0001213900-18-010163.txt : 20180803 0001213900-18-010163.hdr.sgml : 20180803 20180803122042 ACCESSION NUMBER: 0001213900-18-010163 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 64 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20180803 DATE AS OF CHANGE: 20180803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Desert Hawk Gold Corp. CENTRAL INDEX KEY: 0001168081 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 820230997 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-169701 FILM NUMBER: 18991005 BUSINESS ADDRESS: STREET 1: 1290 HOLCOMB AVE. CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: (775) 322-4621 MAIL ADDRESS: STREET 1: 1290 HOLCOMB AVE. CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: LUCKY JOE MINING CO DATE OF NAME CHANGE: 20020222 10-Q 1 f10q0317_deserthawk.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2017.

 

or

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 For the transition period from _______________________to___________________________

 

Commission File Number: 333-169701

 

Desert Hawk Gold Corp.
(Exact name of registrant as specified in its charter)

 

Nevada   82-0230997
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
1290 Holcomb Ave. Reno, NV   89502
(Address of principal executive offices)   (Zip Code)
     
(775) 337-8057
(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ☐  No  ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

  

Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting Company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐  No  ☒

 

Indicate the number of shares outstanding of the issuer’s common stock, as of July 31, 2018: 20,581,603.

 

 

 

 

 

DESERT HAWK GOLD CORP.

Form 10-Q

March 31, 2017

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
   
Item 4. Controls and Procedures 20
PART II – OTHER INFORMATION 21
Item 3. Defaults Upon Senior Securities 21
   
Item 4. Mine Safety Disclosures 21
   
Item 6. Exhibits 21
SIGNATURES 22

  

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

DESERT HAWK GOLD CORP

BALANCE SHEETS

 

 

   March 31,   December 31, 
   2017   2016 
ASSETS  (unaudited)     
CURRENT ASSETS        
Cash  $153,328   $657,944 
Inventories, current portion (Note 4)   135,278    142,921 
Prepaid expenses and other current assets   96,304    132,747 
Total Current Assets   384,910    933,612 
           
INVENTORIES, non-current (Note 4)   3,012,839    2,951,011 
PROPERTY AND EQUIPMENT, net (Note 5)   3,955,793    4,039,887 
MINERAL PROPERTIES AND INTERESTS, net (Note 6)   1,114,675    1,096,482 
RECLAMATION BONDS (Note 6)   752,766    752,754 
           
TOTAL ASSETS  $9,220,983   $9,773,746 
           
LIABILITIES AND STOCKHOLDERS' (DEFICIT)          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $600,730   $744,943 
Accrued liabilities-officer and other wages (Note 12)   539,577    495,808 
Interest payable - related parties (Note 7)   221,506    192,842 
Interest payable - related party (Note 10)   7,787,190    7,239,610 
Convertible debt  - related parties (Note 7)   850,000    850,000 
Obligation under capital lease - related party, current portion (Note 8)   96,066    120,461 
Short-term note payable - related parties (Notes 7 and 12)   -    34,500 
Notes payable - equipment, current portion (Note 9)   477,470    813,818 
Notes payable - related party (Note 10)   15,110,492    14,610,492 
Total Current Liabilities   25,683,031    25,102,474 
           
LONG-TERM LIABILITIES          
Asset retirement obligation (Note 11)   992,237    974,109 
Obligation under capital lease - related party (Note 8)   26,339    51,714 
Notes payable - equipment (Note  9)   296,591    453,276 
    1,315,167    1,479,099 
TOTAL LIABILITIES   26,998,198    26,581,573 
           
COMMITMENTS AND CONTINGENCIES (Notes 11, 12, 13 and 14)          
           
STOCKHOLDERS' (DEFICIT) (Note 3)          
Preferred Stock, $0.001 par value, 10,000,000 shares authorized          
Series A: 958,033 shares issued and outstanding   958    958 
Series A-1: No shares issued and outstanding   -    - 
Series A-2: 180,000  shares issued and outstanding   180    180 
Series B: 444,530 shares issued and outstanding   444    444 
Common stock,  $0.001 par value, 100,000,000 shares authorized; 13,656,603 and 13,656,603 shares issued and outstanding   13,528    13,528 
Additional paid-in capital   9,131,718    9,131,718 
Accumulated deficit   (26,924,043)   (25,954,655)
Total Stockholders' (Deficit)   (17,777,215)   (16,807,827)
           
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)  $9,220,983   $9,773,746 

  

The accompanying notes are an integral part of these financial statements.

 

 1 

 

DESERT HAWK GOLD CORP

STATEMENTS OF OPERATIONS (unaudited)

 

 

   Three Months Ended 
   March 31,   March 31, 
   2017   2016 
         
REVENUE:        
Concentrate sales  $11,575   $291,693 
           
EXPENSES          
General project costs   141,820    387,631 
Exploration expense   -    7,000 
Officers and directors fees   64,537    45,000 
Legal and professional   8,092    25,383 
General and administrative   52,282    65,069 
Depreciation and amortization   96,579    147,019 
    363,310    677,102 
           
OPERATING LOSS   (351,735)   (385,409)
           
OTHER INCOME (EXPENSE)          
Interest and other income   12    477 
Interest and financing expense   (27,542)   (47,887)
Interest expense - related parties   (590,123)   (502,067)
    (617,653)   (549,477)
           
LOSS BEFORE INCOME TAXES   (969,388)   (934,886)
INCOME TAXES   -    - 
           
NET LOSS  $(969,388)  $(934,886)
           
BASIC AND DILUTED NET LOSS PER SHARE  $(0.07)  $(0.07)
           
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED   13,656,603    13,656,603 

 

The accompanying notes are an integral part of these financial statements.

 

 2 

 

DESERT HAWK GOLD CORP

STATEMENTS OF CASH FLOWS (unaudited)

 

 

   Three Months Ended 
   March 31,   March 31, 
   2017   2016 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(969,388)  $(934,886)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation and amortization   96,579    163,974 
Accretion of asset retirement obligation   18,128    18,128 
Changes in operating assets and liabilities:          
Accounts receivable   -    (89,834)
Inventories   (54,185)   (112,632)
Prepaid expenses and other current assets   36,443    8,105 
Accounts payable and accrued expenses   (174,891)   (2,885)
Accrued liabilities - officer wages   43,769    45,000 
Interest payable - related parties   28,664    22,500 
Interest payable - related party   547,580    502,067 
Net cash used by operating activities   (427,301)   (380,463)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Additions to property and equipment   -    (157,370)
Increase in reclamation bonds   (12)   (477)
Net cash used by investing activities   (12)   (157,847)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from note payable - related party   500,000    550,000 
Payment of obligation under capital lease - related party   (49,770)   - 
Payment of note payable - equipment   (493,033)   (102,689)
Payment of short term note payable - related parties   (34,500)   - 
Net cash provided (used) by financing activities   (77,303)   447,311 
           
NET INCREASE (DECREASE) IN CASH   (504,616)   (90,999)
CASH, BEGINNING OF PERIOD   657,944    132,509 
           
CASH, END OF PERIOD  $153,328   $41,510 
           
NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Equipment acquired with note payable - equipment  $-   $28,992 
Equipment acquired with accounts payable - equipment  $30,678   $- 

 

The accompanying notes are an integral part of these financial statements.

 

 3 

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Desert Hawk Gold Corp. (the “Company”) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company. On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada. Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada). On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp. On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc. As a result, the Company has no subsidiaries.

 

The Company never successfully generated any revenue and eventually abandoned the mining business, remaining dormant until it recommenced its mining activities on May 1, 2009.

 

During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company, the Woodman Mining Company and the Moeller Family Trust for the lease of certain of their property interests in the Gold Hill Mining District of Utah.  In 2011, the Company entered into an agreement with DMRJ Group, a Platinum Partners’ related entity managed by Platinum Partners’ Credit Fund (PPCO), which allowed for long term funding of the Kiewit project and helped to provide cash flow for operations during the period from 2009 until 2014 while the permitting process was ongoing. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete at September 30, 2014. Revenue from the Kiewit heap leach operation began in October 2014 with the first sales of gold and silver.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the accompanying unaudited interim balance sheets and statements of operations and cash flows contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of March 31, 2017, and the results of its operations and its cash flows for the three months ended March 31, 2017 and 2016. The operating and financial results for the Company for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

 

These unaudited interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. These unaudited interim financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on June 29, 2018.

 

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

  

 4 

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

Inventories

 

The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is treated with a chemical solution, which dissolves the gold contained in the material. The resulting “pregnant” solution is further processed in a plant where gold is recovered. The Company records ore on leach pad, ore in carbon column in process and gold doré, at average production cost per gold ounce, less provisions required to reduce inventory to net realizable value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct labor; repairs and maintenance; utilities; depreciation and amortization of property, equipment, and mineral properties; and mine administrative expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. Costs are removed from ore on leach pads as ounces are recovered based on the average cost per recoverable ounce of gold on the leach pad.

 

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of March 31, 2017, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

 

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months.

 

Revenue Recognition

 

Revenue is recognized when title and risk of ownership of metals or metal bearing concentrate have passed and collection is reasonably assured. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts.

 

Earnings (loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At March 31, 2017 and 2016, common stock equivalents outstanding are as follows:

 

   March 31,
2017
   March 31,
2016
 
         
Convertible debt   2,203,158    1,028,574 
Convertible preferred stock   47,211,002    47,211,002 
           
Total   49,414,160    48,239,576 

 

However, the diluted earnings (loss) per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

 

 5 

  

Going Concern

 

As shown in the accompanying financial statements, the Company has an accumulated deficit and negative working capital through March 31, 2017, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

The Company will need significant funding to continue operations and increase development through the next fiscal year. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

 

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

 

NOTE 3 – CAPITAL STOCK

 

Common Stock

 

2017 Activity

 

No shares of common stock were issued during the first three months of 2017.

 

2016 Activity

 

No shares of common stock were issued during the first three months of 2016.

 

Preferred Stock

 

2017 Activity

 

No shares of preferred stock were issued during the first three months of 2017. See Note 14 – Subsequent Events, regarding the return of DMRJ Group’s equity shares as part of a reorganization with court appointed trustees.

 

2016 Activity

 

No shares of preferred stock were issued during the first three months of 2016.

 

NOTE 4 – INVENTORIES

 

The following table provides the components of inventories:

 

   March 31,
2017
   December 31,
2016
 
Ore on leach pad  $3,116,252   $3,051,766 
Carbon column in process   31,865    31,214 
Dore finished goods   -0-    10,952 
Total   3,148,117    3,093,932 
           
Less: current portion   (135,278)   (142,921)
           
Non-current inventories  $3,012,839   $2,951,011 

 

Inventories are valued at the lower of cost or net realizable value which at March 31, 2017 is cost.

  

 6 

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

The following is a summary of property, equipment, and accumulated depreciation at March 31, 2017 and December 31, 2016:

 

   March 31,   December 31, 
   2017   2016 
Equipment  $3,077,482   $3,046,803 
Furniture and fixtures, temporary housing   6,981    6,981 
Electronic and computerized equipment   52,874    52,874 
Vehicles   67,115    67,115 
    3,204,452    3,173,773 
Less accumulated depreciation   (1,258,880)   (1,144,108)
    1,945,572    2,029,665 
           
Kiewit property facilities   2,497,435    2,497,436 
Less accumulated amortization   (487,214)   (487,214)
    2,010,221    2,010,222 
           
Total  $3,955,793   $4,039,887 

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. See Note 9.

 

NOTE 6 – MINERAL PROPERTIES AND RECLAMATION BONDS

 

Mineral properties and interests as of March 31, 2017 and December 31, 2016 are as follows:

 

   March 31,
2017
   December 31,
2016
 
Initial lease fee        
Kiewit, Cactus Mill and all other sites  $600,000   $600,000 
           
Asset retirement obligation          
Kiewit Site   789,026    789,026 
Kiewit Exploration   10,780    10,780 
Cactus Mill   16,133    16,133 
Total   815,939    815,939 
Accumulated amortization   (301,264)   (319,457)
    514,675    496,482 
           
Total  $1,114,675   $1,096,482 

 

The Company holds operating interests within the Gold Hill Mining District in Tooele County, Utah, consisting of 247 unpatented claims, including the unpatented mill site claim, and two Utah state mineral leases located on state trust lands. Annual claims fees are currently $155 per claim plus administrative fees.

