Idaho Strategic Resources, Inc. 10-Q

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF O PERATIONS Plan of Operation Idaho Strategic is a gold producer and critical minerals/rare earth element (“REE”) exploration company focused on a diversified asset base and cash flows from operations. Its portfolio of mineral properties are located in the historic producing silver and gold districts of the Coeur d’Alene Mining region of north Idaho and the Elk City region of north-central Idaho, as well as the historic REE-Thorium Belt located near the city of Salmon in central Idaho. The Company’s plan of operation is to generate positive cash flow, increase its gold production and asset base over time while being mindful of corporate overhead. The Company’s management is focused on utilizing its in-house technical and operating skills to build a portfolio of producing mines and milling operations with a focus on gold production and exploration for REEs. The Company’s gold properties include: the Golden Chest Mine (currently in production), and the New Jersey Mill (majority ownership interest), as well as the Eastern Star exploration property and other less advanced properties. The Company’s primary focus as it relates to its gold properties is to continue to grow production at the Golden Chest Mine and look to reinvest the cash flow into both the Golden Chest, the New Jersey Mill, and furthering its exploration efforts near the Golden Chest, as well as at its REE properties. In addition to its gold properties, Idaho Strategic has three REE exploration properties in Idaho known as Lemhi Pass, Diamond Creek, and Mineral Hill. Following observation of industry dynamics and in early response to events impacting long-term domestic critical mineral supply and demand trends, the Company’s strategic expansion into REE’s also aids in diversifying its holdings. The Company believes the anticipated demand for these elements in the electrification of motorized vehicles, defense spending, and a renewed focus on the United States’ domestic critical minerals supply chain security may benefit domestic holders of such assets. The Company also believes it has a first-mover advantage with its addition of recognized REE land holdings in Idaho. To date, Idaho Strategic has conducted numerous exploration programs on its REE properties which include drilling, trenching, sampling, and mapping of certain areas within the Company’s 19,090-acre landholdings. Idaho Strategic has been able to demonstrate and utilize its track record of operations and experience in mining, milling, and exploring at the Golden Chest to develop relationships with different state government agencies, universities, national labs, and other government and non-government entities to advance its REE exploration activities on multiple fronts. Idaho Strategic plans to continue to look for additional partnerships to find mutually beneficial solutions to advance the U.S.' domestic REE supply chain. Critical Accounting Estimates The Company has three 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. Additionally, 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. Finally, the amortization of development costs at the Golden Chest Mine is based on an estimate of reserves and measured and indicated resources calculated annually by the Company’s mine engineers. 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, 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 September 30, 2025, metals that had been sold but not finally settled included 9,533 ounces of which 8,384 ounces were sold at a predetermined price with the remaining 1,149 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. 15 Table of Contents 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 September 30, 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 September 30, 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. This includes inflating the estimated costs in today’s dollars using a reasonable inflation rate up to the date of expected retirement and discounting the inflated costs using a credit-adjusted risk-free rate. Upon initial recognition of the liability, the carrying amount of the related long-lived asset is increased by the same amount. The liability is accreted over time through periodic charges to earnings. In addition, the asset retirement cost is amortized over the life of the related asset. 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. Upward revisions of the amount of undiscounted estimated cash flows are discounted using the current credit-adjusted risk-free rate. Downward revisions in the amount of undiscounted estimated cash flows are discounted using the credit-adjusted risk-free rate that existed when the original liability was recognized. The Company reviews, on an annual basis, unless otherwise deemed necessary, the asset retirement obligations. 