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 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 critical minerals exploration. The Company’s gold properties include: 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 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. 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 March 31, 2026, metals that had been sold but not finally settled included 7,819 ounces of which 7,102 ounces were sold at a predetermined price with the remaining 717 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 March 31, 2026 the Company reviewed its December 31, 2025 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, 2026 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 23, 2026. Highlights during the first quarter of 2026 include: REE Exploration · Exploration plans for the 2026 field season were finalized during the quarter. The bulk of the Company’s REE exploration efforts are planned for high-grade prospects at both its Mineral Hill and Lemhi Pass projects. To support these programs, IDR has retained the help of a seasoned REE exploration geologist following his successful initial consulting stint with the Company in 2025. Golden Chest/Operations · At the Golden Chest, ore mined from underground stopes totaled approximately 11,290 tonnes with all of the tonnage coming from H-Vein stopes. · During the quarter, a total of 193 meters of development was completed in the MAR and associated workings including an escapeway/ventilation raise. A quarterly record of 4,008 cubic meters of cemented rockfill (“CRF”) backfill was placed during the quarter. · For the quarter ended March 31, 2026, a total of 11,290 dry metric tonnes (“dmt”) were processed at the Company’s New Jersey Mill with a flotation feed head grade of 9.68 gpt gold and gold recovery of 92.1%. · Some long lead items for the new mill at the Golden Chest were delivered such as a jaw crusher and a cone crusher. Additional underground mining equipment including two 4-yard LHDs were delivered to the mine during the first quarter. · An exploration program consisting of surface and underground core drilling was continued during the first quarter at the Golden Chest. A total of 8,700 meters of drilling was completed at the Golden Chest targeting the Paymaster, the Red Star, Katie-Dora, and the H-vein. Results of Operations Idaho Strategic’s financial performance during the quarter is summarized below: · Revenue increased 99% to $14,482,286 from $7,278,536 for the three-month periods ended March 31, 2026 and 2025 respectively. The increase in revenue was 97% due to the increased average gold price realized on ounces sold which was $4,702.04 in the first quarter of 2026 and $2,848.74 in the first quarter of 2025. The remaining 3% of the increased revenue was from producing 334 more ounces of gold. · Gross profit as a percentage of sales increased from 50.8% in the first quarter of 2025 to 66.1% in the first quarter of 2026. · Exploration expense was almost unchanged in the first quarter of 2026 when compared to 2025. In the current quarter, the Company capitalized $960,713 of core drilling costs at the Golden Chest, compared to $0 in the first quarter of 2025. · Operating income for the three-month period ended March 31, 2026 was $7,582,160 which is an increase of 441.1% from operating income of $1,401,254 in the first quarter of 2025. The increase is due to the increase in realized gold prices on ounces sold, while keeping cost increases as low as possible. · Other income decreased $44,247 from income of $190,597 in the first quarter of 2025, to income of $146,350 in the same period in 2026. The decrease was from one-time losses sustained when liquidating the Company’s equity and mutual fund investments, which was slightly offset by increased interest income from US treasuries. · Net income for the three-month period ended March 31, 2026 was $6,369,190 compared to $1,591,851 in 2025. The increase in net income is largely due to the increased realized gold price on ounces sold while also producing 334 more ounces of gold. The Company recognized a $1,359,320 tax provision in the current quarter compared to $0 in the first quarter of 2025. · The consolidated net income for the three-month periods ended March 31, 2026 and 2025 included non-cash charges as follows: depreciation and amortization of $713,385 ($549,621 in 2025), gain on sale of equipment of $632 (loss of $239,898 in 2025), accretion of asset retirement obligation of $5,221 ($4,887 in 2025), loss on investment in equity securities of $304,241 ($0 in 2025), loss on investment in Buckskin of $168 (gain of $1,346 in 2025), stock-based compensation expense of $138,641 ($495,146 in 2025), accretion of discount on US treasury notes of $53,768 ($4,903 in 2025), and deferred tax liability of $794,591 ($0 in 2025). 16 Table of Contents 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 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 AISC per ounce produced for the Company’s gold production for the three-month periods ended March 31, 2026, and 2025. The cost per ounce calculations are based on ounces produced. Upon sale, the Company typically receives payment at an average rate of 94% of ounces produced after smelting and refining charges are deducted. 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 the expenditures incurred to discover, develop, and sustain gold production. 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. March 31, 2026 2025 Cost of sales and other direct production costs and depreciation, depletion, and amortization $ 4,917,388 $ 3,580,450 Less depreciation, depletion, amortization and stock-based compensation (799,222 ) (854,755 ) Change in inventory (268,639 ) (271,670 ) Cash Cost $ 3,849,527 $ 2,454,025 Exploration 1,389,349 1,371,433 Less non-gold exploration and stock-based compensation (286,315 ) (164,680 ) Sustaining capital 2,067,486 624,244 General and administrative 223,027 237,018 Less stock-based compensation and other non-cash items (1,201,722 ) (406,789 ) AISC $ 6,041,352 $ 4,115,251 Divided by ounces produced 3,234 2,900 Cash cost per ounce $ 1,190.33 $ 846.22 AISC per ounce $ 1,868.07 $ 1,419.05 Cash cost per ounce for the three-month period ended March 31, 2026 increased $344.11 per ounce as input costs increased slightly. All in sustaining cost per ounce increased $449.02 during the three-month period ended March 31, 2026 compared to the same period in 2025 due to an increase in sustaining capital related to core drilling at the Golden Chest Mine. Adjusted AISC per ounce without exploration expenses were $1,527.00 and $1,002.93 for the three-month periods ended March 31, 2026 and 2025, respectively, and is calculated as follows: March 31, 2026 2025 AISC $ 6,041,352 $ 4,115,251 Less gold exploration costs (1,103,034 ) (1,206,753 ) Adjusted AISC 4,938,318 2,908,498 Divided by ounces produced 3,234 2,900 Adjusted AISC per ounce $ 1,527.00 $ 1,002.93 17 Table of Contents Financial Liquidity and Capital Resources For the Three-Months Ended March 31, Net cash provided (used) by: 2026 2025 Operating activities $ 8,786,197 $ 2,414,492 Investing activities 439,963 (1,998,031 ) Financing activities 1,675,979 (217,238 ) Net change in cash and cash equivalents 10,902,139 199,223 Cash and cash equivalents, beginning of period 9,889,765 1,106,901 Cash and cash equivalents, end of period $ 20,791,904 $ 1,306,124 The Company is currently producing profitably from underground at the Golden Chest Mine. Cash flows provided by operations have been sufficient to fund capital projects necessary to sustain production capacity, as well as invest in future growth initiatives. In the past, when cash flows from operations were not sufficient, the Company was successful in raising required capital from the sale of common stock. With working capital of $50,311,812 at March 31, 2026, sufficient cash flows provided by operations, profitability, and potential equity sales and debt borrowings, management believes contractual obligations and capital requirements will be able to be met for the next 12 months. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for small reporting companies.