 

On January 6, 2014, we obtained the final permit necessary to commence construction of the heap leach pad and process facility. On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining.  The bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site.   Funds of $92,705 were received in April 2014 by the Company for these refunded reclamation bonds.

 

On July 7, 2016, the Company replaced the $1,348,000 cash reclamation bond with a surety bond in the same amount. A condition of the surety bond was the deposit of 50% of the bond amount into an escrow account with the bonding company. An escrow account was established with the bonding company and $674,000 (50% of the original cash bond) was deposited by the Company. The surety bond carries an annual bonding fee of $40,400. Total reclamation bonds posted are $752,766 and $752,754 at March 31, 2017 and December 31, 2016, respectively.  

 

On September 12, 2016, the Yellow Hammer mineral property was returned to the lessor, Moeller Family Trust, and the Company recognized a loss on abandonment in the amount of $175,000 less the accumulated amortization of $37,234, for a net loss of $137,766.

  

 7 

 

NOTE 7 – CONVERTIBLE DEBT

 

On November 18, 2009, the Company issued convertible promissory notes, to two of its minority shareholders, for a total of $600,000. The notes bear interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes are convertible at a rate of $0.70 per share. On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash.

  

The Company failed to repay the loan in full on the November 30, 2012, 2013, 2014, 2015 and 2016 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. In 2014, 2015 and 2016, the stock was valued at an estimated $0.04 (total $12,000) and was accounted for as financing expense. As part of this agreement, the due date of the notes was extended each year and has now been extended to November 30, 2018. Interest was paid with shares of common stock through November 30, 2014 and is to be paid in cash thereafter. Interest has not been paid since November 2014 and accrued interest payable on these notes at March 31, 2017 and December 31, 2016 is $210,000 and $187,500 respectively. Per the terms of these notes, interest is not convertible to common stock.

 

On October 14, 2016, the Company issued convertible promissory notes, convertible at $.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Note), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and is payable quarterly thereafter. Accrued interest payable on these notes at March 31, 2017 and December 31, 2016 is $11,506 and $5,342, respectively. Interest on these notes is convertible to common stock. As a part of this note, DMRJ Group and its related entity, Platinum Partners (Note 10), have agreed to subordinate to these debtholders DMRJ’s collateral interest in the Senior Note, the principal and accrued but unpaid interest on the existing convertible debt and the amounts due to the convertible debtholders under the provisions of the gold loan redemption program.

 

On November 15, 2016, a short-term loan in the amount of $25,000 was obtained from West C Street, one of the Company’s convertible debt holders. Funds were used for operating capital. This amount was repaid to West C Street on January 18, 2017 along with accrued interest of $438.

 

NOTE 8 – OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

 

A capital lease was entered into on June 20, 2016 with RMH Overhead, LLC for the purchase of mining and crushing equipment. RMH Overhead, LLC is an entity owned by the Company’s President, Rick Havenstrite. For the periods ended March 31, 2017 and December 31, 2016, equipment includes assets under capital lease amounting to $165,730 and $172,360, respectively. The lease is being amortized over the estimated useful life of the equipment. Accumulated amortization at March 31, 2017 and December 31, 2016 was $19,888 and $13,258. At March 31, 2017, the estimated future minimum lease payments under the capital lease was as follows:

 

Year ending March 31,    
2018  $108,000 
2019   27,000 
Total   135,000 
Less: Implied interest   (12,595)
Net present value   122,405 
Less: Capital lease obligation-current portion   (96,066)
Long-term capital lease obligation  $26,339 

  

 8 

 

NOTE 9 – NOTES PAYABLE – EQUIPMENT

 

The following is a summary of the equipment notes payable:

 

   March 31,
2017
   December 31,
2016
 
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,441 including interest at 4.99%.  $66,728   $73,203 
           
Note payable to Komatsu Financial, uncollateralized, due in 12 monthly installments of $3,223, beginning in April 2016, including interest at 1.16%.   -0-    9,668 
           
Note payable to CAT Financial, collateralized by five pieces of used mining equipment due in 36 monthly installments of varying amounts including interest at 4.68%.  The equipment has since been returned to CAT. See note below.   440,473    881,894 
           
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,674 including interest at 2.99%.   249,670    282,675 
           
Note payable to Star Capital, LLC, collateralized by a 2009 Multiquip generator, due in 24 monthly installments of $1,412, beginning in March 2016, including interest at 11.4%.   17,190    19,654 
    774,061    1,267,094 
Current portion   (477,470)   (813,818)
Long term portion  $296,591   $453,276 
           
Principal payments are as follows for the twelve months ended March 31,          
2018  $477,470      
2019   286,924      
2020   9,667      
Total  $774,061      

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $372,129, for a net carrying value of $1,128,759. The note payable due to CAT at the time of disposition was $960,585. The CAT contract did not legally release the Company from liability in the case of a repossession thus an extinguishment has not occurred and the debt and assets were not derecognized. On July 31, 2017, a new agreement was made as disclosed in Note 14 – Subsequent Events.

  

NOTE 10 – NOTE PAYABLE - RELATED PARTY

 

DMRJ Group beneficially owns approximately 75% of the Company (on a fully-diluted basis) with Series A, A-2 and B preferred shares convertible to 47,211,002 shares of common stock (See Note 3). They are considered a related party. In July 2010, the Company entered into an Investment Agreement with DMRJ Group. The Agreement has been modified numerous times and at March 31, 2017 operated under the Fourteenth Amendment to the Investment Agreement dated December 22, 2016. The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.

 

The total due to DMRJ Group at March 31, 2017 and December 31, 2016 is as follows:

 

   March 31,   December 31, 
   2017   2016 
         
Principal, due within one year  $15,110,492   $14,610,492 
Interest payable, current   7,787,190    7,239,610 
   $22,897,682   $21,850,102 

 

The Investment Agreement contains certain negative covenants which prohibit us from the following actions or activities:

 

·Incurring any indebtedness except in limited circumstances;
·Creating any significant liens on any of our properties or assets;
·Enter into any sale and lease-back transaction involving any of our properties;
·Make any investments in or loans or advances to other parties;
·Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;
·Declare or pay any dividends, except for dividends to DMRJ Group;
·Engage in any business transactions with affiliates;
·Make capital expenditures except as permitted in the agreement pertaining to our current mining business;

  

 9 

 

·Create any lease obligations;
·Amend, supplement or modify any existing indebtedness;
·Enter into any swap, forward, future or derivative transaction;
·Make any change in our accounting policies or reporting practices;
·Form additional subsidiaries; or
·Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

  

At March 31, 2017, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

 

2017 Activity

 

At March 31, 2017, DMRJ continued to operate through the direction of its court appointed trustees (see 2016 Activity below). Funds in the amount of $500,000 were drawn from the trustees during the quarter ending March 31, 2017 to help fund ongoing expenses.

See Note 14.

 

2016 Activity

 

At December 31, 2016, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

 

Several term loan advances were received from DMRJ Group by the Company between February 9, 2016 and December 29, 2016 totaling $2,470,000. A loan payment of $900,000 was made to DMRJ on July 8, 2016. The advances bear interest at 15% per annum and become due on October 31, 2016 with the remainder of the note due to DMRJ Group. These funds were used for working capital and equipment debt repayment.

 

A Fourteenth Amendment to the Investment Agreement was entered into on December 22, 2016 which allowed for additional funding in the amount of up to $600,000 from DMRJ Group and its affiliated fund managers. This $600,000 was drawn on December 29, 2016 which brought the total funds drawn from DMRJ Group and its affiliates for 2016 to $2,470,000.

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and management of the DMRJ Group, charging Defendants with a complex, multi-pronged, fraudulent scheme to inflate returns to investors, and cover up massive losses and liquidity problems. DMRJ Group effectively owns 75% of stock of the Company (on a fully diluted basis). See Note 14 – Subsequent Events.

 

NOTE 11 – REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

 

Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on the Company’s current mining plan and the best available information for making such estimates. In calculating the present value of the asset retirement obligation the Company used a credit adjusted risk free interest rate of 8% to 10% and projected mine lives of five to 12 years, depending on the site. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.

 

Changes in the reclamation liability for the periods ended March 31, 2017 and December 31, 2016 are as follows:

 

   Three months
ended March 31,
2017
   Year ended
December 31,
2016
 
Reclamation and remediation liability, beginning of period  $974,109   $901,597 
Obligation incurred   -    - 
Accretion expense   18,128    72,512 
Reclamation and remediation liability, end of period  $992,237   $974,109 

 

 10 

 

NOTE 12 – RELATED PARTY TRANSACTIONS

 

In addition to transactions disclosed in Notes 7, 8 and 10, the Company had the following related party transactions.

 

The Company recognized rent expense for rental of office space of $3,000 for the three months ended March 31, 2017 and 2016, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s President and a director. Of the amounts recognized as expense, RMH Overhead, LLC was paid $3,000 during the three months ended March 31, 2017 and 2016, respectively, leaving a total of $13,750 and $17,750 remaining in accounts payable at March 31, 2017 and December 31, 2016, respectively, which represents amounts due from prior years.

 

In addition, a short-term loan totaling $9,500, also for working capital, was obtained from our President, Rick Havenstrite, with draws on multiple dates in November and December 2016. This loan was repaid in full on January 3, 2017 with no interest paid.

 

As of March 31, 2017 and December 31, 2016, accrued compensation of $539,577 and $486,577 were due to directors and officers. Of the amounts accrued at March 31, 2017 and December 31, 2016, accrued compensation of $402,692 and $372,692 respectively, is due to Rick Havenstrite.

 

During the three months ended March 31, 2017 and 2016, the Company recognized general project cost expense of $0 and $6,667, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. $39,367 remains unpaid to Mr. Havenstrite at both March 31, 2017 and December 31, 2016. These amounts are included in accounts payable at those dates.

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Mineral property payments

 

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three year period, it will be required to make annual penalty payments to Clifton Mining in the amount of $50,000 per location.  In 2014, the Company had not begun commercial production and the payments due on July 24, 2014 were paid and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property penalty payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property has since begun. Royalty expense of $702 and $17,160 was recognized during the three months ended March 31, 2017 and 2016, respectively, with these amounts fully paid at March 31, 2017. See Note 14.

 

A letter of default on the Clifton Shears properties dated September 19, 2016 was received by the Company with a 30 day period for curing the default. On October 17, 2016, past due royalties and the $50,000 penalty payments for each of 2015 and 2016 were paid to Clifton Mining, who then acknowledged the cure of default.

 

Mining severance tax in the amount of $92, based on production, was accrued at March 31, 2017.

 

Personal property tax due to Tooele County, Utah in the amount of $155,232 including interest and penalties, was accrued and past due at March 31, 2017. This amount due has not yet been paid.

 

Employment Agreements

 

In September 2010, the Company entered into an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement requires Mr. Havenstrite to meet certain time requirements and limits the number of other board member obligations in which he can participate. The agreement allows for a base annual salary of $120,000 plus certain performance compensation upon fulfillment of established goals. The agreement allows the Board to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

 

As of March 31, 2017, and December 31, 2016, accrued compensation of $534,577 and $486,577, were due to officers. Of the amounts accrued at March 31, 2017 and December 31, 2016, accrued compensation of $402,692 and $372,692 is due to Rick Havenstrite and $131,884 and $113,884 is due to Marianne Havenstrite, Treasurer and Principle Financial Officer. In addition, $5,000 and $-0- was due to directors at March 31, 2017 and December 31, 2016, respectively.

  

11 

 

NOTE 14 – SUBSEQUENT EVENTS

 

Note payable – CAT equipment

 

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for a net carrying value of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of July 10, 2018, six of those payments have been made. The loss on impairment of equipment in the amount of $147,214 was recognized in the 4th quarter of 2016. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

  

 Note payable – Wheeler Machinery

 

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery.  Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract in the amount of $273,067 was finalized and the first of 7 equal monthly payments of $39,009 were to be made.  As of July 24, 2018, three of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company. 

 

Convertible debt

 

The Company failed to make interest payments required under the convertible notes (see Note 7) for all quarters beginning April 2016 through the current date. As a result, the Company was in default of the convertible notes. As per the terms of the Investment Agreement (Note 10), DMRJ Group was informed of this default and it stated that it had no intent to declare an event of default under the Investment Agreement, as amended. In addition, as per the terms of the notes, 300,000 penalty shares for both 2017 and 2016 were issued to the convertible debt holders for failure to pay the convertible notes in November of 2017 and 2016.

