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Item 7. Management’s Discussion and Analysis

2026-03-23 compared with 2025-03-31 · 57 added, 40 removed, 68 unchanged (59% of the section changed)

1 unchanged sentence

Plan of Operation

Idaho Strategic is a gold producer and critical minerals/REE exploration company focused on a diversified asset base and cash flows from operations.

Idaho Strategic is a gold producer and critical minerals 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-Th 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 (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 Golden Chest (currently in production), and the New Jersey Mill (majority ownership interest), as well as the Little Baldy and Niagara exploration properties 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.

The Company’s expansion into REE’s came about in an effort to diversify its holdings towards the anticipated demand for these elements in the electrification of motorized vehicles and a renewed focus on the United States’ domestic critical minerals supply chain security.

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.

In addition to its gold properties, Idaho Strategic has three REE exploration properties in Idaho known as Mineral Hill, Lemhi Pass, and Diamond Creek.

The Company’s expansion into REE’s came about in an effort to diversify its holdings towards the anticipated demand for these elements in advanced robotics, low-carbon technologies, and a renewed focus on the United States’ domestic critical minerals supply chain security for national defense.

To date, Idaho Strategic has conducted numerous exploration programs on its REE properties which include mapping, sampling, trenching, and drilling of certain areas within the Company’s 21,385-acre landholdings.

Idaho Strategic has been able to leverage 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.

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The SEC has indicated that a “critical accounting policy” is one which is both important to the representation of the registrant’s financial condition and results and requires management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain.

We base our estimates on experience and on various other assumptions our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

The Company bases its estimates on experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results will differ and may differ materially from these estimates under different assumptions or conditions.

Additionally, changes in accounting estimates could occur in the future from period to period.

Our management has discussed the development and selection of our most critical financial estimates with the Audit and Finance Committee of our Board of Directors.

The following paragraphs identify our most critical accounting policies:

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.

Company management has discussed the development and selection of the most critical financial estimates with the Audit and Finance Committee of the Company’s Board of Directors.

The following paragraphs identify the most critical accounting policies:

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 transaction price can be reasonably estimated 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 any one concentrate lot will occur.

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.

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

At December 31, 2025, metals that had been sold but not final settled included 6,103 ounces of gold of which 5,089 ounces were sold at a predetermined price with the remaining 1,014 ounces exposed to future price changes until prices are locked in based on the month of settlement.

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At this time, the Company thinks that an adjustment in its asset recovery obligation is not required, and an adjustment in future periods would not have a material impact in the year of adjustment but would change the amount of the annual accretion and amortization costs charged to expenses by an undetermined amount.

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 is included as Exhibit 96.1 to this Form 10-K.

Golden Chest Highlights for 2025 include:

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Mining was focused on the high-grade H-Vein at the Golden Chest mine.

Mined 41,140 tonnes of ore from the H-Vein underground at the Golden Chest Mine at an average grade of 9.67 gpt gold and completed 215 meters of development on the MAR and 129 meters of drifting for an H-Vein exploration project.

Additionally, over 600 meters of stope access ramps were completed during the year.

Mined 41,840 tonnes of ore from the H-Vein underground at the Golden Chest Mine at an average grade of 10.14 gpt gold and completed 315 meters of development on the MAR and 116 meters of related development for sumps, muck-bays, and escape raises.

Additionally, about 700 meters of stope access ramps were completed during the year.

Processed 41,840 dry metric tonnes at the Company’s New Jersey Mill with an average gold head grade of 10.14 gpt and gold recovery of 93.0%.

Completed 10,148 meters of core drilling at the Golden Chest to convert Paymaster Resources to Mineral Reserves and also completed exploration drilling primarily in the northern part of the property in the Klondike area which includes the Red Star zone.

A highlight of the core drilling was hole GC24-265 which intercepted 50.9 gpt gold over 4.5 meters in the newly discovered Red Star zone.

Completed 19,362 meters of core drilling at the Golden Chest at the Paymaster, H-Vein, Red Star, Jumbo, and Klondike areas.

About half of the meterage was dedicated to converting Paymaster Mineral Resources to Mineral Reserves.

A highlight of 2025 exploration was drifting from the Jumbo Pit portal that intercepted the Jumbo vein and found 25 meters of vein strike length with an average thickness of 0.52 meters at a gold grade of 85 gpt.

REE Exploration Highlights for 2025 include:

Idaho Strategic’s CEO and President, John Swallow, was invited by members from the U.S.

Department of Energy to speak at the Future Needs for Responsible Mining of Critical Minerals workshop in January 2024.

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

Attended the International Rare Earth Elements Conference in Washington DC.

Continued discussions with various laboratories, universities, and partners to advance the understanding of Idaho’s rare earth mineralogy and broader mineral endowment.

During the year the Company executed a long-term lease agreement for the mineral claims comprising approximately 1,500 acres of various in-holdings within the Company’s Mineral Hill and Lemhi Pass REE projects.

Key prospects covered by the mineral claims leased by the Company include Cardinal (Mineral Hill), Lucky Horseshoe (Lemhi Pass, Idaho), Silver Queen (Lemhi Pass, Idaho), Last Chance (Lemhi Pass, Montana), Trapper (Lemhi Pass, Montana), and other prospects.

Later in the year, Idaho Strategic sampled greater than 17.6% total REEs from the Cardinal prospect.

Idaho Strategic announced the signing of a Memorandum of Understanding with Clean Core Thorium Energy, Inc.

(“CCTE”) to evaluate the feasibility of thorium mining, processing, and fuel fabrication to facilitate a “Made in America” thorium-based nuclear fuel supply chain utilizing thorium from the Company’s Lemhi Pass project and CCTE’s ANEEL fuel- an advanced nuclear fuel comprised of thorium and high assay low-enriched uranium for use in existing nuclear reactors.

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 initiated a large-scale geophysics program across its Mineral Hill and Lemhi Pass projects including LiDAR, magnetics, and radiometrics surveys.

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 will be utilized to aid in the planning of drill programs and other future exploration work.

Idaho Strategic completed its inaugural phase 1 drill program at a single prospect at Lemhi Pass.

The program drilled 2,056 meters during the fourth quarter with logging and sampling ongoing.

Results of Operations

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Revenue from concentrate sales increased 64.6% to $42,406,253 for the year ending December 31, 2025, compared to $25,765,373 for the comparable period in 2024.

The increase was due to 3,595 more ounces of gold sold during the year, as well as higher gold prices recognized on concentrate sales.

The increase was due to 665 more ounces of gold sold during the year, as well as higher realized gold prices recognized on concentrate sales.

Realized gold price for 2025 was $3,583.43 vs $2,306.86 in 2024.

Ore from the H-vein is anticipated to be the primary source of ore for 2026 as it was in 2025.

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This resulted in an increase in gross profit as a percentage of sales from 50.3% in 2024 to 61.8% in 2025.

This increase is attributable to the higher head grade including H-Vein ore processed at the Company’s New Jersey Mill, as well as higher gold prices recognized on concentrate sales.

This increase is attributable to the higher head grade from H-Vein ore processed at the Company’s New Jersey Mill, as well as higher gold prices recognized on concentrate sales.

Net income for the year ended December 31, 2025 was $16,631,198 compared to net income for the year ended December 31, 2024 of $8,753,377.

The increase was primarily due to increased production and higher gold prices.

The consolidated net profit included non-cash charges of $1,971,666 ($1,470,563 in 2023) as follows:

depreciation and amortization of $1,953,388 ($1,466,703 in 2023), accretion of asset retirement obligation of $18,761 ($15,952 in 2023), loss on disposal of equipment of $1,431 (gain of $13,026 in 2023), equity income on investment in Buckskin Gold and Silver, Inc.

$2,667 ($4,517 in 2023), write down of reclamation bond $300 (none in 2023).

Net income attributable to Idaho Strategic Resources, Inc.

was $8,836,685 and $1,157,746 in the years ended December 31, 2024, and 2023, respectively.

The increase was primarily due to higher gold prices.

The consolidated net income included non-cash charges of $4,556,936 ($1,973,746 in 2024) as follows:

depreciation and amortization of $2,338,100 ($1,953,388 in 2024), accretion of asset retirement obligation of $20,042 ($18,761 in 2024), loss on disposal of equipment of $343,945 ($1,431 in 2024), equity income on investment in Buckskin Gold and Silver, Inc.

$3,646 ($2,667 in 2024), write down of reclamation bond $0 ($300 in 2024) stock-based compensation of $1,505,244 ($0 in 2024), unrealized gain on equity securities and mutual funds of $110,092 ($0 in 2024), amortization of discount on US treasury notes of $37,197 ($2,080 in 2024), and accrued income tax liability of $426,146 ($0 in 2024).

Cash cost per ounce increased $116.80 compared to 2024 due to slightly higher input costs.

All-in sustaining cost per ounce increased $417.74 compared to 2024 due to increased exploration at the Golden Chest which also increased sustaining capital.

Adjusted all-in sustaining cost per ounce without exploration was $1,494.75 and $1,256.16 for 2025 and 2024, respectively.

Gold sales receivable increased to $3,912,922 from $1,578,694 at December 31, 2025 compared to 2024.

The Company saw an increase in exploration expenses of $4,716,900 for 2025 due to the expanded drilling program at the Golden Chest mine for development and exploration purposes.

Professional services costs decreased in 2024.

Professional services in 2023 included a one-time expense.

Cash cost and all in sustaining costs for gold production remained relatively constant for 2023 and 2024.

Cash Costs and All-In Sustaining Costs 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 All-In Sustaining Costs (“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 produced and all in sustaining costs per ounce produced for the Company’s gold production for the years ended December 31, 2024, and 2023.

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 produced and AISC per ounce produced for the Company’s gold production for the years ended December 31, 2025, and 2024.

The cost per ounce calculations are based on ounces produced.

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

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

During 2024, the Company adjusted 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.

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

Depreciation, depletion, and amortization

Change in concentrate inventory

Less REE exploration costs

Less depreciation, depletion, amortization and stock-based compensation

Change in inventory

Less non-gold exploration and stock-based compensation

Sustaining capital

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(61,458,139 )

(20,762,889 )

Financing activities

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Cash and cash equivalents, end of period

The Company has an accumulated deficit of approximately $8 million at December 31, 2024 and earned a consolidated net profit in 2024 of $8,753,377.

The Company has retained earnings of approximately $8.3 million at December 31, 2025 and earned a consolidated net profit in 2025 of $16,631,198.

The Company’s working capital at December 31, 2025 is $47,669,136.

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During 2025, production generated positive cash flow from operations of $19,101,691 compared to a positive cash flow from operations of $10,840,886 in 2024.

Planned production for the next 18 months indicates a positive cash flow from operations will continue as underground mining of the H-Vein remains the primary source of ore feed for the mill.

Planned production for the next 18 months indicates a positive cash flow from operations will continue as underground mining of the H-Vein and Jumbo vein remains the primary source of ore feed for the mill.

In prior years, the Company has been successful in raising required funds for ongoing operations from sale of its common stock or borrowing.

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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-K

Item 7. Management’s Discussion and Analysis