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Item 2. Management’s Discussion and Analysis

2026-08-13 compared with 2026-05-14 · 51 added, 68 removed, 53 unchanged (69% of the section changed)

2 unchanged sentences

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.

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 rare earth element (“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.

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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.

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:

Highlights during the second 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.

The Company was included in the inaugural list of companies that make up the Sprott Rare Earths Ex-China ETF (REXC)

IDR initiated metallurgical work at SGS Laboratory on representative samples from two of its REE prospects.

Golden Chest/Operations

At the Golden Chest, ore mined from underground stopes totaled approximately 12,835 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.

During the quarter, a record 384 meters of development was completed between three projects:

the Paymaster, the MAR and the Jumbo.

A new portal, the No.

2, was established in early May to develop the high-grade Jumbo vein.

2 portal, an up-ramp was driven and connected to the No.

1 portal providing a secondary escapeway and allowing for production from the Jumbo vein to begin in the third quarter.

Another quarterly record of 4,860 cubic meters of cemented rockfill backfill was placed during the quarter.

For the quarter ended June 30, 2026, a total of 11,094 dry metric tonnes were processed at the Company’s New Jersey Mill with a flotation feed head grade of 7.89 gpt gold and gold recovery of 91.4%.

Milling operations were affected by a wildfire adjacent to the mill in June where access to the mill was blocked for one week.

Luckily there was no damage to the mill or the Company’s equipment, though some of its timberland did burn.

The Company received the permit to construct a new tailings storage facility from the Idaho Department of Water Resources at the Golden Chest.

Construction began in the quarter with the relocation of a low-grade stockpile and continued with building of the embankments and diversion structures.

Construction continued on the new mill at the Golden Chest with the installation of the fine ore bin, placement of the screen, foundations for the ball mill, and electrical work throughout the mill building.

Engineering, design and procurement activities continued for the new mill also, and conveyor fabrication is also underway.

An exploration program consisting of surface and underground core drilling was continued during the second quarter at the Golden Chest.

Approximately 10,000 meters of drilling were completed targeting the Paymaster 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).

Revenue increased 13.3% for the three-month period ended June 30, 2026 when compared to the same period in the prior year.

For the six-month period ended June 30, 2026, revenue increased 50.5% when compared to the same period in the prior year.

The increase in revenue for both the three and six-month periods was due to the increased average gold price realized on ounces sold which was $4,277.53 for the three-month period and $4,558.78 for the six-month period ended June 30, 2026.

For the three and six-month periods ended June 30, 2025 it was $3,223.38 and $3,049.19, respectively.

Gross profit as a percentage of sales decreased slightly from 57.8% in the three-month period ended June 30, 2025 to 56.2% in the three-month period ended June 30, 2026 due to lower grade processed.

When comparing the six-month periods ended June 30, 2026 and 2025 gross profit as a percentage of sales increased from 54.8% to 61.9%.

Exploration expense decreased $513,882 and $495,966 when comparing the three and six-month periods ended June 30, 2026 and 2025, respectively.

The Company capitalized $1,046,700 and $2,007,413 of core drilling costs at the Golden Chest in the three and six-month periods ended June 30, 2026, compared to $0 in the three and six-month periods ended June 30, 2025.

Operating income for the three-month period ended June 30, 2026 was $3,662,904 which is an increase of 45.5% from the same period in 2025.

Operating income for the six-month period ended June 30, 2026 was $11,245,064 which is an increase of 187% over 2025.

The increase is due to higher average realized gold price on ounces sold.

Other income increased $468,752 and $424,505 for the three and six-month periods ended June 30, 2026, respectively, when compared to the same periods in the prior year.

The increase was from increased interest income and gains on US treasuries from the company’s short term investment account.

Net income for the three-month period ended June 30, 2026 was $3,627,840 which is a 32.4% increase compared to the same period in 2025.

Net income for the six-month period ended June 30, 2026 was $9,997,030 which is a 130.8% increase compared to the same period in 2025.

The increase was due to higher average realized gold price on ounces sold in both periods.

The consolidated net income for the six-month periods ended June 30, 2026 and 2025 included non-cash charges as follows:

depreciation and amortization of $1,559,425 ($1,091,359 in 2025), gain on sale of equipment of $632 (loss of $308,840 in 2025), accretion of asset retirement obligation of $10,530 ($9,855 in 2025), loss on investment in equity securities of $304,241 ($0 in 2025), equity income on investment in Buckskin of $1,077 ($1,187 in 2025), stock-based compensation expense of $277,292 ($990,292 in 2025), amortization of premium on US treasury notes of $253,852 (discount of $14,068 in 2025), and deferred tax provision of $1,395,177 ($0 in 2025).

Non-Generally Accepted Accounting Principles (“Non-GAAP”) Financial Measures

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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.

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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.

June 30, 2026

June 30, 2025

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

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AISC per ounce

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:

Cash cost per ounce for the three and six-month periods ended June 30, 2026 decreased $43.80 and increased $150.65 per ounce, respectively, compared to the same periods in 2025.

All in sustaining cost per ounce increased during the three and six-month periods ended June 30, 2026 compared to the same periods 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 as follows:

June 30, 2026

June 30, 2025

Less gold exploration costs

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Financial Liquidity and Capital Resources

For the Three-Months Ended March 31,

For the Six-Months Ended June 30,

Net cash provided (used) by:

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Investing activities

(16,415,565 )

(10,371,422 )

Financing activities

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Cash and cash equivalents, end of period

The Company is currently producing profitably from underground at the Golden Chest Mine.

The Company is 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.

With working capital of $41,772,550 at June 30, 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-Q

Item 2. Management’s Discussion and Analysis