 

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

 

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

On July 3, 2018, a short term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.

 

Note payable – related party


In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partner’s related entity), was given to court appointed trustees of the two major funds of Platinum Partners. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company’s Common Stock. All signatures from the court appointed trustees, and funding by the Company, were received and the agreement was finalized on March 8, 2018.

 

Revenue

 

On July 6, 2018, the Company negotiated an arrangement for a one time sale of gold and silver byproduct to H & H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold, and silver byproduct.

 

Stock Offering

 

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company's Common Stock and various loan concessions on existing convertible debt.

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 20 I 8. At June 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

Stock plan

 

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. Shares issued under this plan will fully vest upon issuance. The aggregate Fair Market Value of the Common stock becoming exercisable for the first time during any calendar year shall not exceed $100,000 per optionee.

 

On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which expire February 23, 2023 in the amounts and to the following:

 

Rick Havenstrite – 1,000,000 options;
Howard Crosby – 1,000,000 options;
John Ryan – 200,000 options; and
Linde Havenstrite – 200,000 options.

 

 12 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

 

Forward-looking statements

 

The statements contained in this report that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

 

Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this quarterly report. While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to, the following:

 

  default of outstanding secured obligations;
  maintaining necessary mining permits;
  a decline in metal prices;
  environmental hazards;
  metallurgical and other processing problems;
  unusual or unexpected geological formations;
  global economic and political conditions;
  disruptions in credit and financial markets;
  global productive capacity;
  changes in product costing; and
  competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, flooding, landslides, power outages, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities).

 

Mining operations are subject to a variety of existing laws and regulations relating to exploration, permitting procedures, safety precautions, property reclamation, employee health and safety, air and water quality standards, pollution and other environmental protection controls, all of which are subject to change and are becoming more stringent and costly to comply with. Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.

 

These risk factors could cause our results to differ materially from those expressed in forward-looking statements.

 

Overview

 

Desert Hawk Gold Corp., a Nevada corporation (the “Company”), is engaged in the search for mineral deposits or reserves which could be economically and legally extracted or produced. In addition, we are currently producing gold and silver at the Kiewit property and had our first sales from the property in October 2014. None of our mining properties has any known reserves and our proposed programs on these properties are exploratory in nature. Our projects are located in the Gold Hill Mining District in Tooele County, Utah.

  

 13 

 

We were originally incorporated in the State of Idaho on November 5, 1957. For several years we bought and sold mining leases and claims, but in 1995 we ceased all principal business operations. In 2008, we changed our domicile from the State of Idaho to the State of Nevada. In May 2009, we raised funds to recommence mining activities. In July 2009, we entered into agreements to commence exploration activities on mining claims in the Gold Hill Mining District.

 

On January 6, 2014, we obtained the final permit necessary to commence construction and development of the Kiewit property. The reclamation bond was posted in February 2014 in the amount of $1,348,000. Development of the project was essentially completed in 2014 using funding provided by DMRJ Group I, LLC, a Delaware limited liability company (“DMRJ Group”). DMRJ Group is a Platinum Partners’ related entity managed by the Platinum Partners’ Credit Fund (“PPCO”). The property is located in a historical mining district that has existing disturbances and mine wastes and is in a very arid, desolate area. The property is also adjacent to, and uphill from, the Dugway Proving Grounds and Air Force Gunnery Range that is deemed an environmentally insensitive area, with low water quality. Management believes that through our leased patented claims we have adequate private land for process facilities. There is no material access from any metropolitan area or community.

 

On July 7, 2016, the Company replaced the $1,348,000 cash reclamation bond with a surety bond in the same amount. A condition of the surety bond was the deposit of 50% of the bond amount ($674,000) into an escrow account with the bonding company. The surety bond carries an annual bonding fee of $40,400.  

 

On July 24, 2009, we entered into a Joint Venture Agreement with the Clifton Mining Company and Woodman Mining Company under which Clifton Mining granted to us exclusive possession of certain patented and unpatented mining claims and an unpatented mill site claim and certain Utah state mineral leases covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. Woodman Mining also granted us the same rights in certain of these patented mining claims owned jointly with Clifton Mining. Also, on July 24, 2009, we entered into a Joint Venture Agreement with the Jeneane C. Moeller Family Trust under which the trust granted to us exclusive possession of four patented mining claims covering lands in the Gold Hill Mining District located in Tooele County, Utah, for exploration, development and mining, and the right to occupy the properties and to explore, develop and mine the properties for minerals. These claims are known as the Yellow Hammer property. As part of this agreement, if we did not place the Yellow Hammer property into commercial production within a three-year period from the date of the agreement, we would be required to make annual payments to the Moeller Family Trust of $50,000 to retain our rights to this property.

 

In September of 2016 we received a notice of default regarding the $50,000 annual penalty payment on these claims. The Yellow Hammer agreement was terminated at that time with no payment made and we no longer have rights to any of the claims on the Yellow Hammer property.

 

Prior to July 1, 2010, we notified Clifton Mining that we would surrender certain of the mining claims and leases originally obtained in our lease agreement with it. Also, in 2010 and in 2012, certain amendments were made to the lease agreements. As part of these agreements, if we did not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three-year period from the date of the agreement, we would be required to make annual payments to Clifton Mining of $50,000 per property to retain our rights to those properties.

 

The Cane Springs property was released back to Clifton Mining in 2013.

 

We currently hold leasehold interests within the Gold Hill Mining District consisting of 247 unpatented mining claims, including an unpatented mill site claim, and two Utah state mineral leases located on state trust lands, all covering approximately 10 square miles. We intend to concentrate our activities on the Kiewit project. Mineral extraction activities on the property currently are open-pit.

  

 14 

 

In July 2010, we entered into an Investment Agreement with DMRJ Group. DMRJ Group is a Platinum Partners’ related entity managed by the PPCO. The agreement has been modified numerous times and currently operates under the Fourteenth Amendment to the Investment Agreement. The Amendments have provided for extensions of payment dates, increased funding and other modifications to the agreement.

 

On February 19, 2014, we agreed to the terms of a Tenth Amendment to the Investment Agreement with DMRJ Group.  The Tenth Amendment provided for funding of construction of the heap leach pad and process facility, mining development, and operations through a series of monthly term loan advances totaling a maximum of $5,700,000 over five months.  A total of $5,500,000 of this allotment was eventually loaned to us. As a part of this amendment, on February 19, 2014, we issued to DMRJ Group 249,603 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. During 2014, financing expense in the amount of $998,412 was recorded in association with this share issuance, using an estimated fair value of the equivalent common shares of $0.04.

 

As a result of this issuance, DMRJ beneficially owned approximately 67% of the Company (on a fully-diluted basis) with shares convertible into 27,718,333 shares of common stock.

 

In connection with the Tenth Amendment, we also amended the Certificates of Designation for the Series A Preferred Stock and the Series A-1 and A-2 Preferred Stock to eliminate the mandatory dividends payable to the holders of the Series A Preferred Stock and to exclude the issuances of certain securities from triggering adjustments.

 

An Eleventh Amendment to the Investment Agreement was entered into on March 17, 2015 which established new minimum principal and interest payment dates which were then revised with the Twelfth, Thirteenth and Fourteenth Amendments to the Investment Agreement.

 

The Twelfth Amendment to the Investment Agreement was entered into on June 5, 2015 and allowed for additional funding in the amount of $850,000 for the purpose of additional working capital, financing of the expansion into the east extension of the current pit boundary and to provide for crushing equipment to allow crushing to be done in-house.

 

The Thirteenth Amendment to the Investment Agreement was entered into on August 31, 2015 and allowed for additional funding of up to $525,000 for operating capital and to provide the ability for crushing operations to be performed in-house. This funding was used for working capital and to prepare for a drilling program within the existing boundary of the Kiewit Exploration Permit.

 

As part of this amendment, we issued to DMRJ Group 185,194 shares of Series B Preferred Stock. The conversion rate of the Series B Preferred Stock is 100 shares of common stock for each share of Series B Preferred Stock. As a result of this issuance, DMRJ Group owned approximately 77% of our Company (on a fully-diluted basis) with shares convertible into 47,211,002 of common stock. DMRJ Group is considered a related party.

 

The total due to DMRJ at March 31, 2017 and December 31, 2016 is as follows:

  

   March 31,   December 31, 
   2017   2016 
Principal        
Current  $15,110,492   $14,610,492 
Long-term   -    - 
Total   15,110,492    14,610,492 
Interest payable          
Current   7,787,190    7,239,610 
Long-Term   -    - 
   $22,897,682   $21,850,102 

  

 15 

 

The Investment Agreement contains certain negative covenants which prohibit us from the following actions or activities:

 

  Incurring any indebtedness except in limited circumstances;
  Creating any significant liens on any of our properties or assets;
  Enter into any sale and lease-back transaction involving any of our properties;
  Make any investments in or loans or advances to other parties;
  Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;
  Declare or pay any dividends, except for dividends to DMRJ Group;
  Engage in any business transactions with affiliates;
  Make capital expenditures except as permitted in the agreement pertaining to our current mining business;
  Create any lease obligations;
  Amend, supplement or modify any existing indebtedness;
  Enter into any swap, forward, future or derivative transaction;
  Make any change in our accounting policies or reporting practices;
  Form additional subsidiaries; or
  Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

 

At March 31, 2017, we have failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the defaults and has indicated it has no present intent to declare an event of default under the Investment Agreement.

 

The Thirteenth Amendment also established new minimum principal and interest payment dates beginning in June 2016 as follows:

 

June 30, 2016  $500,000 
September 30, 2016   800,000 
December 31, 2016   600,000 
February 28, 2017   500,000 
May 31, 2017   2,250,000 
August 31, 2017   2,250,000 
      
Total  $6,900,000 

 

We failed to make the minimum payments due June 30, 2016 and September 30, 2016.

 

The Fourteenth Amendment to the Investment Agreement with DMRJ Group was entered into on December 22, 2016 and allowed for December 2016 Term Loan Advances in an amount up to $600,000. The advance was drawn in full.

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and management of the DMRJ Group, charging Defendants with a complex, multi-pronged, fraudulent scheme to inflate returns to investors, and cover up massive losses and liquidity problems. DMRJ Group effectively owned 75% of stock of the Company (on a fully diluted basis). Funds in the amount of $944,060 were drawn from the receivers during the first two quarters of 2017 to help fund ongoing expenses.

 

For most of 2017 and, until an agreement was finalized in 2018, we were working towards a reorganization and recapitalization with the trustees of the two funds and finalized the Assignment and Assumption Agreement dated February 13, 2018. This agreement discharged all of the debt owed by us to DMRJ Group and its related affiliates and returned all of their equity to us in exchange for $625,000. The debt and equity were retired and cancelled by us. The owners of the convertible debt agreed to fund this payment in full, and they also agreed to certain concessions on their outstanding notes with us, in exchange for 4,500,000 shares of our Common Stock. All signatures from the court appointed trustees, and funding by us, have been received and the agreement was closed on March 8, 2018. Due to this development, our mining operations have been temporarily shut down since third quarter of 2017 but, if financing is successfully secured, we plan on commencing full mining operations in 2018.

 

 16 

 

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $0.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

 

The Company issued to one of the convertible debt holders two short-term loans which were subsequently repaid. On September 29, 2016, $50,000 was loaned at no interest and was repaid to the debtholder on October 14, 2016. On November 5, 2016, an additional $25,000 was loaned to the Company at 10% interest and was repaid including interest of $438 on January 18, 2017. These loan funds were used for operating capital. A third short term loan in the amount of $100,000 with 10% interest and a loan initiation fee of 2% was issued to one of the convertible debt holders on July 3, 2018. This loan has not yet been paid.

 

On October 14, 2016, the Company issued convertible promissory notes, convertible at $0.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Notes), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and is payable quarterly thereafter.

 

On August 7, 2017, the convertible debt holders funded an additional aggregate of $500,000 under similar terms. These funds were used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018 both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

An equity financing was initiated in September 2012 for the sale of up to 1,150,000 shares of our common stock. This offering closed December 31, 2012 with proceeds of $130,000 raised through sales of 130,000 shares of our common stock. Under the terms of this offering, stock can be converted to cash generated from the sale of gold, for a period of 12 months after commencement of operations at the Kiewit project. Proceeds from 5% of the gold produced during the first year of production will be allocated to fund this option. Each investor received the right to convert a minimum of one-half and up to all of his shares (on a pro rata basis) into the value of the number of ounces represented by the total investment, determined using a base price of $1,000 per ounce. At March 31, 2017, conversion proceeds due to shareholders are $151,406 for all 130,000 conversion shares. Due to the redemption feature of these shares, management has concluded that the proceeds from these stock sales should be recorded as a liability and not as equity. Payment of these funds due to investors has not yet begun, due to limited cash flow, and is included in accounts payable and liabilities. The amount owed to the shareholders in excess of $1,000 per ounce for redemptions through March 31, 2017 is $21,406. This amount has been recorded as an administrative expense.

 

On June 20, 2016, we entered into an agreement with a related party, RMH Overhead, LLC, to lease certain mining and crushing equipment, some of which was previously owned by us. We have recorded this liability as a capital lease and the liability is reflected on the balance sheet as ‘obligation under capital lease – related party’. The terms of the lease are 24 monthly payments of $9,212 which include interest at 15%. At any time during the lease term, the equipment may be purchased by us for the balance due. 16 of the 24 payments have been made as of July 19, 2018.

 

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for an adjusted balance of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of July 10, 2018, six of those payments have been made. These financial statements as of March 31, 2017, reflect the loss on impairment of equipment in the amount of $147,214 which was recognized in 2016, and the terms of the agreement finalized on July 31, 2017. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

  

 17 

 

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery.  Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract was arrived at and the first of seven monthly payments of $39,009 was made.  As of July 10, 2018, two of those payments have been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company. 

 

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company’s Common Stock and various loan concessions on existing convertible debt.

 

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 2018. At June 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

 

On July 6, 2018, the Company negotiated an arrangement for a one-time sale of gold and silver byproduct to H and H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold and silver byproduct.

 

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which terminate February 23, 2023 in the amounts and to the following:

 

Rick Havenstrite – 1,000,000 options;
Howard Crosby – 1,000,000 options;
John Ryan – 200,000 options; and
Linde Havenstrite – 200,000 options.

 

Historically, we have incurred net losses for the years ended December 31, 2016 and 2015 and have also incurred a loss for the three months ended March 31, 2017.

 

Our financial statements were prepared assuming that we would continue as a going concern. Our significant cumulative losses from operations as of March 31, 2017 raise substantial doubt about our ability to continue as a going concern. If the going-concern assumption was not appropriate for our financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. During 2017, we continued to experience losses from operations. We will require additional funding to complete much of our planned mining exploration and operations. Except for potential proceeds from the sale of equity in offerings by us, the issuance of debt, and revenue from existing operations, which has been minimal, we have no other source for additional funding. Our continued net operating losses and stockholders’ deficiency increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

 

Results of Operations for the Three Months Ended March 31, 2017 and 2016.

 

The operating loss of $351,735 for the three months ended March 31, 2017 as compared to the operating loss of $385,409 for the three months ended March 31, 2016 represents a decreased loss in the amount of $33,674. Other expense for the three months ended March 31, 2017 was $617,653 which consisted of interest and financing expense, increased by $68,176 as compared to the other expense amount of $549,477 for the three months ended March 31, 2016, due to increased interest on related party debt. The net overall increase in net loss for the three months ended March 31, 2017 compared to March 31, 2016 was $34,502.

 

Liquidity and Cash Flow

 

Net cash used by operating activities was $427,301 during the three-month period ended March 31, 2017, compared with cash used by operating activities of $380,463 during the three-month period ended March 31, 2016. This $46,838 increase in the amount of cash used in operating activities is primarily attributable to restrictions caused by insufficient working capital and reduced production.

 

 18 

 

Net cash used by investing activities was $12 during the three-month period ended March 31, 2017, compared to $157,847 cash used by investing activities during the three month-period ended March 31, 2016. This decrease in cash used by investing activities is due to the reduced investment in property and equipment.

 

Net cash used by financing activities was $77,303 during the three-month period ended March 31, 2017, compared with $447,311 cash provided by financing activities during the three-month period ended March 31, 2016. The decrease of $524,614 in cash provided by financing activities during the three-month period ended March 31, 2017 was due to payments made on equipment purchase notes.

 

As a result of the above, cash decreased by $504,616 during the three-month period ended March 31, 2017, leaving us with a cash balance of $153,328 as of March 31, 2017.

 

Critical Accounting Policies

 

The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting rules have changed. Accounting rules generally do not involve a selection among alternatives, but involve an implementation and interpretation of existing rules, and the use of judgment, to the specific set of circumstances existing in our business. Discussed below are the accounting policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. See Note 2, “Summary of Significant Accounting Policies,” in our attached unaudited consolidated financial statements for a discussion of those policies.

 

Revenue Recognition

 

Sales of all metals products are recorded as revenues when title and risk of loss transfer to the purchaser. Sales to the purchaser are recorded at gross sales price, with charges for treatment, refining, smelting and other charges included as part of general project costs.

 

Mineral Exploration and Development Costs

 

We account for mineral exploration costs in accordance with ASC 932 Extractive Activities. All exploration expenditures are expensed as incurred, previously capitalized costs are expensed in the period the property is abandoned. Expenditures to explore new mines, to define further mineralization in existing bodies of mineralized material, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

 

Inventories

 

Inventories consist of estimated gold on the heap leach pad and in the carbon process system and are valued at the lower of production cost or market value. Gold on the heap leach pad is estimated to be 80% complete for cost purposes and gold in the process system is estimated at 95% complete.

 

Mineral Properties

 

We account for mineral properties in accordance with ASC 930 Extractive Activities-Mining. Costs of acquiring mineral properties are capitalized by project area upon purchase of the associated claims. Mineral properties are periodically assessed for impairment of value and any diminution in value.

 

Reclamation and Remediation

 

Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. We use assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on our current mining plan and the best available information for making such estimates.

  

 19 

 

For non-operating properties, we accrue costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is performed.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Control and Procedures

 

Our Chief Executive Officer, who serves as our principal executive officer; and our Treasurer, who serves as our principal financial and accounting officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. However, due to financial considerations, we were unable to timely file this Quarterly Report on Form 10-Q and, thus, our disclosure controls and procedures were not effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during our most recent quarter ended March 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

  

 20 

 

PART II – OTHER INFORMATION

 

Item 3. Defaults Upon Senior Securities.

 

As has been disclosed above, we are currently in default of the Investment Agreement, as amended and the Note with DMRJ Group.

 

Item 4. Mine Safety Disclosures

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this quarterly report.

 

Item 6. Exhibits

 

Exhibit No.   Description
31.1   Rule 15d-14(a) Certification by Principal Executive Officer
31.2   Rule 15d-14(a) Certification by Principal Financial Officer
32.1   Section 1350 Certification of Principal Executive Officer
32.2   Section 1350 Certification of Principal Financial Officer
95   Mine Safety Disclosure
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

 21 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Desert Hawk Gold Corp.
   
Date: August 3, 2018 By: /s/ Rick Havenstrite
Rick Havenstrite, Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 3, 2018 By: /s/ Marianne Havenstrite
    Marianne Havenstrite, Chief Financial Officer
    (Principal Accounting and Financial Officer)

 

 

22

 

EX-31.1 2 f10q0317ex31-1_deserthawk.htm CERTIFICATION

Exhibit 31.1

 

Certification

 

I, Rick Havenstrite, certify that:

 

1.          I have reviewed this Form 10-Q quarterly report of Desert Hawk Gold Corp. for the quarter ended March 31, 2017;

 

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.          The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.          The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 3, 2018

 

/s/ Rick Havenstrite

 

Rick Havenstrite, Chief Executive Officer

(Principal Executive Officer)

EX-31.2 3 f10q0317ex31-2_deserthawk.htm CERTIFICATION

Exhibit 31.2

 

Certification

 

I, Marianne Havenstrite, certify that:

 

1.          I have reviewed this Form 10-Q quarterly report of Desert Hawk Gold Corp. for the quarter ended March 31, 2017;

 

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.          The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.          The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 3, 2018

 

/s/ Marianne Havenstrite

 

Marianne Havenstrite, Treasurer

(Principal Financial and Accounting Officer)

EX-32.1 4 f10q0317ex32-1_deserthawk.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Desert Hawk Gold Corp. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal executive officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 3, 2018

 

/s/ Rick Havenstrite

 

Rick Havenstrite, Chief Executive Officer

(Principal Executive Officer)

EX-32.2 5 f10q0317ex32-2_deserthawk.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

 

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of Desert Hawk Gold Corp. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal financial officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 3, 2018

 

/s/ Marianne Havenstrite

 

Marianne Havenstrite, Treasurer

(Principal Financial and Accounting Officer)

EX-95 6 f10q0317ex95_deserthawk.htm MINE SAFETY DISCLOSURE

Exhibit 95

 

Mine Safety Disclosure Data

 

There have been NO violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine health hazard under section 104.

 

We certify that we had no mining-related fatalities during the quarterly period ended March 31, 2017.

 

We have not received an imminent danger order under Section 107(a) of the Federal Mine Safety and Health Act of 1977.

 

We have not received any notices of a pattern of violations, or of the potential to have such a pattern, of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of mine health and safety hazards.

 

We have no pending legal actions before the Federal Mine Safety and Health Review Commission as of March 31, 2017, and have not instituted any legal actions during the quarterly period ended March 31, 2017.

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As a result, the Company was in default of the convertible notes. As per the terms of the Investment Agreement (Note 10), DMRJ Group was informed of this default and it stated that it had no intent to declare an event of default under the Investment Agreement, as amended. 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The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company&#8217;s Common Stock. 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The offering expired on June 30, 20 I 8. 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The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; font-size-adjust: none; font-stretch: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2017
Jul. 31, 2018
Document and Entity Information    
Entity Registrant Name Desert Hawk Gold Corp.  
Entity Central Index Key 0001168081  
Trading Symbol DHGC  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Mar. 31, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q1  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   20,581,603
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Balance Sheets - USD ($)
Mar. 31, 2017
Dec. 31, 2016
CURRENT ASSETS    
Cash $ 153,328 $ 657,944
Inventories, current portion (Note 4) 135,278 142,921
Prepaid expenses and other current assets 96,304 132,747
Total Current Assets 384,910 933,612
INVENTORIES, non-current (Note 4) 3,012,839 2,951,011
PROPERTY AND EQUIPMENT, net (Note 5) 3,955,793 4,039,887
MINERAL PROPERTIES AND INTERESTS, net (Note 6) 1,114,675 1,096,482
RECLAMATION BONDS (Note 6) 752,766 752,754
TOTAL ASSETS 9,220,983 9,773,746
CURRENT LIABILITIES    
Accounts payable and accrued expenses 600,730 744,943
Accrued liabilities-officer and other wages (Note 12) 539,577 495,808
Interest payable - related parties (Note 7) 221,506 192,842
Interest payable - related party (Note 10) 7,787,190 7,239,610
Convertible debt - related parties (Note 7) 850,000 850,000
Obligation under capital lease - related party, current portion (Note 8) 96,066 120,461
Short-term note payable - related parties (Notes 7 and 12) 34,500
Notes payable - equipment, current portion (Note 9) 477,470 813,818
Notes payable - related party (Note 10) 15,110,492 14,610,492
Total Current Liabilities 25,683,031 25,102,474
LONG-TERM LIABILITIES    
Asset retirement obligation (Note 11) 992,237 974,109
Obligation under capital lease - related party (Note 8) 26,339 51,714
Notes payable - equipment (Note 9) 296,591 453,276
Total Long-Term Liabilities 1,315,167 1,479,099
TOTAL LIABILITIES 26,998,198 26,581,573
COMMITMENTS AND CONTINGENCIES (Notes 11, 12, 13 and 14)
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized
Common stock, $0.001 par value, 100,000,000 shares authorized; 13,656,603 and 13,656,603 shares issued and outstanding 13,528 13,528
Additional paid-in capital 9,131,718 9,131,718
Accumulated deficit (26,924,043) (25,954,655)
Total Stockholders' (Deficit) (17,777,215) (16,807,827)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) 9,220,983 9,773,746
Series A Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized 958 958
Series A-1 Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized
Series A-2 Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized 180 180
Series B Preferred Stock    
STOCKHOLDERS' (DEFICIT) (Note 3)    
Preferred Stock, $0.001 par value, 10,000,000 shares authorized $ 444 $ 444
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Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2017
Dec. 31, 2016
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 13,656,603 13,656,603
Common stock, shares outstanding 13,656,603 13,656,603
Series A Preferred Stock    
Preferred stock, shares issued 958,033 958,033
Preferred stock, shares outstanding 958,033 958,033
Series A-1 Preferred Stock    
Preferred stock, shares issued
Preferred stock, shares outstanding
Series A-2 Preferred Stock    
Preferred stock, shares issued 180,000 180,000
Preferred stock, shares outstanding 180,000 180,000
Series B Preferred Stock    
Preferred stock, shares issued 444,530 444,530
Preferred stock, shares outstanding 444,530 444,530
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Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
REVENUE:    
Concentrate sales $ 11,575 $ 291,693
EXPENSES    
General project costs 141,820 387,631
Exploration expense 7,000
Officers and directors fees 64,537 45,000
Legal and professional 8,092 25,383
General and administrative 52,282 65,069
Depreciation and amortization 96,579 147,019
Total Expenses 363,310 677,102
OPERATING LOSS (351,735) (385,409)
OTHER INCOME (EXPENSE)    
Interest and other income 12 477
Interest and financing expense (27,542) (47,887)
Interest expense - related parties (590,123) (502,067)
Total Other Income (Expense) (617,653) (549,477)
LOSS BEFORE INCOME TAXES (969,388) (934,886)
INCOME TAXES
NET LOSS $ (969,388) $ (934,886)
BASIC AND DILUTED NET LOSS PER SHARE $ (0.07) $ (0.07)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 13,656,603 13,656,603
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Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (969,388) $ (934,886)
Adjustments to reconcile net loss to net cash used by operating activities:    
Depreciation and amortization 96,579 163,974
Accretion of asset retirement obligation 18,128 18,128
Changes in operating assets and liabilities:    
Accounts receivable (89,834)
Inventories (54,185) (112,632)
Prepaid expenses and other current assets 36,443 8,105
Accounts payable and accrued expenses (174,891) (2,885)
Accrued liabilities - officer wages 43,769 45,000
Interest payable - related parties 28,664 22,500
Interest payable - related party 547,580 502,067
Net cash used by operating activities (427,301) (380,463)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Additions to property and equipment (157,370)
Increase in reclamation bonds (12) (477)
Net cash used by investing activities (12) (157,847)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from note payable - related party 500,000 550,000
Payment of obligation under capital lease - related party (49,770)
Payment of note payable - equipment (493,033) (102,689)
Payment of short term note payable - related parties (34,500)
Net cash provided (used) by financing activities (77,303) 447,311
NET INCREASE (DECREASE) IN CASH (504,616) (90,999)
CASH, BEGINNING OF PERIOD 657,944 132,509
CASH, END OF PERIOD 153,328 41,510
NON-CASH FINANCING AND INVESTING ACTIVITIES:    
Equipment acquired with note payable - equipment 28,992
Equipment acquired with accounts payable - equipment $ 30,678
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Organization and Description of Business
3 Months Ended
Mar. 31, 2017
Organization and Description of Business [Abstract]  
ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Desert Hawk Gold Corp. (the “Company”) was incorporated on November 5, 1957, in the State of Idaho as Lucky Joe Mining Company. On July 17, 2008, the Company merged with its wholly-owned subsidiary, Lucky Joe Mining Company, a Nevada corporation, for the sole purpose of effecting a change in domicile from the State of Idaho to the State of Nevada. Lucky Joe Mining Company (Nevada) was the continuing and surviving corporation and each outstanding share of Lucky Joe Mining Company (Idaho) was converted into one outstanding share of Lucky Joe Mining Company (Nevada). On April 3, 2009, the Company filed a Certificate of Amendment with the State of Nevada changing the name of the Company to Desert Hawk Gold Corp. On June 30, 2014, the Company dissolved its sole subsidiary, Blue Fin Capital, Inc. As a result, the Company has no subsidiaries.

 

The Company never successfully generated any revenue and eventually abandoned the mining business, remaining dormant until it recommenced its mining activities on May 1, 2009.

 

During the year ended December 31, 2009, the Company entered into Joint Venture Agreements with the Clifton Mining Company, the Woodman Mining Company and the Moeller Family Trust for the lease of certain of their property interests in the Gold Hill Mining District of Utah.  In 2011, the Company entered into an agreement with DMRJ Group, a Platinum Partners’ related entity managed by Platinum Partners’ Credit Fund (PPCO), which allowed for long term funding of the Kiewit project and helped to provide cash flow for operations during the period from 2009 until 2014 while the permitting process was ongoing. The final permit needed to begin development of the Kiewit property was received in January 2014 and development began in February 2014. Construction at the site was substantially complete at September 30, 2014. Revenue from the Kiewit heap leach operation began in October 2014 with the first sales of gold and silver.

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Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2017
Summary of Significant Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the accompanying unaudited interim balance sheets and statements of operations and cash flows contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of the Company as of March 31, 2017, and the results of its operations and its cash flows for the three months ended March 31, 2017 and 2016. The operating and financial results for the Company for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

 

These unaudited interim financial statements have been prepared by management in accordance with generally accepted accounting principles used in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. These unaudited interim financial statements do not include all note disclosures required by U.S. GAAP on an annual basis, and therefore should be read in conjunction with the annual audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on June 29, 2018.

 

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

  

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

Inventories

 

The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is treated with a chemical solution, which dissolves the gold contained in the material. The resulting “pregnant” solution is further processed in a plant where gold is recovered. The Company records ore on leach pad, ore in carbon column in process and gold doré, at average production cost per gold ounce, less provisions required to reduce inventory to net realizable value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct labor; repairs and maintenance; utilities; depreciation and amortization of property, equipment, and mineral properties; and mine administrative expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. Costs are removed from ore on leach pads as ounces are recovered based on the average cost per recoverable ounce of gold on the leach pad.

 

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of March 31, 2017, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

 

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months.

 

Revenue Recognition

 

Revenue is recognized when title and risk of ownership of metals or metal bearing concentrate have passed and collection is reasonably assured. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts.

 

Earnings (loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At March 31, 2017 and 2016, common stock equivalents outstanding are as follows:

 

    March 31,
2017
    March 31,
2016
 
             
Convertible debt     2,203,158       1,028,574  
Convertible preferred stock     47,211,002       47,211,002  
                 
Total     49,414,160       48,239,576  

 

However, the diluted earnings (loss) per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

 

Going Concern

 

As shown in the accompanying financial statements, the Company has an accumulated deficit and negative working capital through March 31, 2017, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

The Company will need significant funding to continue operations and increase development through the next fiscal year. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

 

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

XML 20 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Capital Stock
3 Months Ended
Mar. 31, 2017
Capital Stock [Abstract]  
CAPITAL STOCK

NOTE 3 – CAPITAL STOCK

 

Common Stock

 

2017 Activity

 

No shares of common stock were issued during the first three months of 2017.

 

2016 Activity

 

No shares of common stock were issued during the first three months of 2016.

 

Preferred Stock

 

2017 Activity

 

No shares of preferred stock were issued during the first three months of 2017. See Note 14 – Subsequent Events, regarding the return of DMRJ Group’s equity shares as part of a reorganization with court appointed trustees.

 

2016 Activity

 

No shares of preferred stock were issued during the first three months of 2017.

XML 21 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories
3 Months Ended
Mar. 31, 2017
Inventories [Abstract]  
INVENTORIES

NOTE 4 – INVENTORIES

 

The following table provides the components of inventories:

 

  March 31, 
2017
  December 31, 
2016
 
Ore on leach pad $3,116,252  $3,051,766 
Carbon column in process  31,865   31,214 
Dore finished goods  -0-   10,952 
Total  3,148,117   3,093,932 
         
Less: current portion  (135,278)  (142,921)
         
Non-current inventories $3,012,839  $2,951,011 

 

Inventories are valued at the lower of cost or net realizable value which at March 31, 2017 is cost.

XML 22 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment
3 Months Ended
Mar. 31, 2017
Property and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 5 - PROPERTY AND EQUIPMENT

 

The following is a summary of property, equipment, and accumulated depreciation at March 31, 2017 and December 31, 2016:

 

  March 31,  December 31, 
  2017  2016 
Equipment $3,077,482  $3,046,803 
Furniture and fixtures, temporary housing  6,981   6,981 
Electronic and computerized equipment  52,874   52,874 
Vehicles  67,115   67,115 
   3,204,452   3,173,773 
Less accumulated depreciation  (1,258,880)  (1,144,108)
   1,945,572   2,029,665 
         
Kiewit property facilities  2,497,435   2,497,436 
Less accumulated amortization  (487,214)  (487,214)
   2,010,221   2,010,222 
         
Total $3,955,793  $4,039,887 

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. See Note 9.

XML 23 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Reclamation Bonds
3 Months Ended
Mar. 31, 2017
Mineral Properties and Reclamation Bonds [Abstract]  
MINERAL PROPERTIES AND RECLAMATION BONDS

NOTE 6 – MINERAL PROPERTIES AND RECLAMATION BONDS

 

Mineral properties and interests as of March 31, 2017 and December 31, 2016 are as follows:

 

  March 31,
2017
  December 31,
2016
 
Initial lease fee      
Kiewit, Cactus Mill and all other sites $600,000  $600,000 
         
Asset retirement obligation        
Kiewit Site  789,026   789,026 
Kiewit Exploration  10,780   10,780 
Cactus Mill  16,133   16,133 
Total  815,939   815,939 
Accumulated amortization  (301,264)  (319,457)
   514,675   496,482 
         
Total $1,114,675  $1,096,482 

 

The Company holds operating interests within the Gold Hill Mining District in Tooele County, Utah, consisting of 247 unpatented claims, including the unpatented mill site claim, and two Utah state mineral leases located on state trust lands. Annual claims fees are currently $155 per claim plus administrative fees.

 

On January 6, 2014, we obtained the final permit necessary to commence construction of the heap leach pad and process facility. On February 20, 2014, the Kiewit reclamation bond in the amount of $1,348,000 was posted with the State of Utah, Division of Oil, Gas and Mining.  The bond amount includes bonding for the Yellow Hammer Small Mine and the Yellow Hammer Exploration sites along with the Herat Exploration site.   Funds of $92,705 were received in April 2014 by the Company for these refunded reclamation bonds.

 

On July 7, 2016, the Company replaced the $1,348,000 cash reclamation bond with a surety bond in the same amount. A condition of the surety bond was the deposit of 50% of the bond amount into an escrow account with the bonding company. An escrow account was established with the bonding company and $674,000 (50% of the original cash bond) was deposited by the Company. The surety bond carries an annual bonding fee of $40,400. Total reclamation bonds posted are $752,766 and $752,754 at March 31, 2017 and December 31, 2016, respectively.  

 

On September 12, 2016, the Yellow Hammer mineral property was returned to the lessor, Moeller Family Trust, and the Company recognized a loss on abandonment in the amount of $175,000 less the accumulated amortization of $37,234, for a net loss of $137,766.

XML 24 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Debt
3 Months Ended
Mar. 31, 2017
Convertible Debt [Abstract]  
CONVERTIBLE DEBT

NOTE 7 – CONVERTIBLE DEBT

 

On November 18, 2009, the Company issued convertible promissory notes, to two of its minority shareholders, for a total of $600,000. The notes bear interest at 15% per annum. Interest-only is payable in equal monthly installments of $7,500. The notes are convertible at a rate of $0.70 per share. On July 5, 2011, the Company entered into an agreement with the two holders of the convertible debt to begin paying their monthly interest in stock rather than cash.

  

The Company failed to repay the loan in full on the November 30, 2012, 2013, 2014, 2015 and 2016 maturity dates, so the Company was required to issue an additional 300,000 shares of common stock to these debt holders in each of those years. In 2014, 2015 and 2016, the stock was valued at an estimated $0.04 (total $12,000) and was accounted for as financing expense. As part of this agreement, the due date of the notes was extended each year and has now been extended to November 30, 2018. Interest was paid with shares of common stock through November 30, 2014 and is to be paid in cash thereafter. Interest has not been paid since November 2014 and accrued interest payable on these notes at March 31, 2017 and December 31, 2016 is $210,000 and $187,500 respectively. Per the terms of these notes, interest is not convertible to common stock.

 

On October 14, 2016, the Company issued convertible promissory notes, convertible at $.25 per share, to its two convertible debt holders in the amount of $125,000 each (Senior Note), at 10% interest, due in full on September 30, 2018. Interest is payable on September 30, 2017 and is payable quarterly thereafter. Accrued interest payable on these notes at March 31, 2017 and December 31, 2016 is $11,506 and $5,342, respectively. Interest on these notes is convertible to common stock. As a part of this note, DMRJ Group and its related entity, Platinum Partners (Note 10), have agreed to subordinate to these debtholders DMRJ’s collateral interest in the Senior Note, the principal and accrued but unpaid interest on the existing convertible debt and the amounts due to the convertible debtholders under the provisions of the gold loan redemption program.

 

On November 15, 2016, a short-term loan in the amount of $25,000 was obtained from West C Street, one of the Company’s convertible debt holders. Funds were used for operating capital. This amount was repaid to West C Street on January 18, 2017 along with accrued interest of $438.

XML 25 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party
3 Months Ended
Mar. 31, 2017
Obligation Under Capital Lease - Related Party [Abstract]  
OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

NOTE 8 – OBLIGATION UNDER CAPITAL LEASE - RELATED PARTY

 

A capital lease was entered into on June 20, 2016 with RMH Overhead, LLC for the purchase of mining and crushing equipment. RMH Overhead, LLC is an entity owned by the Company’s President, Rick Havenstrite. For the periods ended March 31, 2017 and December 31, 2016, equipment includes assets under capital lease amounting to $165,730 and $172,360, respectively. The lease is being amortized over the estimated useful life of the equipment. Accumulated amortization at March 31, 2017 and December 31, 2016 was $19,888 and $13,258. At March 31, 2017, the estimated future minimum lease payments under the capital lease was as follows:

 

Year ending March 31,      
2018   $ 108,000  
2019     27,000  
Total     135,000  
Less: Implied interest     (12,595 )
Net present value     122,405  
Less: Capital lease obligation-current portion     (96,066 )
Long-term capital lease obligation   $ 26,339  
XML 26 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment
3 Months Ended
Mar. 31, 2017
Notes Payable - Equipment [Abstract]  
NOTES PAYABLE - EQUIPMENT

NOTE 9 – NOTES PAYABLE – EQUIPMENT

 

The following is a summary of the equipment notes payable:

 

  March 31,
2017
  December 31, 
2016
 
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,441 including interest at 4.99%. $66,728  $73,203 
         
Note payable to Komatsu Financial, uncollateralized, due in 12 monthly installments of $3,223, beginning in April 2016, including interest at 1.16%.  -0-   9,668 
         
Note payable to CAT Financial, collateralized by five pieces of used mining equipment due in 36 monthly installments of varying amounts including interest at 4.68%.  The equipment has since been returned to CAT. See note below.  440,473   881,894 
         
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,674 including interest at 2.99%.  249,670   282,675 
         
Note payable to Star Capital, LLC, collateralized by a 2009 Multiquip generator, due in 24 monthly installments of $1,412, beginning in March 2016, including interest at 11.4%.  17,190   19,654 
   774,061   1,267,094 
Current portion  (477,470)  (813,818)
Long term portion $296,591  $453,276 
         
Principal payments are as follows for the twelve months ended March 31,        
2018 $477,470     
2019  286,924     
2020  9,667     
Total $774,061     

 

In November 2016, five pieces of mining equipment financed by CAT Financial were returned to CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $372,129, for a net carrying value of $1,128,759. The note payable due to CAT at the time of disposition was $960,585. The CAT contract did not legally release the Company from liability in the case of a repossession thus an extinguishment has not occurred and the debt and assets were not derecognized. On July 31, 2017, a new agreement was made as disclosed in Note 14 – Subsequent Events.

XML 27 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party
3 Months Ended
Mar. 31, 2017
Note Payable - Related Party [Abstract]  
NOTE PAYABLE - RELATED PARTY

NOTE 10 – NOTE PAYABLE - RELATED PARTY

 

DMRJ Group beneficially owns approximately 75% of the Company (on a fully-diluted basis) with Series A, A-2 and B preferred shares convertible to 47,211,002 shares of common stock (See Note 3). They are considered a related party. In July 2010, the Company entered into an Investment Agreement with DMRJ Group. The Agreement has been modified numerous times and at March 31, 2017 operated under the Fourteenth Amendment to the Investment Agreement dated December 22, 2016. The Amendments have provided for extensions of payment dates, increased funding capacity and other modifications to the debt agreement.

 

The total due to DMRJ Group at March 31, 2017 and December 31, 2016 is as follows:

 

    March 31,     December 31,  
    2017     2016  
             
Principal, due within one year   $ 15,110,492     $ 14,610,492  
Interest payable, current     7,787,190       7,239,610  
    $ 22,897,682     $ 21,850,102  

 

The Investment Agreement contains certain negative covenants which prohibit us from the following actions or activities:

 

· Incurring any indebtedness except in limited circumstances;
· Creating any significant liens on any of our properties or assets;
· Enter into any sale and lease-back transaction involving any of our properties;
· Make any investments in or loans or advances to other parties;
· Engage in any merger, consolidation, sale of assets or acquisition transaction, except for the purchase or sale of inventory or certain limited investments;
· Declare or pay any dividends, except for dividends to DMRJ Group;
· Engage in any business transactions with affiliates;
· Make capital expenditures except as permitted in the agreement pertaining to our current mining business;

· Create any lease obligations;
· Amend, supplement or modify any existing indebtedness;
· Enter into any swap, forward, future or derivative transaction;
· Make any change in our accounting policies or reporting practices;
· Form additional subsidiaries; or
· Modify or grant a waiver or release under or terminate any principal lease agreement or other material contract.

  

At March 31, 2017, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

 

2017 Activity

 

At March 31, 2017, DMRJ continued to operate through the direction of its court appointed trustees (see 2016 Activity below). Funds in the amount of $500,000 were drawn from the trustees during the quarter ending March 31, 2017 to help fund ongoing expenses.

See Note 14.

 

2016 Activity

 

At December 31, 2016, the Company has failed to pay certain obligations in violation of these covenants. DMRJ Group has been informed of the default and has indicated it has no present intent to declare an event of default under the Investment Agreement, as amended.

 

Several term loan advances were received from DMRJ Group by the Company between February 9, 2016 and December 29, 2016 totaling $2,470,000. A loan payment of $900,000 was made to DMRJ on July 8, 2016. The advances bear interest at 15% per annum and become due on October 31, 2016 with the remainder of the note due to DMRJ Group. These funds were used for working capital and equipment debt repayment.

 

A Fourteenth Amendment to the Investment Agreement was entered into on December 22, 2016 which allowed for additional funding in the amount of up to $600,000 from DMRJ Group and its affiliated fund managers. This $600,000 was drawn on December 29, 2016 which brought the total funds drawn from DMRJ Group and its affiliates for 2016 to $2,470,000.

 

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. On December 19th, 2016, the Securities and Exchange Commission (“SEC”) filed a Complaint (the “Complaint”) against Defendants Platinum Management, LLC (“Platinum Management”), Platinum Credit Management, L.P. (“Platinum Credit”), and management of the DMRJ Group, charging Defendants with a complex, multi-pronged, fraudulent scheme to inflate returns to investors, and cover up massive losses and liquidity problems. DMRJ Group effectively owns 75% of stock of the Company (on a fully diluted basis). See Note 14 – Subsequent Events.

XML 28 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Remediation Liability and Asset Retirement Obligation
3 Months Ended
Mar. 31, 2017
Remediation Liability and Asset Retirement Obligation [Abstract]  
REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

NOTE 11 – REMEDIATION LIABILITY AND ASSET RETIREMENT OBLIGATION

 

Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on the Company’s current mining plan and the best available information for making such estimates. In calculating the present value of the asset retirement obligation the Company used a credit adjusted risk free interest rate of 8% to 10% and projected mine lives of five to 12 years, depending on the site. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.

 

Changes in the reclamation liability for the periods ended March 31, 2017 and December 31, 2016 are as follows:

 

    Three months
ended March 31,
2017
    Year ended
December 31,
2016
 
Reclamation and remediation liability, beginning of period   $ 974,109     $ 901,597  
Obligation incurred     -       -  
Accretion expense     18,128       72,512  
Reclamation and remediation liability, end of period   $ 992,237     $ 974,109  
XML 29 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions
3 Months Ended
Mar. 31, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 12 – RELATED PARTY TRANSACTIONS

 

In addition to transactions disclosed in Notes 7, 8 and 10, the Company had the following related party transactions.

 

The Company recognized rent expense for rental of office space of $3,000 for the three months ended March 31, 2017 and 2016, respectively, paid to RMH Overhead, LLC, a company owned by Rick Havenstrite, the Company’s President and a director. Of the amounts recognized as expense, RMH Overhead, LLC was paid $3,000 during the three months ended March 31, 2017 and 2016, respectively, leaving a total of $13,750 and $17,750 remaining in accounts payable at March 31, 2017 and December 31, 2016, respectively, which represents amounts due from prior years.

 

In addition, a short-term loan totaling $9,500, also for working capital, was obtained from our President, Rick Havenstrite, with draws on multiple dates in November and December 2016. This loan was repaid in full on January 3, 2017 with no interest paid.

 

As of March 31, 2017 and December 31, 2016, accrued compensation of $539,577 and $486,577 were due to directors and officers. Of the amounts accrued at March 31, 2017 and December 31, 2016, accrued compensation of $402,692 and $372,692 respectively, is due to Rick Havenstrite.

 

During the three months ended March 31, 2017 and 2016, the Company recognized general project cost expense of $0 and $6,667, respectively, for geological services provided by Stuart Havenstrite, the father of Rick Havenstrite. $39,367 remains unpaid to Mr. Havenstrite at both March 31, 2017 and December 31, 2016. These amounts are included in accounts payable at those dates.

XML 30 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Mineral property payments

 

During the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the lease of their property interests in the Gold Hill Mining District of Utah.  Under the terms of the Joint Venture Agreement, the Company is required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company is also required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company does not place the Kiewit property, the Clifton Shears-Smelter Tunnel property, and the Cane Springs property into commercial production within a three year period, it will be required to make annual penalty payments to Clifton Mining in the amount of $50,000 per location.  In 2014, the Company had not begun commercial production and the payments due on July 24, 2014 were paid and accepted by Clifton Mining for the Clifton Shears and Kiewit properties. The Cane Springs property penalty payment was not made in 2013 and this claim was released back to Clifton Mining at that time.  Production at the Kiewit property has since begun. Royalty expense of $702 and $17,160 was recognized during the three months ended March 31, 2017 and 2016, respectively, with these amounts fully paid at March 31, 2017. See Note 14.

 

A letter of default on the Clifton Shears properties dated September 19, 2016 was received by the Company with a 30 day period for curing the default. On October 17, 2016, past due royalties and the $50,000 penalty payments for each of 2015 and 2016 were paid to Clifton Mining, who then acknowledged the cure of default.

 

Mining severance tax in the amount of $92, based on production, was accrued at March 31, 2017.

 

Personal property tax due to Tooele County, Utah in the amount of $155,232 including interest and penalties, was accrued and past due at March 31, 2017. This amount due has not yet been paid.

 

Employment Agreements

 

In September 2010, the Company entered into an employment agreement with Mr. Havenstrite as President of the Company, which is ongoing. The agreement requires Mr. Havenstrite to meet certain time requirements and limits the number of other board member obligations in which he can participate. The agreement allows for a base annual salary of $120,000 plus certain performance compensation upon fulfillment of established goals. The agreement allows the Board to terminate Mr. Havenstrite’s employment at any time, providing for a severance payment upon termination without cause.

 

As of March 31, 2017, and December 31, 2016, accrued compensation of $534,577 and $486,577, were due to officers. Of the amounts accrued at March 31, 2017 and December 31, 2016, accrued compensation of $402,692 and $372,692 is due to Rick Havenstrite and $131,884 and $113,884 is due to Marianne Havenstrite, Treasurer and Principle Financial Officer. In addition, $5,000 and $-0- was due to directors at March 31, 2017 and December 31, 2016, respectively.

XML 31 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 14 – SUBSEQUENT EVENTS

 

Note payable – CAT equipment

 

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for a net carrying value of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of July 10, 2018, six of those payments have been made. The loss on impairment of equipment in the amount of $147,214 was recognized in the 4th quarter of 2016. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

  

 Note payable – Wheeler Machinery

 

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery.  Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract in the amount of $273,067 was finalized and the first of 7 equal monthly payments of $39,009 were to be made.  As of July 24, 2018, three of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company. 

 

Convertible debt

 

The Company failed to make interest payments required under the convertible notes (see Note 7) for all quarters beginning April 2016 through the current date. As a result, the Company was in default of the convertible notes. As per the terms of the Investment Agreement (Note 10), DMRJ Group was informed of this default and it stated that it had no intent to declare an event of default under the Investment Agreement, as amended. In addition, as per the terms of the notes, 300,000 penalty shares for both 2017 and 2016 were issued to the convertible debt holders for failure to pay the convertible notes in November of 2017 and 2016.

 

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

 

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

 

On July 3, 2018, a short term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.

 

Note payable – related party


In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partner’s related entity), was given to court appointed trustees of the two major funds of Platinum Partners. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company’s Common Stock. All signatures from the court appointed trustees, and funding by the Company, were received and the agreement was finalized on March 8, 2018.

 

Revenue

 

On July 6, 2018, the Company negotiated an arrangement for a one time sale of gold and silver byproduct to H & H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold, and silver byproduct.

 

Stock Offering

 

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company's Common Stock and various loan concessions on existing convertible debt.

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 20 I 8. At June 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

Stock plan

 

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. Shares issued under this plan will fully vest upon issuance. The aggregate Fair Market Value of the Common stock becoming exercisable for the first time during any calendar year shall not exceed $100,000 per optionee.

 

On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which expire February 23, 2023 in the amounts and to the following:

 

Rick Havenstrite – 1,000,000 options;
Howard Crosby – 1,000,000 options;
John Ryan – 200,000 options; and
Linde Havenstrite – 200,000 options.
XML 32 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2017
Summary of Significant Accounting Policies [Abstract]  
New Accounting Pronouncements

New Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating the impact of this guidance and our method of adoption.

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

 

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance and our method of adoption.

  

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Inventories

Inventories

 

The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is treated with a chemical solution, which dissolves the gold contained in the material. The resulting “pregnant” solution is further processed in a plant where gold is recovered. The Company records ore on leach pad, ore in carbon column in process and gold doré, at average production cost per gold ounce, less provisions required to reduce inventory to net realizable value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct labor; repairs and maintenance; utilities; depreciation and amortization of property, equipment, and mineral properties; and mine administrative expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. Costs are removed from ore on leach pads as ounces are recovered based on the average cost per recoverable ounce of gold on the leach pad.

 

Estimates of recoverable gold on the leach pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered are regularly monitored and estimates are refined based on actual results over time. As of March 31, 2017, the Company had a limited operating history and actual results only over that short period of time. Due to this, estimates of recoverable gold are based primarily on initial tests and only limited refinements.

 

Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded. The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet date that the Company expects to recover during the next 12-18 months.

Revenue Recognition

Revenue Recognition

 

Revenue is recognized when title and risk of ownership of metals or metal bearing concentrate have passed and collection is reasonably assured. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, and are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts.

Earnings (loss) Per Share

Earnings (loss) Per Share

 

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. At March 31, 2017 and 2016, common stock equivalents outstanding are as follows:

 

    March 31,
2017
    March 31,
2016
 
             
Convertible debt     2,203,158       1,028,574  
Convertible preferred stock     47,211,002       47,211,002  
                 
Total     49,414,160       48,239,576  

However, the diluted earnings (loss) per share are not presented because its effect would be anti-dilutive due to the Company’s recurring losses.

Going Concern

Going Concern

 

As shown in the accompanying financial statements, the Company has an accumulated deficit and negative working capital through March 31, 2017, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

The Company will need significant funding to continue operations and increase development through the next fiscal year. This funding is expected to come via sales revenues and loan funds, but the timing and amount of capital requirements will depend on a number of factors, including demand for products and services, metals pricing and the availability of opportunities for expansion through affiliations and other business relationships.

 

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

XML 33 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2017
Summary of Significant Accounting Policies [Abstract]  
Schedule of common stock equivalents outstanding

  March 31,
2017
    March 31,
2016
 
             
Convertible debt     2,203,158       1,028,574  
Convertible preferred stock     47,211,002       47,211,002  
                 
Total     49,414,160       48,239,576  
XML 34 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Tables)
3 Months Ended
Mar. 31, 2017
Inventories [Abstract]  
Schedule of components of inventories
  March 31, 
2017
  December 31, 
2016
 
Ore on leach pad $3,116,252  $3,051,766 
Carbon column in process  31,865   31,214 
Dore finished goods  -0-   10,952 
Total  3,148,117   3,093,932 
         
Less: current portion  (135,278)  (142,921)
         
Non-current inventories $3,012,839  $2,951,011
XML 35 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Tables)
3 Months Ended
Mar. 31, 2017
Property and Equipment [Abstract]  
Summary of property, equipment, and accumulated depreciation
  March 31,  December 31, 
  2017  2016 
Equipment $3,077,482  $3,046,803 
Furniture and fixtures, temporary housing  6,981   6,981 
Electronic and computerized equipment  52,874   52,874 
Vehicles  67,115   67,115 
   3,204,452   3,173,773 
Less accumulated depreciation  (1,258,880)  (1,144,108)
   1,945,572   2,029,665 
         
Kiewit property facilities  2,497,435   2,497,436 
Less accumulated amortization  (487,214)  (487,214)
   2,010,221   2,010,222 
         
Total $3,955,793  $4,039,887
XML 36 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Reclamation Bonds (Tables)
3 Months Ended
Mar. 31, 2017
Mineral Properties and Reclamation Bonds [Abstract]  
Schedule of mineral properties and interests
  March 31,
2017
  December 31,
2016
 
Initial lease fee      
Kiewit, Cactus Mill and all other sites $600,000  $600,000 
         
Asset retirement obligation        
Kiewit Site  789,026   789,026 
Kiewit Exploration  10,780   10,780 
Cactus Mill  16,133   16,133 
Total  815,939   815,939 
Accumulated amortization  (301,264)  (319,457)
   514,675   496,482 
         
Total $1,114,675  $1,096,482
XML 37 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party (Tables)
3 Months Ended
Mar. 31, 2017
Obligation Under Capital Lease - Related Party [Abstract]  
Schedule of estimated future minimum lease payments under the capital lease
Year ending March 31,   
2018 $108,000 
2019  27,000 
Total  135,000 
Less: Implied interest  (12,595)
Net present value  122,405 
Less: Capital lease obligation-current portion  (96,066)
Long-term capital lease obligation $26,339
XML 38 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Tables)
3 Months Ended
Mar. 31, 2017
Notes Payable - Equipment [Abstract]  
Schedule of the equipment notes payable
  March 31,
2017
  December 31, 
2016
 
Note payable to Komatsu Financial, collateralized by a Komatsu Telehandler lift, due in 48 monthly installments of $2,441 including interest at 4.99%. $66,728  $73,203 
         
Note payable to Komatsu Financial, uncollateralized, due in 12 monthly installments of $3,223, beginning in April 2016, including interest at 1.16%.  -0-   9,668 
         
Note payable to CAT Financial, collateralized by five pieces of used mining equipment due in 36 monthly installments of varying amounts including interest at 4.68%.  The equipment has since been returned to CAT. See note below.  440,473   881,894 
         
Note payable to Komatsu Financial, collateralized by a Komatsu D275 dozer, due in one monthly installment of $21,000 and 47 monthly installments of $11,674 including interest at 2.99%.  249,670   282,675 
         
Note payable to Star Capital, LLC, collateralized by a 2009 Multiquip generator, due in 24 monthly installments of $1,412, beginning in March 2016, including interest at 11.4%.  17,190   19,654 
   774,061   1,267,094 
Current portion  (477,470)  (813,818)
Long term portion $296,591  $453,276
Schedule of principal payments
2018 $477,470     
2019  286,924     
2020  9,667     
Total $774,061     

XML 39 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party (Tables)
3 Months Ended
Mar. 31, 2017
Note Payable - Related Party [Abstract]  
Schedule of due to DMRJ
    March 31,     December 31,  
    2017     2016  
             
Principal, due within one year   $ 15,110,492     $ 14,610,492  
Interest payable, current     7,787,190       7,239,610  
    $ 22,897,682     $ 21,850,102  
XML 40 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Remediation Liability and Asset Retirement Obligation (Tables)
3 Months Ended
Mar. 31, 2017
Remediation Liability and Asset Retirement Obligation [Abstract]  
Schedule of asset retirement obligations
  Three months
ended March 31,
2017
  Year ended
December 31,
2016
 
Reclamation and remediation liability, beginning of period $974,109  $901,597 
Obligation incurred  -   - 
Accretion expense  18,128   72,512 
Reclamation and remediation liability, end of period $992,237  $974,109 
XML 41 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details) - shares
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Summary of Significant Accounting Policies [Abstract]    
Convertible debt 2,203,158 1,028,574
Convertible preferred stock 47,211,002 47,211,002
Total 49,414,160 48,239,576
XML 42 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Capital Stock (Details) - shares
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2016
Capital Stock [Line Items]      
Common stock, shares issued 13,656,603 13,656,603  
2016 Activity [Member]      
Capital Stock [Line Items]      
Common stock, shares issued  
Preferred stock, shares issued  
2017 Activity [Member]      
Capital Stock [Line Items]      
Common stock, shares issued  
Preferred stock, shares issued  
XML 43 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Inventories [Abstract]    
Ore on leach pad $ 3,116,252 $ 3,051,766
Carbon column in process 31,865 31,214
Dore finished goods 0 10,952
Total 3,148,117 3,093,932
Less: current portion (135,278) (142,921)
Non-current inventories $ 3,012,839 $ 2,951,011
XML 44 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Total $ 3,955,793 $ 4,039,887
Property, Plant and Equipment [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 3,204,452 3,173,773
Less accumulated depreciation (1,258,880) (1,144,108)
Property and equipment, Total 1,945,572 2,029,665
Property, Plant and Equipment [Member] | Equipment [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 3,077,482 3,046,803
Property, Plant and Equipment [Member] | Furniture and fixtures, temporary housing [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 6,981 6,981
Property, Plant and Equipment [Member] | Electronic and computerized equipment [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 52,874 52,874
Property, Plant and Equipment [Member] | Vehicles [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 67,115 67,115
Finite-Lived Intangible Assets [Member] | Kiewit property facilities [Member]    
Summary of property, equipment, and accumulated depreciation    
Property and equipment, Gross 2,497,435 2,497,436
Less accumulated depreciation (487,214) (487,214)
Property and equipment, Total $ 2,010,221 $ 2,010,222
XML 45 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Reclamation Bonds (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Initial lease fee    
Kiewit, Cactus Mill and all other sites $ 600,000 $ 600,000
Asset retirement obligation    
Kiewit Site 789,026 789,026
Kiewit Exploration 10,780 10,780
Cactus Mill 16,133 16,133
Total 815,939 815,939
Accumulated amortization (301,264) (319,457)
Mineral properties after accumulated depletion 514,675 496,482
Total $ 1,114,675 $ 1,096,482
XML 46 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Mineral Properties and Reclamation Bonds (Details Textual) - USD ($)
3 Months Ended
Sep. 12, 2016
Jul. 07, 2016
Mar. 31, 2017
Dec. 31, 2016
Apr. 30, 2014
Feb. 20, 2014
Mineral Properties and Interests (Textual)            
Claims fees (per claim)     $ 155      
Kiewit reclamation bond, Amount           $ 1,348,000
Refunded reclamation bonds         $ 92,705  
Total reclamation bonds posted amount     752,766 $ 752,754    
Accumulated amortization     $ 301,264 $ 319,457    
Bond deposit   $ 674,000        
Annual bonding fee   $ 40,400        
Percentage of deposit bond into escrow account   50.00%        
Yellow Hammer mineral property [Member]            
Mineral Properties and Interests (Textual)            
Recognized loss on abandonment amount $ 175,000          
Accumulated amortization 37,234          
Net loss $ 137,766          
XML 47 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Debt (Details) - USD ($)
12 Months Ended
Oct. 14, 2016
Nov. 18, 2009
Dec. 31, 2016
Mar. 31, 2017
Jan. 18, 2017
Nov. 30, 2016
Nov. 15, 2016
Dec. 31, 2015
Nov. 30, 2015
Dec. 31, 2014
Nov. 30, 2014
Nov. 30, 2013
Nov. 30, 2012
Convertible Debt (Textual)                          
Convertible debt   $ 600,000 $ 850,000 $ 850,000                  
Interest payable   15.00%                      
Periodic payment of interest   $ 7,500                      
Conversion price (per shares)   $ 0.70                      
Additional shares of common stock issued to debt holders           300,000     300,000   300,000 300,000 300,000
Accrued interest payable     187,500 210,000                  
Short-term loan     $ 34,500                  
Share price per share     $ 0.04         $ 0.04   $ 0.04      
Loan maturity date     Nov. 30, 2018                    
Financing expense     $ 12,000                    
Convertible Debt [Member]                          
Convertible Debt (Textual)                          
Convertible debt $ 125,000                        
Interest payable 10.00%                        
Conversion price (per shares) $ 0.25                        
Accrued interest payable     $ 5,342 $ 11,506                  
Common stock and principal and interest were initially due date Sep. 30, 2018                        
West C Street [Member]                          
Convertible Debt (Textual)                          
Accrued interest payable         $ 438                
Short-term loan             $ 25,000            
XML 48 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Year ending March 31,    
2018 $ 108,000  
2019 27,000  
Total 135,000  
Less: Implied interest (12,595)  
Net present value 122,405  
Less: Capital lease obligation-current portion (96,066) $ (120,461)
Long-term capital lease obligation $ 26,339 $ 51,714
XML 49 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Obligation under Capital Lease - Related Party (Details Textual) - RMH Overhead, LLC [Member] - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Obligation Under Capital Lease - Related Party (Textual)    
Equipment includes assets under capital lease amount $ 165,730 $ 172,360
Accumulated amortization $ 19,888 $ 13,258
XML 50 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Note payable $ 774,061 $ 1,267,094
Current portion (477,470) (813,818)
Long term portion 296,591 453,276
Komatsu Financial, collateralized by a Komatsu Telehandler lift [Member]    
Debt Instrument [Line Items]    
Note payable 66,728 73,203
Komatsu Financial, uncollateralized [Member]    
Debt Instrument [Line Items]    
Note payable 0 9,668
CAT Financial, Collateralized by Five Pieces of used Mining Equipment [Member]    
Debt Instrument [Line Items]    
Note payable 440,473 881,894
Komatsu Financial, Collateralized by a Komatsu D275 Dozer [Member]    
Debt Instrument [Line Items]    
Note payable 249,670 282,675
Star Capital, LLC, Collateralized by a 2009 Multiquip Generator [Member]    
Debt Instrument [Line Items]    
Note payable $ 17,190 $ 19,654
XML 51 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Details 1) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Schedule of principal payments    
2018 $ 477,470  
2019 286,924  
2020 9,667  
Total $ 774,061 $ 1,267,094
XML 52 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Notes Payable - Equipment (Details Textual)
3 Months Ended
Mar. 31, 2017
USD ($)
Installments
Dec. 31, 2016
USD ($)
Nov. 30, 2016
USD ($)
Nov. 18, 2009
Notes Payable - Equipment (Textual)        
Interest rate       15.00%
Net carrying value $ 3,955,793 $ 4,039,887    
Komatsu Financial, collateralized by a Komatsu Telehandler lift [Member]        
Notes Payable - Equipment (Textual)        
Number of installment (in monthly) | Installments 48      
Note payable amount (remaining installments) $ 2,441      
Interest rate 4.99%      
Komatsu Financial, uncollateralized [Member]        
Notes Payable - Equipment (Textual)        
Note payable amount (first installment) $ 3,223      
Number of installment (in monthly) | Installments 12      
Interest rate 1.16%      
CAT Financial, Collateralized by Five Pieces of used Mining Equipment [Member]        
Notes Payable - Equipment (Textual)        
Number of installment (in monthly) | Installments 36      
Note payable amount (remaining installments) $ 960,585      
Interest rate 4.68%      
Equipment original cost     $ 1,500,888  
Accumulated depreciation     372,129  
Net carrying value     $ 1,128,759  
Komatsu Financial, Collateralized by a Komatsu D275 Dozer [Member]        
Notes Payable - Equipment (Textual)        
Note payable amount (first installment) $ 21,000      
Number of installment (in monthly) | Installments 47      
Note payable amount (remaining installments) $ 11,674      
Interest rate 2.99%      
Star Capital, LLC, Collateralized by a 2009 Multiquip Generator [Member]        
Notes Payable - Equipment (Textual)        
Note payable amount (first installment) $ 1,412      
Number of installment (in monthly) | Installments 24      
Interest rate 11.40%      
XML 53 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]    
Principal, due within one year $ 15,110,492 $ 14,610,492
Interest payable, current 7,787,190 7,239,610
Total $ 22,897,682 $ 21,850,102
XML 54 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Note Payable - Related Party (Details Textual) - USD ($)
1 Months Ended 3 Months Ended 11 Months Ended 12 Months Ended
Dec. 29, 2016
Dec. 22, 2016
Mar. 31, 2017
Mar. 31, 2016
Dec. 29, 2016
Dec. 31, 2016
Note Payable - Related Party (Textual)            
Proceeds from notes payable     $ 500,000 $ 550,000   $ 2,470,000
Notes payable due date           Nov. 30, 2018
DMRJ [Member]            
Note Payable - Related Party (Textual)            
Convertible shares of common stock     47,211,002      
Ownership percentage of stock on a fully-diluted basis     75.00%     75.00%
Additional funding amount     $ 500,000      
Total amount drawn $ 600,000          
Additional Funding Agreement Terms [Member]            
Note Payable - Related Party (Textual)            
Additional funding amount   $ 600,000        
Convertible Notes Payable [Member] | DMRJ [Member]            
Note Payable - Related Party (Textual)            
Percentage of interest rate         15.00%  
Total amount drawn         $ 2,470,000  
Notes payable due date         Oct. 31, 2016  
Loan payment         $ 900,000  
XML 55 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Remediation Liability and Asset Retirement Obligation (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Remediation Liability and Asset Retirement Obligation [Abstract]      
Reclamation and remediation liability, beginning of period $ 974,109 $ 901,597 $ 901,597
Obligation incurred  
Accretion expense 18,128 $ 18,128 72,512
Reclamation and remediation liability, end of period $ 992,237   $ 974,109
XML 56 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Remediation Liability and Asset Retirement Obligation (Details Textual)
3 Months Ended
Mar. 31, 2017
Maximum [Member]  
Remediation Liability and Asset Retirement Obligation (Textual)  
Risk free interest rate 10.00%
Estimated useful lives of mine property 12 years
Minimum [Member]  
Remediation Liability and Asset Retirement Obligation (Textual)  
Risk free interest rate 8.00%
Estimated useful lives of mine property 5 years
XML 57 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Related Party Transactions (Textual)      
Accrued compensation $ 539,577   $ 486,577
Rick Havenstrite [Member]      
Related Party Transactions (Textual)      
Accounts payable 39,367   39,367
Additional, short-term loan totaling 9,500    
Accrued compensation 402,692   372,692
RMH Overhead, LLC [Member]      
Related Party Transactions (Textual)      
Rent expense for rental of office space 3,000 $ 3,000  
Accounts payable 13,750   $ 17,750
Stuart Havenstrite [Member]      
Related Party Transactions (Textual)      
Recognized general project cost expense $ 0 $ 6,667  
XML 58 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Sep. 30, 2010
Dec. 31, 2009
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Dec. 31, 2015
Commitments and Contingencies (Textual)            
Percentage of royalty payments   4.00%        
Royalty expense     $ 702 $ 17,160 $ 50,000 $ 50,000
Mining severance amount     92      
Base annual salary $ 120,000          
Interest and penalties     155,232      
Rick Havenstrite [Member]            
Commitments and Contingencies (Textual)            
Accrued compensation     402,692   372,692  
Marianne Havenstrite [Member]            
Commitments and Contingencies (Textual)            
Accrued compensation     131,884   113,884  
Officers [Member]            
Commitments and Contingencies (Textual)            
Accrued compensation     534,577   486,577  
Directors [Member]            
Commitments and Contingencies (Textual)            
Accrued compensation     $ 5,000   $ 0  
Moeller Family Trust [Member] | Mineral property payments [Member]            
Commitments and Contingencies (Textual)            
Annual payments to trust amount   $ 50,000        
Percentage of royalty payments   6.00%        
Moeller Family Trust [Member] | Minimum [Member] | Mineral property payments [Member]            
Commitments and Contingencies (Textual)            
Percentage of royalty payments   2.00%        
Moeller Family Trust [Member] | Maximum [Member] | Mineral property payments [Member]            
Commitments and Contingencies (Textual)            
Percentage of royalty payments   15.00%        
XML 59 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details) - USD ($)
1 Months Ended 12 Months Ended
Jul. 06, 2018
Mar. 08, 2018
Jul. 24, 2018
Jul. 03, 2018
Jun. 30, 2018
Jun. 06, 2018
Feb. 28, 2018
Feb. 23, 2018
Nov. 30, 2017
Jul. 31, 2017
Nov. 30, 2016
Dec. 31, 2016
Aug. 07, 2017
Mar. 31, 2017
Subsequent Events (Textual)                            
Net carrying value                       $ 4,039,887   $ 3,955,793
Short term loan                       $ 34,500  
Expired date                       Nov. 30, 2018    
Convertible debt [Member]                            
Subsequent Events (Textual)                            
Penalty shares issued to convertible debt                     300,000      
Note payable - CAT equipment [Member]                            
Subsequent Events (Textual)                            
Equipment original cost                     $ 1,500,888      
Accumulated depreciation                     339,487      
Net carrying value                     1,161,402      
Note payable due to CAT                     $ 960,585      
Loss on impairment of equipment                       $ 147,214    
Forecast [Member] | Stock Offering [Member]                            
Subsequent Events (Textual)                            
Convertible debt holders shares             2,250,000              
Convertible debt received             $ 312,500              
Sale of common stock per share               $ 0.40            
Sale of common stock shares raised               $ 1,600,000            
Expired date               Jun. 30, 2018            
Shares of stock issued offering         2,125,000                  
Funds raised through offering stock         $ 850,000                  
Forecast [Member] | 2018 Stock Incentive Plan [Member]                            
Subsequent Events (Textual)                            
Option authorized               2,400,000            
Aggregate fair market value of the common stock becoming exercisable               $ 100,000            
Grant of an aggregate options               2,400,000            
Exercisable per share               $ 0.40            
Expired date               Feb. 23, 2023            
Forecast [Member] | Revenue [Member]                            
Subsequent Events (Textual)                            
Proceeds received an advance $ 68,785                          
Percentage of revenue product 90.00%                          
Forecast [Member] | Convertible debt [Member]                            
Subsequent Events (Textual)                            
Convertible debt holders shares   4,500,000                        
Convertible promissory notes, description             The terms were changed for the 15% convertible promissory notes, convertible at $.70 per share, to two of the Company's minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019.              
Convertible debt received   $ 625,000                        
Additional aggregate convertible debt                         $ 500,000  
Penalty shares issued to convertible debt                 300,000          
Short term loan       $ 100,000                    
Short term loan terms       A short term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.                    
Forecast [Member] | Note payable - CAT equipment [Member]                            
Subsequent Events (Textual)                            
Mining equipment financed, description                   A new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017.        
Forecast [Member] | Note payable - Wheeler Machinery [Member]                            
Subsequent Events (Textual)                            
Payment of first seven month rental equipment           $ 39,009                
Rental equipment to a purchase contract           $ 273,067                
Note payable payments terms     Three of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company.                      
Forecast [Member] | Rick Havenstrite [Member] | 2018 Stock Incentive Plan [Member]                            
Subsequent Events (Textual)                            
Grant of an aggregate options               1,000,000            
Forecast [Member] | Howard Crosby [Member] | 2018 Stock Incentive Plan [Member]                            
Subsequent Events (Textual)                            
Grant of an aggregate options               1,000,000            
Forecast [Member] | John Ryan [Member] | 2018 Stock Incentive Plan [Member]                            
Subsequent Events (Textual)                            
Grant of an aggregate options               200,000            
Forecast [Member] | Linde Havenstrite [Member] | 2018 Stock Incentive Plan [Member]                            
Subsequent Events (Textual)                            
Grant of an aggregate options               200,000            
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