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. Amortization of development costs is calculated using the units-of-production method over the expected life as per the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 360-10-35-4. This includes the cost to define proven and probable reserves and measured and indicated resources accessible via the Main Access Ramp (“MAR”). Measured resources are 90-100% interpolated, and indicated resources 75-80% interpolated, using a 2 grams per tonne gold cut-off grade at the diluted minimum mining width. Conservative estimation parameters (three samples within 25 meters for measured, two within 50 meters for indicated) and economic factors ensure viability. Inferred resources are excluded to reduce uncertainty, and therefore, the volumes are risk-adjusted. Assumptions are regularly evaluated, with material deviations disclosed to ensure a systematic and rational cost allocation. More information on the Company’s reserves and resources can be found in the Technical Report Summary For the Golden Chest Mine which was included as Exhibit 96.1 to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2025. Highlights during the third quarter of 2025 include: REE Exploration · The Company announced the discovery of a carbonatite with strong REE mineralization at the Lucky Horseshoe prospect within the Lemhi Pass project. Initial samples taken from outcrop assayed up to 6.14% total rare earth oxides with ratios of 65% magnet rare earth oxides (Nd, Pr, Dy, Tb) and 11% SEG oxides (Sm, Eu, Gd). · Idaho Strategic sampled greater than 17.6% total REEs from its recently added Cardinal prospect. The Cardinal prospect is the third identified carbonatite occurrence at the Company’s Mineral Hill project, known for its high grade monazite hosted REEs at surface. · Idaho Strategic initiated a large-scale geophysics program across its Mineral Hill and Lemhi Pass projects including LiDAR, magnetics, and radiometrics surveys. The Company is interpreting and utilizing the data as it is received from the geophysics contractor to aid with additional exploration efforts and drill program planning. · The Company initiated a soil sampling program covering many key prospects across the Idaho portion of its Lemhi Pass project. Initial success of the program at identifying areas of anomalous REEs in soils has led to an extension of the project scope. Soil sampling work is ongoing and will be utilized to aid in the planning of drill programs and other future exploration work. Golden Chest/Operations · At the Golden Chest, ore mined from underground stopes totaled approximately 10,570 tonnes with all of the tonnage coming from H-Vein stopes. · During the quarter, a total of 111 meters of development was completed in the MAR and associated workings including and escapeway/ventilation raise. A total of 2,810 cubic meters of backfilling was completed during the quarter. · For the quarter ended September 30, 2025, a total of 10,570 dry metric tonnes (“dmt”) were processed at the Company’s New Jersey Mill with a flotation feed head grade of 9.94 gpt gold and gold recovery of 93.1%. · With the New Jersey Mill tailings filtration circuit construction completed, construction efforts transitioned to the fabrication of paste backfill equipment and support framework. Electrical work was also completed on the paste backfill circuit. Construction also continued on a new surface warehouse and dry building. · An exploration program consisting of surface and underground core drilling was continued during the third quarter at the Golden Chest and the surface core drilling program was completed in the Murray Gold Belt. A total of 5,335 meters of drilling was completed at the Golden Chest targeting the Paymaster, the Red Star, and the H-vein. A total of 3,747 meters of drilling was completed in the Murray Gold Belt at the King Mine, Argus, McComber and Butte Gulch prospects, Results of Operations Idaho Strategic’s financial performance during the quarter is summarized below: · Revenue increased 80.1% for the three-month period ended September 30, 2025 when compared to the same period in the prior year. For the nine-month period ended September 30, 2025, revenue increased 53.1% when compared to the same period in the prior year. The increase in revenue for both the three and nine-month periods was primarily due to the increased average gold price realized on ounces sold which was $3,578.07 for the three-month period and $3,249.28 for the nine-month period ended September 30, 2025. For the three and nine-month periods ended September 30, 2024 it was $2,411.16 and $2,178.79, respectively. · Gross profit as a percentage of sales showed an increase of 14.9% from 48.7% in the three-month period ended September 30, 2024 to 63.6% in the three-month period ended September 30, 2025. When comparing the nine-month periods ended September 30, 2025 and 2024 gross profit as a percentage of sales increased from 49.0% to 58.3%. 16 Table of Contents · Exploration expense increased $2,712,860 and $5,441,150 when comparing the three and nine-month periods ended September 30, 2025 and 2024, respectively. The increase is due to increased core drilling activity this year compared to last as well as geophysics conducted on multiple properties which did not occur last year. This quarterly exploration expense is expected to continue 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 September 30, 2025 was $2,593,970 which is an increase of 80.2% from the same period in 2024. Operating income for the nine-month period ended September 30, 2025 was $6,512,098 which is an increase of 14.7%. The increase in both the three and nine-month periods is due to the increase in revenue from the higher gold price on ounces sold. · Other income increased $234,396 and $594,924 for the three and nine-month periods ended September 30, 2025, respectively, when compared to the same periods in the prior year. The increase was from increased interest income and gains on US treasuries from having higher balances in the company’s short term investment account. · Net income for the three-month period ended September 30, 2025 was $2,960,340 which is an 88.4% increase compared to the same period in 2024. Net income for the nine-month period ended September 30, 2025 was $7,292,163 which is a 24.4% increase compared to the same period in 2024. The increase in net income is due to the increase in revenue from the higher gold price on ounces sold which overcame the planned increase in exploration expense seen in both periods. · The consolidated net income for the nine-month periods ended September 30, 2025 and 2024 included non-cash charges as follows: depreciation and amortization of $1,694,427 ($1,443,232 in 2024), loss on sale of equipment of $308,840 ($1,431 in 2024), accretion of asset retirement obligation of $14,907 ($13,954 in 2024), loss on investment in equity securities of $0 ($453 in 2024), equity income on investment in Buckskin of $2,376 ($1,579 in 2024), stock-based compensation expense of $1,247,768 (none in 2024), debt payments made by 3 rd party of $44,951 (none in 2024) and amortization of discount on US treasury notes of $18,832 ($278 in 2024). · Cash cost per ounce for the three and nine-month periods ended September 30, 2025 increased $315.26 and $174.98 per ounce, respectively, compared to the same periods in 2024 · All in sustaining cost per ounce increased during the three and nine-month periods ended September 30, 2025 compared to the same periods in 2024 due to an increase in exploration costs from underground and surface drilling at the Golden Chest Mine as well as increased exploration costs across many of the Company’s projects. Adjusted all in sustaining costs without exploration expenses were $1,468.75 and $1,271.85 per ounce for the three and nine-month periods ended September 30, 2025, respectively and $1,108.41 and $1,126.19 for the three and nine-month periods ended September 30, 2024, respectively. Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial Measures 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 AISC per ounce for the Company’s gold production in the three and nine-month periods ended September 30, 2025, and 2024. 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. During 2024, the Company changed the method of calculating sustaining capital to better reflect actual costs required to sustain mining operations. Prior periods have been restated in the table below to reflect this change. Idaho Strategic calculates sustaining capital by including depreciation and amortization as an estimate of property, plant, and equipment wear and tear necessary to maintain production capacity, plus Golden Chest capitalized development costs, net of current period amortization, to reflect expenses for sustaining mine access and gold production. September 30, 2025 September 30, 2024 Three Months Nine Months Three Months Nine Months Cost of sales and other direct production costs and depreciation and amortization $ 4,033,867 $ 11,615,270 $ 3,155,931 $ 9,268,589 Less depreciation, depletion, amortization and stock-based compensation (761,738 ) (2,463,364 ) (485,514 ) (1,443,232 ) Change in inventory 274,432 53,363 (204,895 ) (94,826 ) Cash Cost $ 3,546,561 $ 9,205,269 $ 2,465,522 $ 7,730,531 Exploration 3,898,320 7,514,514 1,185,460 2,073,364 Less non-gold exploration costs (908,030 ) (1,363,304 ) (67,259 ) (238,960 ) Sustaining capital 847,392 2,260,358 575,928 1,940,075 General and administrative 230,745 691,498 203,732 543,851 Less stock-based compensation and other non-cash items (121,502 ) (774,083 ) 2,453 (14,537 ) AISC $ 7,493,486 $ 17,534,252 $ 4,365,836 $ 12,034,324 Divided by ounces produced 3,066 8,950 2,930 9,057 Cash cost per ounce $ 1,156.74 $ 1,028.52 $ 841.48 $ 853.54 AISC per ounce $ 2,444.06 $ 1,959.13 $ 1,490.05 $ 1,328.73 17 Table of Contents Financial Condition and Liquidity For the Nine-Months Ended September 30, Net cash provided (used) by: 2025 2024 Operating activities $ 8,355,889 $ 7,686,400 Investing activities (32,792,837 ) (9,364,394 ) Financing activities 27,113,731 7,783,551 Net change in cash and cash equivalents 2,676,783 6,105,557 Cash and cash equivalents, beginning of period 1,106,901 2,286,999 Cash and cash equivalents, end of period $ 3,783,684 $ 8,392,556 The Company is currently producing profitably from underground at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its profitable production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for small reporting companies.