in sustaining costs decreased slightly as the increased exploration cost was largely made up for by the increased production when compared to the nine-month period ending September 30, 2023.

Adjusted all in sustaining costs without exploration expenses were $1,109.79 and $1,128.78 per ounce for the three and nine-month periods ending September, 30 2024, respectively.

Idaho Strategic’s financial performance during the quarter is summarized below:

Revenue increased 23.4% to $7,278,536 from $5,898,938 for the three-month periods ended March 31, 2025 and 2024 respectively.

The increase in revenue was due to the increased average gold price realized on ounces sold which was $1,968.28 in the first quarter of 2024 and $2,848.74 in the first quarter of 2025.

Gross profit as a percentage of sales increased slightly from 48.1% in the first quarter of 2024 to 50.8% in the first quarter of 2025.

Exploration expense increased significantly in the first quarter of 2025 when compared to the same period in the prior year due to core drilling that ran through the entire first quarter this year versus none in the first quarter last year.

This quarterly exploration expense is expected to continue, and may increase, throughout the remainder of 2025 as the Company continues to invest in the future of the Golden Chest and advance other exploration properties.

Operating income for the three-month period ended March 31, 2025 was $1,401,254 which is a decrease of $740,719 from operating income of $2,141,973 in the first quarter of 2024.

The decrease is due to the increase in exploration expense when compared to the three-month period ended March 31, 2024.

Other income increased $176,756 from income of $13,841 in the first quarter of 2024, to income of $190,597 in the same period in 2025.

The increase was from increased interest income and gains on US treasuries from the company’s short term investment account which was not in place yet in the first quarter of 2024.

Net income for the three-month period ended March 31, 2025 was $1,591,851 compared to $2,155,814 in 2024.

The decrease in net income is due to the large increase in exploration expense, as well as the stock-based compensation expense of $495,146 in this period and none in the same period in 2024.

The consolidated net income for the three-month periods ended March 31, 2025 and 2024 included non-cash charges as follows:

depreciation and amortization of $549,621 ($501,788 in 2024), loss on sale of equipment of $239,898 ($4,409 in 2024), accretion of asset retirement obligation of $4,887 ($4,575 in 2024), loss on investment in equity securities of $0 ($453 in 2024), equity income on investment in Buckskin of $1,346 ($1,867 in 2024), and stock-based compensation expense of $495,146 (none in 2024).

Cash cost per ounce for the three-month period ended March 31, 2025 remained flat compared to the same period in 2024 as the Company continues to stay diligent in keeping production costs low.

All in sustaining cost per ounce increased during the three-month period ended March 31, 2025 compared to the same period in 2024 due to an increase in exploration costs from underground and surface drilling at the Golden Chest Mine.

Adjusted all in sustaining costs without exploration expenses were $993.74 and $1,115.11 per ounce for the three-month periods ended March, 31 2025 and 2024, respectively.

Cash Costs and All In Sustaining Costs (“AISC”) Reconciliation to Generally Accepted Accounting Principles (“GAAP”)

Reconciliation of cost of sales and other direct production costs and depreciation, depletion, and amortization (GAAP) to cash cost per ounce and AISC per ounce (non-GAAP).

The table below presents reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion, and amortization to the non-GAAP measures of cash cost per ounce and all in sustaining costs per ounce for the Company’s gold production in the three and nine-month periods ended September 30, 2024, and 2023.

Cash cost per ounce is an important operating measure that we utilize to measure operating performance.

AISC per ounce is an important measure that we utilize to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital.

Cash cost per ounce is an important operating measure that is utilized to measure operating performance.

AISC per ounce is an important measure that is utilized to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital.

Current GAAP measures used in the mining industry, such as cost of goods sold do not capture all of the expenditures incurred to discover, develop, and sustain gold production.

At September 30, 2024, the Company changed the way sustaining capital is calculated to better reflect actual costs required to sustain mining operations.

During 2024, the Company changed the way sustaining capital is calculated to better reflect actual costs required to sustain mining operations.

Prior periods have been restated in the table below to reflect this change.

September 30, 2024

September 30, 2023

Cost of sales and other direct production costs and depreciation and amortization

Depreciation and amortization

Change in concentrate inventory

Cost of sales and other direct production costs and depreciation, depletion, and amortization

Less depreciation, depletion, amortization and stock-based compensation

Change in inventory

Less REE exploration costs

6 unchanged sentences

Financial Condition and Liquidity

For the Nine-Months Ended September 30,

For the Three-Months Ended

Net cash provided (used) by:

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis