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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period __________ to ____________

Commission file number 000-28837

NEW JERSEY MINING
COMPANY(Name of small business issuer in its charter)

|**Idaho**                                        | **82-0490295**                      
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     

|**89 Appleberg Road, Kellogg, Idaho**    | **83837** 
|---------------------------------------- | ----------
|(Address of principal executive offices) | (Zip code)

Issuers telephone number, including area code: (208) 783-1032

Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, No par value per share

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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
[X] No [ ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form and no disclosure will be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act Yes [ ] No [X ]

The registrants revenues for its most recent fiscal year
  were $339,077.

The aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the average of the bid and ask prices
on March 1, 2006, as reported by the Over the Counter Bulletin Board was
$14,960,000.

At March 1, 2006, the registrant had 30,219,319 outstanding
shares of no par value common stock.

Transitional Small Business Disclosure Format (Check One): Yes [
] No [X ]

1

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TABLE OF CONTENTS

|Glossary of Significant
      Mining Terms | 3                                                                                                                                                
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------
|                                           |                                                                                                                                                  
|                                           | PART I                                                                                                                                           
|                                           |                                                                                                                                                  
|Item 1.                                    | Description of
      Business                                                                                                                    
|Item 2.                                    | Description of Property                                                                                                                          
|Item 3                                     | Legal Proceedings                                                                                                                                
|Item 4.                                    | Submission of Matters to a Vote
      of Security Holders                                                                                        
|                                           |                                                                                                                                                  
|                                           | PART II                                                                                                                                          
|                                           |                                                                                                                                                  
|Item 5.                                    | Market for Common Equity and
      Related Stockholder Matters                                                                                   
|Item 6                                     | Management's
      Discussion, Analysis and Plan of Operations                                                                                   
|Item 7.                                    | Financial Statements                                                                                                                             
|Item 8                                     | Changes In and Disagreements With Accountants on Accounting
      and Financial Disclosure                                                       
|Item 8A                                    | Controls and Procedures                                                                                                                          
|Item 8B                                    | Other Information                                                                                                                                
|                                           |                                                                                                                                                  
|                                           | PART III                                                                                                                                         
|                                           |                                                                                                                                                  
|Item 9.                                    | Directors, Executive Officers, Promoters, Control Persons
      and Corporate Governance; Compliance With Section 16(a) of the Exchange
      Act
|Item 10.                                   | Executive Compensation                                                                                                                           
|Item 11.                                   | Security Ownership of Certain Beneficial Owners and Management
      and  Related Stockholder Matters                                            
|Item 12.                                   | Certain Relationships and Related Transactions, and Director
      Independence                                                                  
|Item 13.                                   | Exhibits                                                                                                                                         
|Item 14.                                   | Principal Accounting Fees and Services                                                                                                           
|                                           |                                                                                                                                                  
|Signatures                                 | 57                                                                                                                                               

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GLOSSARY OF SIGNIFICANT MINING TERMS

Ag-Silver.

Au-Gold.

Alluvial-Adjectivally used to identify minerals deposited over
time by moving water.

Argillites-Metamorphic rock containing clay minerals.

Arsenopyrite-An iron-arsenic sulfide. Common constituent of
gold mineralization.

Ball Mill-A large rotating cylinder usually filled to about 45%
of its total volume with steel grinding balls. The mill rotates and crushed rock
is fed into one end and discharged through the other. The rock is pulverized
into small particles by the cascading and grinding action of the balls.

Bedrock-Solid rock underlying overburden.

Cu-Copper.

CIL-A standard gold recovery process involving the leaching
with cyanide in agitated tanks with activated carbon. CIL means
"carbon-in-leach."

Crosscut-A nominally horizontal tunnel, generally driven at
right angles to the strike of a vein.

Dip-Angle made by an inclined surface with the horizontal,
measured perpendicular to strike.

Deposit-A mineral deposit is a mineralized body which has been
intersected by sufficient closely-spaced drill holes or underground sampling to
support sufficient tonnage and average grade(s) of metal(s) to warrant further
exploration or development activities.

Development Stage-As defined by the SEC- includes all issuers
engaged in the preparation of an established commercially mineable deposit
(reserves) for its extraction which are not in the production stage.

Drift-A horizontal mine opening driven on the vein. Driving is
a term used to describe the excavation of a tunnel.

Exploration Stage-As defined by the SEC-includes all issuers
engaged in the search for mineral deposits (reserves) which are not in either
the development or production stage.

Fault-A fracture in the earth's crust accompanied by a
displacement of one side of the fracture with respect to the other and in a
direction parallel to the fracture.

Flotation-A physiochemical process for the separation of finely
divided solids from one another. Separation of these (dissimilar) discrete
solids from each other is affected by the selective attachment of the particle
surface to gas bubble.

GPT-grams per metric tonne.

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Galena-A lead sulfide mineral. The most important lead mineral
in the Coeur d'Alene Mining District.

Grade-A term used to assign the concentration of metals per
unit weight of ore. An example-ounces of gold per ton of ore (opt). One troy
ounce per short ton is 34.28 parts per million or 34.28 grams per metric tonne.

Mill-A general term used to denote a mineral processing plant.

Mineralization-The presence of minerals in a specific area or
geologic formation.

Ore-A mineral or aggregate of minerals which can be mined and
treated at a profit. A large quantity of ore which is surrounded by waste or
sub-ore material is called an orebody.

Production Stage-As defined by the SEC-includes all issuers
engaged in the exploitation of a mineral deposit (reserve).

Pyrite-An iron sulfide. A common mineral associated with gold
  mineralization. Quartz-Crystalline silica (SiO2). An important rock-forming
  and gangue material in gold veins.

Quartzites-Metamorphic rock containing quartz.

Raise-An underground opening driven upward, generally on the
vein.

Ramp-An underground opening usually driven downward, but not
always, to provide access to an orebody for rubber-tired equipment such as
loaders and trucks. Typically ramps are inclined at about a 15% grade.

Reserves-That part of a mineral deposit which could be
economically and legally extracted or produced at the time of the reserve
determination. Reserves are subcategorized as either proven (measured) reserves,
for which (a) quantity is computed from dimensions revealed in outcrops,
trenches, workings, or drill holes, and grade and/or quality are computed from
the results of detailed sampling, and (b) the sites for inspection, sampling,
and measurement are spaced so closely and geologic character is so well defined
that size, shape, depth, and mineral content are well-established; or probable
(indicated) reserves, for which quantity and grade and/or quality are computed
from information similar to that used for proven (measured) reserves, yet the
sites for inspection, sampling and measurement are farther apart.

Stope-An underground void created by the mining of ore.

Strike-The bearing or azimuth of the line created by the intersection
  of a horizontal plane with an inclined rock strata, vein or body.

Tetrahedrite-Sulfosalt mineral containing copper, antimony, and
silver.

Vein-A zone or body of mineralized rock lying within boundaries
separating it from neighboring wallrock. A mineralized zone having a more or
less regular development in length, width and depth to give it a tabular form
and commonly inclined at a considerable angle to the horizontal.

Wallrock-Barren rock surrounding a vein.

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PART I

ITEM 1.

DESCRIPTION OF THE BUSINESS

BUSINESS DEVELOPMENT

With the exception of historical matters, the matters discussed
in this report are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and involve risks and uncertainties
that could cause actual results to differ materially from projections or
estimates contained herein. Such forward-looking statements include statements
regarding planned levels of exploration and other expenditures, anticipated mine
lives, timing of production and schedules for development and permitting.
Factors that could cause actual results to differ materially include, among
others, metals price volatility, permitting delays, and the Companys ability to
secure funding. Most of these factors are beyond the Companys ability to
predict or control. The Company disclaims any obligation to update any
forward-looking statement made herein. Readers are cautioned not to put undue
reliance on forward-looking statements.

Form and Year of OrganizationNew Jersey
Mining Company (the Company or NJMC) is a corporation organized under the
laws of the State of Idaho on July 18, 1996. The Company was dormant until
December 31,1996, when all of the assets and liabilities of the New Jersey Joint
Venture (a partnership) were transferred to the Company in exchange for
10,000,000 shares of common stock. The New Jersey Joint Venture, a partnership,
was formed in 1994 to develop the New Jersey mine. The partnership consisted of
Mine Systems Design, Inc. [75%], Plainview Mining Company [13%], Silver Trend
Mining Company [10%], Mark C. Brackebusch [1%], and Mascot Silver-Lead Mines,
Inc. [1%].

Any Bankruptcy, Receivership or Similar
ProceedingsThere have been no bankruptcy, receivership or similar
proceedings.

Any Material Reclassification, Merger, Consolidation, or
Purchase or Sale of a SignificantAmount of Assets Not in
the Ordinary Course of Business.There have been no material
reclassifications, mergers, consolidations, purchases, or sales for the past
three years.

BUSINESS OF THE COMPANY

General Description of the BusinessThe
Company is involved in exploring for and developing gold, silver and base metal
ore resources in the Pacific Northwest of the USA. The Company has a portfolio
of mineral properties including: the Niagara copper silver-deposit, the New
Jersey mine, the Silver Strand mine, the Golden Chest mine and several other
exploration prospects. The Company operates a small (100 tonnes per day) mineral
processing facility (mill) in Kellogg, Idaho.

The Company is executing a strategy of mineral exploration that
is focused on the Belt Basin area of northern Idaho and western Montana. See
Location Map. Our mineral processing plant has been processing ore and other
mineralized material from the Golden Chest, New Jersey and Silver Strand
properties for the past two years. Our strategy is to produce some income from
these properties while we explore them at depth by driving ramps or drifts to
and along the mineralized structures. We can then

5

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mine and process any economic material to help offset our exploration
  costs. We also conduct exploratory diamond drilling (surface and underground),
  and grassroots exploration in the area. We view our mill as another exploration
  tool that not only helps to provide a source of cash flow, but also allows us
  to better determine the grade and metallurgical characteristics of our properties.
  Feed for the mill in 2006 was primarily sourced from the Golden Chest. Currently,
  the mill is not fully utilized as it is operated four 10-hour days per week.

Our mining operations do not provide enough income to fund our
exploration and development activities and corporate overhead so it is necessary
for the Company to raise funds through the sale of common stock in private
placements to qualified investors. Therefore, our exploration plans and
resulting schedules are dependent on our ability to raise sufficient funding. If
we cannot raise funds through sales of common stock, our exploration programs
may be deferred or delayed.

Competitive Business ConditionsThe Company
competes on several different fronts within the minerals exploration industry.
Currently, the minerals exploration business is very active due to the
attractive price levels of metals such as gold, silver, and copper. As a result,
we compete with other junior exploration companies for investment capital. There
are many junior mining companies competing to attract qualified investors to
participate in their equity offerings which may make it more difficult for us to
raise capital. Also, we compete with other companies for exploration properties.
To date, we have not seen significant activity near our exploration properties,
but this may change as metal prices continue to move up. There has been
resurgence in exploration activity by junior mining companies in the Silver Belt
of the Coeur dAlene Mining District.

We also compete with other exploration and mining companies
within our area for qualified employees. The long bear market in the mining
industry caused many young people to find employment in other industries and
this has led to a shortage of qualified workers such as miners, drillers and
geologists. The tight market for labor has led to increased wages within the
industry which has led to higher exploration, development, and mining costs. We
pay our key employees a competitive wage so that we can retain them.

We are also subject to the risks inherent to the mineral
industry. The primary risk is the low probability of finding a major deposit of
ore. We attempt to mitigate this risk by focusing our efforts in an area already
know to host ore deposits, and also by acquiring properties we believe have the
geologic and technical merits to host potentially economic mineralization.
Another significant risk is the price of metals such as copper, gold and silver.
If the prices of these metals were to fall substantially, it would most likely
lead to a loss of investor interest in the mineral exploration sector which
would make it more difficult to raise the capital necessary to move our
exploration and development plans forward.

Availability of Service Providers (Diamond Drill
Contractors)The current boom in minerals exploration has led to
shortage of diamond drill (core drill) rigs within the industry. This shortage
has led to the delay of our exploration drilling programs for up to one year.
During the past two years, our diamond drilling costs by have increased by 50%
on a per-foot-basis. Given the shortage in diamond drill rigs and increased
costs, management decided to purchase a drill-rig so that the exploration of our
properties can proceed in a timely and efficient manner.

6

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Effect of Existing or Probable Governmental Regulations
on the BusinessAll operating and exploration plans have been made in
consideration of existing governmental regulations. Regulations that would most
affect operations are related to water quality. A plan of operation is usually
required before exploration or mining activities can be conducted on public land
that is administered by the Bureau of Land Management or US Forest Service.

The New Jersey mine, the Silver Strand mine and the Golden
Chest properties are part of the expanded Bunker Hill Superfund Site. Current
plans for expanded cleanup do not include any of our mines. There is no known
evidence that previous operations at the New Jersey mine prior to 1910 caused
any ground water or stream pollution or discharged any tailings into the South
Fork of the Coeur d'Alene River; however, such evidence could be uncovered. The
nature of the risk would probably be to clean up or cover old mine tailings that
may have washed downstream from upstream mining operations. No mineral
processing operations were ever conducted at the Silver Strand mine and water
sampling data has not indicated any pollution. There are no mineral processing
tailings deposits at the Golden Chest mine. However, at least two old adits have
small water discharges. The Company could conceivably be required to conduct
cleanup operations at its own expense, however the EPAs Record of Decision for
the Bunker Hill Mining and Metallurgical Complex Operating Unit 3 does not
include any cleanup activities at the Companys mines. New Jersey Mining Company
has not received any notifications that it could be liable for any environmental
cleanup.

Estimate of the Amount Spent on Exploration for the Last
Two YearsDuring the years ending December 31, 2006 and 2005, we have
spent $319,954 and $132,242, respectively, on exploration activities.

Costs and Effects of Compliance with Environmental Laws
(Federal, State and Local)No major Federal permits are required for
the New Jersey mine because most operations are on private land and there are no
process discharges to streams. Any exploration program conducted by the Company
on unpatented mining claims, usually administered by the U.S. Bureau of Land
Management (BLM) or U.S. Forest Service (USFS), requires a Plan of Operation to
be submitted. Our exploration programs can be delayed for significant periods of
time (one to two years) because of the slow NEPA permitting process applied by
the USFS. We believe the USFS permitting delays are caused by insufficient
manpower, complicated regulations, misplaced priorities and sympathy for
environmental groups who oppose any mining project.

The Company submitted a Plan of Operation to the USFS in April
2003 for a seasonal, underground mining operation at the Silver Strand mine. The
USFS conducted an Environmental Assessment (EA) of the plan and requested public
comments on the EA in September 2004. In June 2005, the USFS issued a final
Decision Notice and Finding of No Significant Impact which essentially approved
the Companys Plan of Operations, but with 26 stipulations. The stipulations
cover various aspects of the plan including but not limited to the operating
season, public access through the site, water quality monitoring, development
rock monitoring, slope stability monitoring, and reclamation standards. In
August 2006, both the USFS and the Company signed the final operating plan or
Decision Notice. Before the Company can begin operations at the Silver Strand,
it must post a reclamation bond of $119,725. An additional bond of $32,075 is
due prior to the second operating season which gives a total bond of $151,800
for the planned project. Permit compliance activities and water monitoring at
the Silver Strand are expected to cost about $5,000 per year.

The Company is also subject to the rules of the U.S. Department
of Labor, Mine Safety and Health Administration (MSHA) for the New Jersey mine
and Golden Chest mine operations. When a mine is

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operating, MSHA performs a series of regular inspections to
verify compliance with mine safety laws, and can assess financial penalties for
unsafe practices or conditions.

The New Jersey mine has two important State of Idaho permits.
The first is an Idaho Cyanidation Permit and the second is a reclamation plan
for surface mining operations. No permit is required for the current flotation
process as there is no discharge of water to surface waters and the tailings
impoundments are less than 30 feet high from toe to crest. An Idaho cyanidation
permit was granted October 10, 1995 [No. CN-000027]. Completion of the
Concentrate Leach Plant, which utilizes cyanide leaching, is expected in 2007.
The Cyanidation permit requires quarterly surface and groundwater monitoring
prior to startup of the plant and monthly sampling once operations commence. The
current water monitoring program costs the Company about $2,000 on an annual
basis. The estimated annual cost for sampling once leaching operations begin is
about $25,000.

A surface mining reclamation plan for the New Jersey mine was
approved by the Idaho State Department of Lands in 1993. The plan calls for
grading of steep fill slopes and planting of vegetation on the area disturbed by
the open pit mine. An annual reclamation fee of $133 is paid to the Idaho
Department of Lands for surface disturbance associated with the New Jersey mine
open pit. The Company has estimated its costs to reclaim the New Jersey mine
site to be $18,000.

When the Company plans an exploration drilling program on
public lands, it must submit a Plan of Operations to either the BLM or US Forest
Service. Compilation of the plan can take several days of professional time and
a reclamation bond is usually required to start drilling once the plan is
approved. Bond costs vary directly with surface disturbance area, but a small,
single set-up drilling program usually requires a bond amount of about $2,500.
On completion of the reclamation and approval by the managing agency, the bond
amount is returned to the Company.

The Company complies with local building codes and ordinances
as required by law.

Number of Total Employees and Number of Full Time
EmployeesThe Company's total number of employees is twelve including
President Fred Brackebusch, Vice President Grant Brackebusch and Secretary Tina
Brackebusch. Tina C. Brackebusch works part-time for the Company

REPORTS TO SECURITY HOLDERS

The Company is not required to deliver an annual report to
shareholders, however, it plans to deliver an annual report to shareholders in
2007. The annual report will contain audited financial statements. The Company
may also rely on the Internet in the future to deliver annual reports to
shareholders.

The Company filed a Form 10-SB with the Securities and Exchange
Commission on January 11, 2000. The filing became effective on January 27, 2000.
The Company has filed the required annual 10-KSB reports, quarterly 10-QSB
reports, and occasional 8-K reports since that time.

The public may read a copy of any materials the Company files
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC.

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The Company maintains a website where recent press releases and
other information can be found. A link to the Companys filings with the SEC is
provided on the Companys website-www.newjerseymining.com.

ITEM 2.

DESCRIPTION OF PROPERTIES



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NEW JERSEY MINE

LocationThe New Jersey mine is located in the
Gold Run Gulch area, two miles east of Kellogg, Idaho in the Coeur d'Alene
Mining District. The property includes the gold bearing Coleman vein system, a
base metal Sullivan-type prospect known as the Enterprise and another gold
prospect called the Scotch Thistle. The mine is adjacent to U.S. Interstate 90
and is easily accessed by local roads throughout the entire year. Three phase
electrical power is supplied to the New Jersey mill by Avista Utilities. The
area is underlain by argillites and quartzites of the Prichard formation [member
of Belt Supergroup], which commonly hosts gold mineralization.

Mineral PropertyThe Company owns 62 acres of
patented mining claims, mineral rights to 108 acres of fee land, and
approximately 130 acres of unpatented mining claims. The unpatented claims are
on federal land administered by the U.S. Bureau of Land Management. The Coleman
pit is located on the patented mining claims.

Mineral LeasesA mineral lease from William
Zanetti in the New Jersey mill area contains about 60 acres. The lease provides
for the Company's exploration, development and mining of minerals on fee land
through October 2008 and thereafter as long as mining operations are deemed
continuous. The lessor may terminate the lease upon the Company's failure to
perform under the terms of the lease. The lease provides for royalties of 5% of
net sales of ores or concentrates less transportation also known as a Net
Smelter Return. Additional royalties of 1% to 5% are due if the gold price
exceeds $670 per ounce as of December 31, 2006. This additional royalty gold
price is indexed to the Consumer Price Index with the December 1988 CPI as the
base. Also, annual advance royalties totaling $500 per year are required under
the lease. The advance royalties are accumulated and will be credited against
the royalty obligations.

A second mineral lease, known as the Grenfel lease, was
acquired from Mine Systems Design, Inc. (MSD) in 2001 in exchange for 1,000,000
shares of the Company's Common Stock. The lease covers the mineral rights to 68
acres located north of the New Jersey mine area. The lease has a fifteen year
term and thereafter so long as mining operations are deemed continuous. The
lessors may terminate the leases upon the Company's failure to perform under the
terms of the lease. A 3% Net Smelter Return (NSR) royalty will be paid to the
lessors if production is achieved. However, the NSR shall not exceed 10% of the
net proceeds, except the NSR shall not be less than 1%. No advance royalties or
other advance payments are required by this lease.

HistoryThere are at least 14 gold prospects
in or near the New Jersey mine area. In the late 1800s and early 1900s more
than 2,500 feet of development workings including drifts, crosscuts, shafts, and
raises, were driven by the New Jersey Mining and Milling Company (an unrelated
company) to develop the Coleman vein and the northwest branch of the Coleman
vein. A 10 stamp gravity mill was built and operated for a short period. The
amount of money spent from 1899 to 1910 appears to have been $500,000 to
$1,000,000 in 1996 dollars. The operation was discontinued because of the
difficulty in recovering fine gold without cyanidation technology, because of
the lower price of gold relative to mining costs, and because of inadequate
drilling and mining technology.

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Present Condition and Work Completed on the
PropertyA 100 tonne per day flotation mill has been built and
commissioned on the New Jersey mine property. A ball mill is used to grind the
crushed ore and is the limiting factor for throughput. Currently, hourly
throughput is limited to about 4.0 tonnes per hour. The crushing plant and
grinding circuit were built in 1996, and the flotation circuit was built in
2004. Construction of a concentrate leach plant was started in mid-2006, and
completion is expected in 2007. The leach plant uses cyanidation and direct
electro-winning to produce a gold-silver dore from gold-bearing pyrite
concentrates.

During 2001, the Company drilled two holes to explore a
geophysical anomaly detected in the autumn of 2000. One hole intercepted a broad
zone of arsenopyrite mineralization, named the Grenfel zone, which contained two
separate zones of anomalous gold content (0.70 grams per tonne gold over two
separate 10 meter intervals). In 2002, 1,317 meters of diamond drilling was
completed amongst 11 holes at the New Jersey mine. The drilling confirmed the
continuity of the Coleman vein system as nine of the holes intercepted the vein
system. Reserves were not increased as the drilling was too widely spaced. The
best intercept was in DDH02-02 which assayed 2.76 gpt gold over 12.5 meters
including 2.5 meters of 6.80 gpt gold. Drilling was conducted at the Scotch
Thistle prospect, Enterprise prospect and northern Coleman vein in 2003. Silver,
lead and zinc mineralization was discovered at the Enterprise and a new zone of
gold mineralization was found at the Scotch Thistle. In 2004, two drillholes
were drilled at the Enterprise where base metal mineralization (lead, zinc &
silver) was intercepted. Also in 2004, a single hole was drilled at the Scotch
Thistle prospect and intercepted a gold zone that assayed 2.56 gpt over 6.6
meters extending the zone discovered a year earlier.

In late 2006, the Company began preparations to drive an
exploration crosscut to the Coleman vein on the 740 Level. At least two months
were spent on ground support activities to make the 740 drift safe for passage.
Also, electrical cable, compressed air and water lines were installed in the 740
drift. Additionally, surface support facilities such as a dry and tool shed were
placed near the 740 portal and electrical power was installed to the portal and
underground. A new drill road was constructed to provide drill access to the
Enterprise prospect. Finally, 567 tonnes of ore were mined from the Coleman pit
at a grade of 3.25 gpt gold.

As of December 31, 2006, the Company had a capital cost of
$973,442 associated with the mineral processing plant and a capitalized
development plus investment cost of $598,451 associated with the mine.

Exploration PlansThe Company plans to
commence exploration drifting on the Coleman vein once the crosscut intersects
the vein which is expected to occur in March 2007. The Company has purchased a
diamond drill rig and plans to do exploratory core drilling at the Enterprise
and Scotch Thistle prospects. The drill rig is due for delivery in April 2007.

Geology and ReservesThe description of the
geology of the New Jersey mine and the calculation of mineral resources have
been completed by the Company. The description of the geology of the area can be
verified from third party published reports by the U.S. Geological Survey and
unpublished reports by Oscar Hershey, former Coeur d'Alene District geologist.
The Company is solely responsible for the reserve calculations.

GeologyThe Prichard formation, which is
25,000 feet in thickness, underlies the New Jersey mine area which is adjacent
to and north of the major Osburn fault. The Osburn fault is in the center of a
Proterozoic rifting basin. The Prichard formation is divided into nine rock
units of alternating argillites and quartzites, and

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the units exposed in the New Jersey mine area appear to belong
to the lower members. A broad domal structure with a series of tighter folds
near the Osburn fault typifies the structure of the area. South of the Osburn
fault, the Wallace formation is exposed on the north flank of the Big Creek
anticline. A fault was discovered by the 2001 drilling program. The fault
appears to be a fairly large east-west striking structure that may separate the
Coleman veins from the Grenfel zone. However, more information is required to
confirm that hypothesis.

Gold mineralization is associated with sulfide-bearing quartz
veins which cut the bedding in Prichard argillite and quartzite. Associated
sulfides are pyrite, arsenopyrite, chalcopyrite, low-silver tennatite, galena,
and sphalerite. Most commonly in the Coleman vein of the New Jersey mine visible
gold is associated with the tennatite. Gold prospects are concentrated in the
New Jersey mine area possibly because of the presence of lower Prichard
stratigraphic members, an anticlinal structure, and/or the existence of a gold
source. Gold is associated with arsenic, copper, and antimony. Igneous dikes are
relatively rare. Some wallrock alteration has been observed, and the Coleman
vein shows a characteristic brecciation.

ReservesThe reserves at the New Jersey mine
as of this date are those contained within the open pit on the Coleman vein.
Open pit reserves are from the planned pit which extends from the south portal
north to the terminus of the Coleman vein. The vertical extent of the pit is
from the surface outcrop down to the Keyhole Tunnel level. Grade estimation for
the blocks in the pit reserve is based upon calculated head grades from 5,000
short tons of gravity-mill production. Other sample sources include channel
samples from the outcrop and also from the Keyhole Tunnel.

Open Pit Reserve (Proven & Probable)

Ore Blocks
      Metric 
        Tonnes
      Gold Grade 
        (grams per tonne)
      Ounces (gold)Coleman (17+00 to 21+00)
      56,250
      4.59
      8,303Coleman Split (21+00 to 23+00
      20,753
      3.53
      2,355North Vein (21+00)
      2,990
      8.57
      824Total
      79,993
      4.46
      11,482


The open pit reserve tonnages are diluted. That is, the
expected dilution from open pit mining is accounted for in the grade and tonnage
of the reserve blocks. The ounces stated in the above table are contained
ounces. The cutoff grade used was 3.0 grams/tonne gold. The cutoff grade is
based on historical costs of a 100 tonne/day open pit operation with a flotation
processing plant recovering 95% of the gold. Gold prices used were those on
December 31, 2006 or $20.32/gram ($632.00/troy ounce).

SILVER STRAND MINE

LocationThe Silver Strand mine is located in
Kootenai County, Idaho about 12 miles east-northeast of Coeur d'Alene, Idaho. It
is situated on Lone Cabin Creek, a tributary of Burnt Cabin Creek and of the
Little North Fork Coeur d'Alene River. Primary access is from Coeur d'Alene via
paved and dirt roads from Fernan Lake to Lone Cabin Creek.

Mineral PropertyThe Company's Silver Strand
mine consists of fifteen unpatented lode claims on public lands administered by
the U.S. Forest Service. The claims were acquired from Trend Mining Company
pursuant to a purchase agreement dated July 14, 2000. Mine Systems Design, Inc.
assumed Trends

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royalty on the Silver Strand claims in July 2001. The royalty
is a 1.5% Net Smelter Return (NSR) capped at $50,000 after which the NSR
decreases to 0.5% .

HistoryThe Silver Strand deposit was
discovered during nearby logging activity during the 1960's and mined during the
1970's and 1980's for siliceous smelter flux. Production was 13,752 tons grading
0.093 ounces per ton gold, 9.6 ounces per ton silver and 87.1% silica. The
mining operation was shut down when the ASARCO Tacoma smelter closed in the
early 1980's. Previous owner/operators include Silver Strand Mining Company,
Silver Trend Mining Company, and Trend Mining Company. Mine Systems Design, Inc.
(MSD) had an exploration agreement with Silver Trend Mining Company that was
terminated in 1997. During the term of that lease, MSD made an agreement with
U.S. Bureau of Mines, Spokane Research Center to conduct a mining research
product at the Silver Strand mine. The USBM monitored water quality and flows
from the mine, maintained the underground openings, and conducted some diamond
drilling.

Present Condition and Work Completed on the
PropertyThe Silver Strand mine is an underground mine that was mined
during the 1970's and early 1980's. No mining has taken place at the property
since that time. Since mining was suspended only limited exploration has taken
place at the Silver Strand including geochemical sampling and diamond drilling.
In 1997, Silver Trend Mining Company completed a four-hole surface diamond
drilling program which totaled 795 meters. The mine is accessed by three
horizontal openings called levels: the No. 2 Level, the No. 225 Level and the
No. 3 Level which is the lowest level and is located at the creek bottom
adjacent to forest road No. 411. All three levels are accessible from the
surface via a network of dirt roads. The USBM installed a large culvert at the
portal of the No. 3 Level in order to stabilize that entrance. No surface
infrastructure presently exists at the Silver Strand. There is no energy
available at the site. Any electrical energy requirements would have to be
satisfied with an on-site generator.

During 2002, an exploration drilling program was completed at
the Silver Strand. Also, rehabilitation of the 225 Level portal was started but
not completed in 2002. The drilling was successful in extending the ore shoot
below the No. 3 Level. In April 2003, the Company submitted a Plan of Operations
(POO) to the USFS for a seasonal underground mining operation with a planned
production rate of 1,000 tonnes per month. A geophysical exploration program was
completed at the Silver Strand in 2004. Several anomalies were discovered and
the largest merits exploration drilling.

In June 2005, the USFS affirmed their Finding of No Significant
Impact with respect to the Companys Plan of Operations after an environmental
group appealed their earlier decision. In August 2006, both the USFS and the
Company signed the final operating plan or Decision Notice. Before the Company
can begin operations at the Silver Strand, it must post a reclamation bond of
$119,725. An additional bond of $32,075 is due prior to the second operating
season which gives a total bond of $151,800 for the planned project. Preparatory
work completed in 2006 included the installation of road gates, the clearing of
roads, the fabrication of settling tanks and road surveying.

As of December 31, 2006, the Company had a capitalized
development plus investment cost of $133,004 associated with the Silver Strand
mine.

Exploration and Development PlansWe plan to
start preparations of our 1,000 tonne per month seasonal mining operation in
2007. Initial efforts will focus on the completion of a new No. 3 portal, the
construction of roads, and the installation of a sediment collection system.
Several months of work is required before any ore can be shipped to the

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mill. The typical operating season will be from May through
October. It is estimated by the Company that $150,000 will be required for
startup capital.

A surface diamond drilling program is also planned to
investigate geophysical anomalies that were discovered several years ago.

Geology and ReservesCompany geologists have
completed the description of the geology of the Silver Strand mine. Reserve
calculations were completed by the Companys geologists and engineers.
Verification of the areas geology can be found from third party published
reports by Alfred L. Anderson of the Idaho Bureau of Mines and Geology (Pamphlet
53).

GeologyThe upper part of the Revett Formation
outcrops at the mine. The upper Revett member contains alternating sequences of
quartzite and siltite-argillite. Beds dip shallowly to moderately northerly (30
to 50 degrees). Alfred L. Anderson of the Idaho Bureau of Mines and Geology
mapped the geology and discussed the mineral resources of Kootenai County in
1940 (Pamphlet 53). Anderson combined the Burke and Revett formations and
estimated the combined thickness to be from 1,000 to 3,000 feet. There are no
major intrusive rocks near the Silver Strand mine. A major diabase dike has
intruded the Silver Strand mineralized zone. The Burnt Cabin fault is the major
geologic structure near the Silver Strand mine.

The Silver Strand orebody consists of a nearly-vertical,
silicified (quartz) replacement zone which cuts the flat to moderately dipping
Revett beds. The zone is not a fissure-filling vein. The boundaries and shape of
the silicified zone were determined to some extent by the 1997 diamond drilling
program. The sulfide ore mined to date appears to be enclosed within the quartz
zone. The ore is black and very fine-grained. Sulfide minerals are not easy to
identify because of the fine-grained texture. Occasional euhedral crystals of
pyrite can be observed, and tetrahedrite is visible in the higher grade ore.
Minerals observed by microscopic study during metallurgical tests include:
pyrite, tetrahedrite, tennatite, sphalerite, arsenopyrite and stibnite.

ReservesOre grades and dimensions of the
reserve blocks are based on chip sampling of the vein underground and diamond
drilling. Reserves were calculated using a gold equivalent cutoff grade of 5
grams per tonne gold and a minimum mining width of 1.5 meters. The cutoff grade
is based on historical and estimated costs of a 1,000 tonne/month underground
mining operation, hauling ore to the Companys mineral processing plant about 40
miles distant, and processing with flotation and recovering 75% of the silver
and gold. Silver and gold prices used were those on December 31, 2006 or
$0.416/gram ($12.95/troy ounce) and $20.32/gram ($632.00/troy ounce),
respectively.

Classification
    Metric Tonnes
    Gold Grade
    Silver GradeGrams Per Tonne
    Ounces Per Ton
    Grams Per Tonne
    Ounces Per TonProven & Probable
    6,903
    5.43
    0.158
    361
    10.5


The reserve tonnages are diluted. That is, the expected
dilution from underground mining is accounted for in the grade and tonnage of
the reserve blocks.

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GOLDEN CHEST

LocationThe Golden Chest project is located
in Reeder Gulch about 1.2 miles east of Murray, Idaho along Forest Highway 9.
The property consists of two mining leases and unpatented claims covering
approximately 500 acres. The site is accessible by an improved dirt road. A 30
ft by 20 ft steel-clad pole building is present near the ramp portal and is used
as a shop and a dry. Single phase electrical power supplied by Avista Utilities
has been installed to the portal site in Reeder Gulch.

Mineral LeaseOn January 3, 2005, the Company
signed a mining lease on the Golden Chest with Metaline Contact Mines (MTLI) and
J.W. Beasley Interests, LLC (JWBI) that covers about 270 acres. The Company
completed a pre-feasiblity study on an open pit resource drilled by Newmont
Exploration Limited and issued 50,000 shares of its restricted common stock to
both MTLI and JWBI to exercise the mining lease. The term of the lease is
fifteen years and as long thereafter as Leased Substances are mined, processed
or marketed from the Leased Premises. A Net Smelter Royalty (NSR) of 3% is
payable to the Lessors. An additional NSR up to a maximum 3% is payable based on
a sliding scale of increasing gold prices adjusted by the Consumer Price Index
(CPI) using June 2003 (CPI = 183.7) as the base. See table below.

Sliding Scale for Additional NSR Royalty

Price of Gold, $ / Troy Ounce (using December 2006
      CPI-U)
    Additional NSR Royalty< $439
    None$439 to $494
    1.0%$494 to $549
    1.5%$549 to $604
    2.0%> $604
    3.0%


Finally, the Company will issue 50,000 shares of restricted
common stock for each increment of 10,000 troy ounces of gold production.

On January 3, 2005, the Company signed a mining lease with
Prichard Creek Resource Partners, LLC that covers about 41 acres of unpatented
lode claims. Upon exercising the lease the Company issued 30,000 shares of
restricted common stock to Prichard Creek Resource Partners. The term of the
lease is fifteen years and as long thereafter as Leased Substances are mined,
processed or marketed from the Leased Premises. A NSR of 3% is payable to the
Lessors. An additional NSR is based on the same sliding scale, presented in the
table above, is also payable to Prichard Creek Resource Partners. Finally, if
commercial production is commenced from these claims a one-time payment of
30,000 shares of the Companys common stock is payable to Prichard Creek
Resource Partners.

The Company also holds an additional 195 acres at the Golden
Chest property through unpatented claims wholly owned by the Company. The
portion of these claims within Sections 4 and 5 of Township 49N, Range 5E, BM
are subject to a 1% Net Profits Royalty payable to MTLI.

HistoryThe Golden Chest was the largest lode
producer in the Murray district, producing 65,000 ounces of gold from narrow
high grade veins primarily in the late 1800s. Newmont Exploration Limited (NEL)
spent over $500,000 on an exploration program at the Golden Chest in the late
1980s, which consisted of soil and rock sampling, surface and underground
mapping, and 11,133 feet of drilling. Newmonts work

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identified a potential open pit gold resource. Newmont dropped
the property in 1990, apparently because it did not meet their criterion of a
one million ounce open-pit resource. New Jersey Mining Company signed a mining
lease for the property in January 2005.

Present Condition and Work Completed on the
PropertyDuring 2004, the Company completed an exploration ramp 152
meters long that intercepted the Katie vein, and the vein was drifted on for 40
meters to the northeast before intercepting an old stope. Also during 2004, a
deep core drilling program comprised of 4 holes and 1,142 meters was completed
at the Golden Chest. The deepest hole, DDH04-06 intercepted 17.5 meters that
assayed 4.83 gpt gold including a higher grade section of 5.8 meters that
assayed 10.13 gpt gold.

The Company completed studies in 2004 on the potentially open
pitable resource drilled by Newmont. Handbook and scaled costs were used in
conjunction with current gold prices and gold prices substantially higher than
current prices or three-year average prices. It was concluded that the resource
would not be feasible as a stand-alone project and does not meet the SEC Guide 7
requirements for reserves. Therefore, exploration at the Golden Chest will be
directed toward developing resources on the Idaho vein for a larger scale
underground mine.

During 2005, the Company commenced a small-scale underground
mining operation at the Golden Chest from the 965 level on an oreshoot of the
Katie vein. The limits of the oreshoot on the 965 level were reached and stoping
was completed in mid 2006. In the second quarter of 2006, a decline ramp was
driven from the 965 level to the 955 for a total of 70 meters, and 60 meters of
development was completed on the 955 level. A raise was completed from the 955
to the 965 level and ore was mined from this area in late 2006. A total of 3,520
tonnes of ore were mined in 2006 at a grade of 6.0 grams per tonne gold. The ore
is shipped to the New Jersey mill in Kellogg, a trip of about 40 miles one-way.
A bulk sulfide flotation concentrate was made at the New Jersey mill and sold to
either Barrick Goldsrike in Nevada or Penoles in Mexico.

In 2005 and 2006, 685 meters and 1,125 meters, respectively, of
exploratory diamond drilling were completed. Drilling has primarily been focused
on an area of the Idaho vein which is south of and deeper than the current
mining area. The drilling was successful in delineating a higher grade section
of the Idaho vein which was converted to ore reserves as of December 31, 2006.

As of December 31, 2006, the Company had a capitalized
development plus investment cost of $110,718 associated with the Golden Chest
mine.

Exploration and Development PlansIt became
evident in late 2006 that the Katie vein oreshoot was declining in gold grade
from the grade found on the upper level. So in early 2007, we made the decision
to suspend mining of the Katie oreshoot and focus our efforts on driving the
decline ramp to the reserves outlined on the Idaho vein. A design has been
completed and mining of the new ramp has started. The plan calls for 600 meters
of ramp to be driven at a -15% grade to intercept the Idaho vein at the 865
level. Included in the Idaho ramp plan is the development of a secondary escape
through the historical Idaho No. 3 level which is expected to be intercepted by
the new ramp. It is expected that the Idaho ramp project will take at least 18
months to reach the target 865 level.

Geology and ReservesCompany geologists have
completed the description of the geology of the Golden Chest mine. Reserve
calculations were completed by the Companys geologist and engineer.
Verification of the areas

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geology can be found from third party published reports by
Philip J. Shenon (Idaho Bureau of Mines Pamphlet No. 47) and unpublished reports
by Newmont Mining Corporation.

GeologyGold mineralization occurs in veins
associated with a thrust fault that has exploited the top of a quartzite unit on
the east limb of a north-trending synclinal fold. The mineralization occurs in
two types of quartz veins which are generally conformable to bedding of the
Prichard formation of Proterozoic age. Thin banded veins, occurring in
argillite, contain visible gold, pyrite, arsenopyrite, galena, and sphalerite.
Thicker, massive veins occur in quartzite and contain pyrite, sphalerite,
galena, chalcopyrite, scheelite and rare visible gold. Gold mineralization is of
Mesozoic age and related to granitic intrusive rocks.

ReservesOre grades and dimensions of the
reserve block are based on nine diamond drillholes through the Idaho vein with
an average spacing of 40 meters. Samples are collected by sawing the selected
mineralized section of core in half and submitting one-half to the assay lab and
retaining the other half in the Companys secure storage facility. Reserves were
calculated by the Companys geologist and engineer using a polygonal method with
a cutoff grade of 4 gpt gold, and a minimum mining width of 2 meters.

The reserves were calculated using actual 2006 operating costs
of a 400 tonne per month operation which includes the following costs:
underground mining costs, haulage costs for hauling ore to the Companys mineral
processing plant about 40 miles distant, and processing costs with a flotation
mineral processing plant recovering 94% of the gold. Gold prices used were those
on December 31, 2006 or $20.32/gram ($632.00/troy ounce).

Classification
    Metric Tonnes
    Gold Grade (grams per tonne)
    Ounces of GoldProven & Probable
    158,958
    5.52
    28,214


The reserve tonnages are diluted. That is, the expected
dilution from underground mining is accounted for in the grade and tonnage of
the reserve blocks.

NIAGARA PROJECT

LocationThe Niagara copper-silver deposit is
located near the forks of Eagle Creek about seven kilometers north of the
Company's Golden Chest operation. The property is without known ore reserves.
Nine unpatented claims cover the deposit which is about 180 acres. Access to the
site is maintained through the use of a US Forest Service road which is closed
to the general public. No electrical energy is present at the site.

Mineral LeaseThe Company signed an
Exploration Agreement with Revett Metals Associates (RMA) in December 2006. The
Exploration Agreement has a term of five years, beginning on December 2, 2006,
and is for nine unpatented claims that cover the deposit. In addition, the
Exploration Agreement covers an Area of Mutual Interest within 1⁄2 mile of the
property excluding property valued primarily for its gold mineralization. Upon
signing the Agreement, the Company issued 30,000 shares of restricted common
stock to RMA and paid $4,500. At each anniversary of the signing, the Company
has agreed to pay $3,000 and issue 30,000 shares of restricted common stock to
RMA. Any time prior to the expiration of the Exploration Agreement, the Company
can exercise an option to convert the Exploration Agreement to a Mining
Agreement. If exercised, the Mining Agreement would have a term of 25 years, and
the Company would pay a NSR to RMA of 3.0% on ores or concentrates mined on the
property. The

17

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Company is granted the option to purchase 90% of the NSR from
RMA for $2,500,000 which would leave a remaining royalty of 0.3% .

HistoryAn exploration program completed by
Earth Resources Company on the Niagara property in the 1970's identified a large
volume of copper-silver mineralization within the Revett formation. Their
exploration program included eight drill holes and six trenches on the outcrop
of the mineralized strata. Earth Resources also completed metallurgical testwork
that indicated conventional flotation will achieve recoveries of 94% for copper
and 90% for silver. Earth Resources also completed preliminary economic studies
on the deposit. Kennecott owned the claims that cover the Niagara desposit for a
period time after Earth Resources. Revett Metals Associates re-staked the
property in 2004 after Kennecott dropped the claims.

Exploration and Development PlansVery little
exploration or development work has taken place on the property since Earth
Resources work in the 1970s. A network of roads was constructed on the site to
provide drill stations and allow logging of the site. Some clearing of brush and
minimal dozer work will be required to re-open these roads for more drilling.
Revett Metals Associates submitted a Plan of Operations (POO) to the USFS for a
drilling program in September 2006 which has been assumed by NJMC.

Once the POO is approved by the USFS, we plan to conduct a
diamond drilling program on the Niagara deposit with the primary goal to perform
in-fill drilling to upgrade the quality of the resource estimate to the level
sufficient for a feasibility study. The feasibility study would evaluate the
economics of an open pit and/or underground mining operation with a mill
processing in the range of 5,000 tonnes per day. A secondary goal of the
drilling program will be to drill deeper holes that will probe into the lower
Revett formation to explore for a deeper copper-silver deposit

As of December 31, 2006, the Company had an investment cost of
$19,500 associated with the Niagara project.

GeologyThe Niagara deposit occurs in a
section of mineralized upper Revett formation near the axis of a north-south
striking syncline. The western limb of the syncline has been truncated by the
north-south striking Murray Peak fault, a steep, west dipping reverse fault.
Other faults offset the mineralized zone slightly. In the Niagara deposit, the
mineralization occurs in the upper Revett Formation, which here is a light gray,
massive quartzite with thin siltite interbeds. The mineralized horizon crops out
along the East Fork Eagle Creek and is approximately 30m below the contact with
the overlying St. Regis Formation. Copper minerals include bornite,
chalcopyrite, chalcocite and some copper oxide minerals. Silver minerals include
stomeyerite and jalpaite. Pyrite and galena also occur in trace amounts.

GOLD BUTTE PROSPECT

LocationThe Gold Butte is an exploration
prospect without known ore reserves. It is located near the head end of Butte
Gulch near Murray, Idaho, and is about seven kilometers northeast of the Golden
Chest mine. The property is accessible via the State Line dirt road near the
Jack Waite mine which is maintained by the USFS. The road is typically
accessible from May through November. No electrical energy is available at the
site.

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Mineral PropertyIn 2006, we staked six
unpatented lode claims that cover about 124 acres. The claims are wholly owned
by the Company.

HistoryHistoric workings on the property
consist of a network of roads and trails accessing a series of five portals
spaced vertically on the hillside, along with some bulldozer trenches and
miscellaneous prospect pits. Two old drillhole collars also were also found.
From historic records, it appears that most of this work was done by a local
company named Idaho Goldfields.

Present Condition and Work CompletedThe roads
constructed by the historic operator are still present at the site, but will
require a minor amount of brush clearing and dozer work to make them usable for
our planned drilling program. From our interpretation of the mineralized zone,
it appears the historic drillholes were oriented incorrectly. During the 2006
season, we completed a soil sampling, and a geophysical survey program which
both suggest the mineralized zone may extend 400 meters to the north.

Exploration PlanWe submitted a POO to the
USFS in late 2006 for a planned diamond drill program consisting of 1,200
meters. This project is our highest priority exploration drilling project, and
the timing of the drilling is dependent on the USFS completing biological
surveys this spring. Preliminary indications from the USFS indicate that the
permitting may be completed by late summer 2007.

GeologyPreliminary geologic interpretation of
the prospect indicates the presence of a zone of pyritic, silicified breccia
parallel to the axial plane of a small fold in the Prichard Formation, on the
east limb of the north-trending Trout Creek Anticline. The mineralized zone
outcrops over a strike length of at least 200 meters and has a vertical extent
of 120 meters. Soil sampling indicates the zone may continue north for at least
another 400 meters, with a width of 75 to 90 meters. Geochemical analysis of the
soil samples shows anomalous concentrations of molybdenum, tellurium and
antimony.

CA-TOBOGGAN AREA PROSPECT

SummaryThe CA-Toboggan area prospect is an
exploration property without known ore reserves. In 2006, the Company staked
fourteen claims covering an area of about 290 acres in the East Fork of Eagle
Creek drainage. These claims are wholly owned by the Company. The claims can be
accessed from May through November using a USFS dirt road. No electrical energy
is available at the site. Prior geophysical exploration work by Cominco-American
in this area in the mid 1980s found a large CSAMT geophysical anomaly, roughly
two square kilometers in area. In 1987, Cominco American drilled a hole 500
meters in depth in the center of the anomaly but did not intersect any
significant mineralization nor any obvious reasons for the large anomaly. It is
possible that the exploration hole was not deep enough. Our exploration efforts
in the summer of 2006 revealed that the area around the CA prospect has a
geochemical signature which may be indicative of gold mineralization. NJMC filed
an operational plan in December 2006 with the US Forest Service to drill at
least 2,000 meters at the CA prospect from three planned drill sites which are
located on existing roads.

More study of the geophysical anomaly will be done before
drilling is started, including a surveying of the area with sensitive VLF
instruments. NJMC intends to continue exploration in the area because of the
promising indications of geochemistry and geophysics.

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LOST EAGLE PROSPECT

SummaryThe Lost Eagle is an exploration
prospect without known ore reserves. It is located in the West Fork of Eagle
Creek near Murray, Idaho. The outcrop of the Lost Eagle vein is located on the
hillside above a USFS road. Access to the outcrop is by foot only. Electrical
power is not available at the site. The Company's five lode claims cover 103
acres and are on public land administered by the USFS. The project is a gold and
silver exploration project. The Lost Eagle vein is a quartz vein carrying
sulfides that outcrops in the Revett formation. The sulfide minerals found in
the vein are galena, pyrite, hessite and petzite. Hessite is a silver telluride
mineral and petzite is a gold-silver telluride mineral. The presence of
tellurides is thought to be significant as tellurides are usually associated
with high-grade gold deposits near alkaline-igneous bodies. However, no known
igneous bodies are mapped in the area. Historical workings included two short
adits, about 5 meters long, located along the strike of a quartz vein system. An
upper adit established by the old-timers exposes the vein where it is
mineralized. Work completed by the Company includes re-opening of the adit,
channel sampling the vein, geochemical soil sampling, and a geophysical survey.
As of December 31, 2006, the Company had an investment cost of $5,000 associated
with this property.

In 2003, the Company completed two diamond drillholes each
about 185 meters in length. Both holes intercepted abundant alteration including
carbonate enrichment, potassic alteration, and a halo of specular hematite and
pyrite with occasional galena. Gold and silver values were only weakly
anomalous. Anomalous levels of molybdenum were also discovered by the 2003
drilling. No exploration work has been completed on the property since 2003.
Exploration plans call for additional diamond drilling but the holes will be
collared closer to the outcrop by using a helicopter to place the drill.

WISCONSIN-TEDDY PROSPECT

SummaryThe Wisconsin-Teddy is an exploration
project without known ore reserves. The project area lies north of the New
Jersey mine and is accessed by a local frontage road. Electrical power is
available adjacent to the site. The Company's claims cover 83 acres. The claims
are unpatented and are on public land administered by the U.S. Bureau of Land
Management. The project is a base metal exploration project in the Prichard
formation. Several tunnels with an aggregate length of 2,000 feet were driven on
the property prior to 1930. This development was related to two veins systems -
a copper-gold vein and a zinc-lead-silver vein. Work completed by the Company
included the opening of the Teddy underground workings, sampling on the surface
and underground, and geologic mapping. Two exploration holes were drilled in the
summer of 2003 and anomalous base metal mineralization was found. No exploration
work has been completed since 2003 and there are no plans for additional
exploration work in 2007.

SILVER BUTTON/ROUGHWATER PROSPECT

SummaryThe Silver Button is an exploration
project without known ore reserves and covers an area of 20 acres and is located
in the Clark Fork mining district of northern Idaho. Clark Fork is about 60
miles north of Kellogg, Idaho. The property was staked by the Company in 2004
and is located in the Lightning Creek drainage. Float collected from over a 100
m length of a vein subcrop on a talus slope contained silver minerals as
identified by microscopic analyses and by chemical analyses. Access to the site
is via foot trail and no electrical power is available at the site. Only
preliminary field sampling and claim staking have taken place at the prospect. A
Plan of Operations for a helicopter-mobilized core-drilling program has been
submitted to the US Forest Service (USFS). Modifications to the Plan of
Operations were made

20

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after meeting with the USFS in June of 2005. A site visit was
made with USFS personnel in 2006, but the USFS has yet to indicate if or when
the Plan of Operations will be approved. Exploration drilling will be dependent
on the Companys ability to raise sufficient funds and the timely receipt of a
permit from the USFS. As of December 31, 2006, the Company had an investment
cost of $25,500 associated with this property.

ITEM 3.

LEGAL PROCEEDINGS

The Company is not currently involved in any legal proceedings
and is not aware of any pending or potential legal actions.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of shareholders during the
fourth quarter of 2006.

PART II

ITEM 5.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market InformationThe Company's stock trades
on the NASD's OTCBB under the symbol "NJMC". The Company began trading on the
OTCBB on January 28, 1998 following its merger with Plainview Mining Company,
Inc.

The following table sets forth, for the respective periods
indicated, the prices for the Company's Common Stock in the over-the-counter
market according to the NASD's OTC Bulletin Board. These prices represent
inter-dealer quotations, without adjustments for retail markups, markdowns or
commissions and may not necessarily represent actual transactions. All prices in
the following table have been rounded to the nearest whole cent.

Year Ending December 31, 2006
    High Bid
    Low BidFirst Quarter
    $0.80
    $0.32Second Quarter
    $1.25
    $0.64Third Quarter
    $0.74
    $0.40Fourth Quarter
    $0.68
    $0.41Year Ending December 31, 2005
    High Bid
    Low BidFirst Quarter
    $0.60
    $0.45Second Quarter
    $0.52
    $0.37Third Quarter
    $0.45
    $0.38Fourth Quarter
    $0.45
    $0.22


ShareholdersAs of March 5, 2007 there were
1,203 shareholders of record of the Company's Common Stock. As of March 1, 2006
the Company had issued and outstanding 30,219,319 shares of Common Stock.

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Dividend PolicyThe Company has not declared
or paid cash dividends or made distributions in the past and the Company does
not anticipate that it will pay cash dividends or make distributions in the
foreseeable future. The Company currently intends to retain and reinvest future
earnings, if any, to finance its operations.

Transfer AgentThe transfer agent for the
Company's Common Stock is Columbia Stock Transfer Company, 1602 E. Seltice Way
#303, Post Falls, Idaho 83854.

Securities Authorized for Issuance Under Equity
Compensation PlansThe Company has not adopted an equity compensation
plan for the award of options, warrants or rights to employees or non-employees.
However, on April 27, 2006, the Board of Directors approved a compensation plan
for our President, Fred W. Brackebusch, that states that any time over 25 hours
per week is compensated with restricted common stock at a rate of $125 per hour.
The number of shares is calculated quarterly using the average bid price for the
quarter as quoted by the OTC Bulletin Board. During the years ended
December 31, 2006 and 2005, the Company issued 116,480 and 274,275 shares,
respectively, of its restricted common stock valued at $61,063 and $111,125,
respectively, to Fred Brackebusch for management services.

Occasionally, we pay for goods and services with restricted
common stock. Our policy is to determine the fair value of the goods or
services, and then issue the number of corresponding shares using the bid price
for our common stock as quoted by the OTC Bulletin Board.

Recent Sales of Unregistered SecuritiesOn
February 12th 2007 the company completed a non brokered (i.e. no
commissions were paid to an underwriter or broker) sale of 2,684,585 units at a
price of $0.40 per unit generating $1,073,834 in net proceeds. Each unit
consisted of one share of restricted common stock plus one half warrant whereby
each whole warrant could purchase one share of the Company's restricted common
stock at $0.55 per share until December 31, 2008. The sale was strictly limited
to persons in the United States who met certain minimum financial (accredited
investors) or sophistication requirements. The offering was made in reliance on
exemptions from registration provided by Section 4(2) and Rule 506 of Regulation
D of the Securities Act of 1933, as amended.

On April 13, 2006 the Company completed a non brokered (i.e. no
commissions were paid to an underwriter or broker) sale of 4,400,000 units at
$.030 per unit generating $1,320,000 in net proceeds. Each unit consisted of one
share of the Companys restricted common stock plus one warrant, whereby each
warrant could purchase one share of the companys restricted common stock at
$0.50 per share until March 1, 2008. The sale was strictly limited to persons in
the United States who met certain minimum financial (accredited investors) or
sophistication requirements. The offering was made in reliance on exemptions
from registration provided by Section 4(2) and Rule 506 of Regulation D of the
Securities Act of 1933, as amended.

For the year ending December 31, 2006, the Company issued
462,740 shares of restricted common stock for management and directors fees,
equipment, services, exploration and a mining lease payment. A value of $216,150
(for an average value of $0.47 per share) was assigned to these fees, services,
and equipment. See the statement of shareholders equity for a detailed list.
The transactions were strictly limited to persons in the United States who met
certain minimum financial (accredited investors) or sophistication requirements.
In managements opinion, the securities were issued pursuant to exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.

22

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ITEM 6.

MANAGEMENT'S DISCUSSION, ANALYSIS, AND PLAN OF OPERATIONS

Plan of OperationThe Company is executing its
strategy to conduct mining and mineral processing operations on higher grade ore
reserves it has located on its exploration properties. The financial strategy is
to generate cash from these operations to pay for corporate expenses and to
provide additional funds for exploration, thus reducing the need to raise funds
through financing activities including sale of common stock. The Company plans
to continue exploration for gold, silver and base metal deposits in the greater
Coeur dAlene Mining District of northern Idaho. The strategy includes finding
and developing ore reserves in order to increase production of gold, silver, and
base metals.

The Company has four properties at which most exploration is
being conducted; the Niagara, the Golden Chest, the Silver Strand, and the
Coleman. The Niagara copper-silver deposit was acquired during the year. The
Niagara deposit was drilled in the 1970s, and although more drilling is needed,
the Company will conduct economic studies to determine if the deposit can be
mined profitably. Production of gold ore occurred during the year at the Golden
Chest mine, but production has been suspended while a ramp is being driven to
access a block of reserves discovered by drilling from surface. Permitting has
been completed and production of silver-gold ore is planned at the Silver Strand
mine in 2007. An exploration crosscut is being driven at the Coleman underground
mine where drilling has indicated gold-silver mineralization. Production from
lower grade reserves at the Coleman open pit mine may be conducted to fill up
mill capacity.

The Company completed six more drillholes into the Idaho vein
at the Golden Chest mine during the year. With a total of 10 drillholes
penetrating the Idaho vein, sufficient information is available to designate a
block of ore reserves of 159,000 tonnes grading 5.52 grams/tonne gold.

Mining operations on the Katie Dora vein at the Golden Chest
mine were conducted in 2006. By year end most of the Katie Dora reserves had
been mined.

At the Silver Strand mine, operating permits have been received
for mining and exploration. Mining plans are to develop infrastructure, drive a
new adit, and mine a reserve block above the main adit level in 2007. Drilling
plans are to test geophysical anomalies which were found in 2004.

Management also thinks exploration in the New Jersey mine area
has promising potential. Previous drilling has indicated higher grade
mineralization in the North Coleman vein area and at the Scotch Thistle
prospect, and interesting silver-base metal mineralization has been drilled at
the Enterprise prospect. A crosscut at the lowest adit level, the 740 level, is
being driven to test the North Coleman area, and further drilling may be
conducted at the Scotch Thistle and Enterprise prospects.

In 2006, a concentrate leach circuit at the New Jersey mineral
processing plant was designed and was 70% completed. It is planned to complete
the leach circuit in 2007 and to commission the process. Concentrate will be
leached and a gold-silver dore produced for sale. The reason for adding the
concentrate leach circuit was to obtain more revenue compared to selling
concentrates by increasing recovery and eliminating concentrate freight as well
as to avoid any potential difficulties in marketing concentrates. In 2006, the
Companys customer for pyrite concentrates quit buying concentrates. Two
shipments were made to another customer, but with the availability of the
concentrate leach circuit, no further concentrate shipments are planned.

23

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In 2006, an exploration program was conducted in the Murray
area where the Golden Chest mine is located. The program was successful in
finding new drilling targets. The most promising target is called the Gold Butte
prospect where a 50 m wide breccia zone with gold mineralization occurs. The
Niagara deposit was also acquired as part of the 2006 exploration effort. The
Company has ordered a core drilling rig and plans to conduct its own drilling
operations in 2007. Operating permits have been submitted to the U.S. Forest
Service for exploration drilling in the Murray area. The Companys long term
objective in the Murray area is to develop enough ore reserves to justify
construction of a larger mineral processing plant in the area.

Financial Condition-The Company maintains an adequate cash
balance by increasing or decreasing its exploration expenditures as limited by
availability of cash from operations or from financing activities. The cash
balance at the end of 2006 was $276,821 (including certificates of deposit), and
Figure 1 shows the corresponding balances for previous accounting periods.



Results of Operations-Revenue for the year 2006 was $339,077
compared to $261,293 in 2005. Figure 2 shows the net loss for the fourth quarter
of 2006 of $190,812 and the net losses in previous accounting periods. The net
loss for 2006 was $991,602 compared to a net loss of $590,485 in 2005. The net
loss increased in 2006 because of higher exploration and management costs.

24

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Gold production in pyrite concentrates and bullion was 228
ounces in the fourth quarter and 679 ounces for the year 2006 as compared to 337
and 824 ounces for the respective 2005 periods. Gold production was lower in
2006 due to lower grade ore than 2005. Gold production is expected to be
approximately 100 ounces per quarter during the next two quarters and then to
increase, along with silver production, when Silver Strand ore processing
starts.

Mining operations at the Golden Chest mine are expected to be
suspended for approximately one year while the access ramp is being extended to
the Idaho vein reserves. Once the Idaho vein ramp development is completed there
will be enough reserves for many years of mining at the current rate of 4,000
tonnes/year.

Mining and mineral processing operations have continued year
around through the winter months even though occasional storms delay operations.
Mineral processing equipment is cleaned out in the winter period to supplement
production in the cold months. Experience is that about 20% of gold production
comes from cleanout.

Mining operations are planned to start at the Silver Strand
mine in 2007, however a capital expenditure of approximately $300,000 will be
required to bring the mine into production, although not all that amount will
have to be spent in 2007. Operating results at the Silver Strand mine will
depend upon the price of silver as well as gold. Present silver and gold prices
are sufficient in managements estimation to generate a gross profit at the
Silver Strand mine based on the operating plan which was part of the permitting
process.

No additional capital expenditures are required for the mineral
processing plant in 2007, however the concentrate leaching plant will be
completed and commissioned in 2007. Mill feed will come from the Coleman open
pit and the Silver Strand mine in 2007.

The amount of money to be spent on exploration at the Companys
mines and prospects will depend

25

---

upon the amount of gross profit generated by operations and the
amount of money raised by financing activities. Basically, management expects to
be able to continue the present operating scenario with its three active mines
and mineral processing plant indefinitely, but expanded exploration or
production activities depend upon the results of financing activities.

[The balance of this page has been intentionally left
blank.]

26

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ITEM 7.

FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm

Board of DirectorsNew Jersey Mining Company

We have audited the accompanying balance sheets of New Jersey
Mining Company (A Development Stage Company) (the Company) as of
December 31, 2006 and 2005, and the related statements of operations, changes in
stockholders equity and accumulated comprehensive income, and cash flows for
the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements
referred to above present fairly, in all material respects, the financial
position of New Jersey Mining Company as of December 31, 2006 and 2005, and the
results of its operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.

DeCoria, Maichel & Teague P.S./s/ DeCoria, Maichel
& Teague P.S.

Spokane, WashingtonFebruary 28, 2007

27

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New Jersey Mining Company(A Development Stage
Company)Table of Contents

|                                                                                                                                                                                                                                                  | Page 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----
|Balance
      Sheets, December 31, 2006 and 2005                                                                                                                                                                                                  | 29   
|Statements
      of Operations for the years ended December 31, 2006 and 2005 and from the
      date of inception on July 18, 1996 through December 31, 2006 (Unaudited)                                                                         | 30   
|Statement of Changes in Stockholders Equity and Accumulated
        Comprehensive Income for the years ended December 31, 2006 and 2005 and
        for the period from inception on July 18, 1996 through December 31, 2006
        (Unaudited) | 31-33
|Statements
      of Cash Flows for the years ended December 31, 2006 and 2005 and from
      the  date of inception on July 18, 1996 through December 31,
      2006 (Unaudited)                                                                  | 34   
|Notes to Financial Statements                                                                                                                                                                                                                     | 35-48

[The balance of this page has been intentionally left blank.]

28

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|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Balance Sheets               
|December 31, 2006 and 2005   

|ASSETS                                                                 |   |            |   |  
|---------------------------------------------------------------------- | - | ---------- | - | -
|                                                                       |   | 2006       |   |  
|Current assets:                                                        |   |            |   |  
|Cash and cash equivalents                                              | $ | 76,821     |   | $
|Certificates of deposit                                                |   | 200,000    |   |  
|Investment in marketable equity security at
      market (cost-$7,500) |   | 918,750    |   |  
|Accounts receivable                                                    |   | 13,628     |   |  
|Inventory                                                              |   | 132,086    |   |  
|Total current assets                                                   |   | 1,341,285  |   |  
|                                                                       |   |            |   |  
|Building and equipment, net of depreciation                            |   | 1,061,064  |   |  
|Mineral properties, net of amortization                                |   | 810,970    |   |  
|Other assets                                                           |   | 2,500      |   |  
|Total assets                                                           | $ | 3,215,819  |   | $
|                                                                       |   |            |   |  
|                                                                       |   |            |   |  
|LIABILITIES AND
      STOCKHOLDERS EQUITY                             |   |            |   |  
|                                                                       |   |            |   |  
|Current liabilities:                                                   |   |            |   |  
|Accounts payable                                                       | $ | 112,633    |   | $
|Accrued payroll and related
      payroll expenses                     |   | 31,521     |   |  
|Obligations under capital lease-current
      portion                  |   | 35,472     |   |  
|Equipment notes
      payable-current portion                          |   | 12,615     |   |  
|Total current liabilities                                              |   | 192,241    |   |  
|                                                                       |   |            |   |  
|Accrued reclamation costs                                              |   | 18,000     |   |  
|Obligation under capital lease-non-current                             |   | 83,896     |   |  
|Equipment notes payable-non-current                                    |   | 28,278     |   |  
|                                                                       |   |            |   |  
|Total liabilities                                                      |   | 322,415    |   |  
|                                                                       |   |            |   |  
|Commitments and contingencies (Note 8)                                 |   |            |   |  
|                                                                       |   |            |   |  
|Stockholders equity:                                                  |   |            |   |  
|Preferred stock, no par value,
      1,000,000 shares                  |   |            |   |  
|authorized;
      no shares issued and outstanding                     |   |            |   |  
|Common stock no par value,
      50,000,000                            |   |            |   |  
|shares
      authorized; 2006-27,586,485 and 2005-                     |   |            |   |  
|22,602,495 shares issued and outstanding                               |   | 5,027,317  |   |  
|Deficit accumulated during the development
      stage                 |   | (3,045,163 | ) |  
|Accumulated other
      comprehensive income                           |   |            |   |  
|Unrealized
      gain in marketable equity security                    |   | 911,250    |   |  
|Total stockholders equity                                             |   | 2,893,404  |   |  
|                                                                       |   |            |   |  
|Total liabilities and
      stockholders equity                       | $ | 3,215,819  |   | $

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

29

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|New Jersey Mining Company                                        
|-----------------------------------------------------------------
|(A Development Stage Company)                                    
|Statements of Operations                                         
|For the Years Ended December 31,2006 and 2005,                   
|And from Inception (July 18, 1996)through
      December 31, 2006

|                                     |   |              |   |   |            |   |   | From Inception    |  
|------------------------------------ | - | ------------ | - | - | ---------- | - | - | ----------------- | -
|                                     |   |              |   |   |            |   |   | (July 18, 1996)   |  
|                                     |   | December 31, |   |   | Through    |  
|                                     |   |              |   |   |            |   |   | December 31, 2006 |  
|                                     |   | 2006         |   |   | 2005       |   |   | (Unaudited)       |  
|Revenue:                             |   |              |   |   |            |   |   |                   |  
|Sales of gold                        | $ | 40,429       |   | $ | 9,280      |   | $ | 49,709            |  
|Sales of concentrate                 |   | 298,648      |   |   | 252,013    |   |   | 550,661           |  
|Total revenue                        |   | 339,077      |   |   | 261,293    |   |   | 600,370           |  
|                                     |   |              |   |   |            |   |   |                   |  
|Costs and expenses:                  |   |              |   |   |            |   |   |                   |  
|Production costs                     |   | 333,549      |   |   | 242,482    |   |   | 576,032           |  
|Management                           |   | 284,454      |   |   | 227,586    |   |   | 648,508           |  
|Exploration                          |   | 319,954      |   |   | 132,242    |   |   | 1,090,586         |  
|Gain on sale of mineral property     |   | (90,000      | ) |   |            |   |   | (90,000           | )
|Depreciation and
      amortization  |   | 122,786      |   |   | 57,790     |   |   | 180,576           |  
|General and administrative expenses  |   | 342,780      |   |   | 226,466    |   |   | 1,185,435         |  
|Total operating expenses             |   | 1,313,523    |   |   | 886,566    |   |   | 3,591,137         |  
|                                     |   |              |   |   |            |   |   |                   |  
|Other (income) expense:              |   |              |   |   |            |   |   |                   |  
|Timber sales (net)                   |   | 800          |   |   | (51,695    | ) |   | (50,902           | )
|Net royalties and other
      income |   | 11,186       |   |   | 9,391      |   |   | (41,239           | )
|Interest expense (net)               |   | 5,170        |   |   | 7,516      |   |   | 25,587            |  
|Write-off of goodwill                |   |              |   |   | -          |   |   | 30,950            |  
|Write-off of investment              |   |              |   |   | -          |   |   | 90,000            |  
|Total other (income) expense         |   | 17,156       |   |   | (34,788    | ) |   | 54,396            |  
|                                     |   |              |   |   |            |   |   |                   |  
|Net loss                             | $ | 991,602      |   | $ | 590,485    |   | $ | 3,045,163         |  
|                                     |   |              |   |   |            |   |   |                   |  
|                                     |   |              |   |   |            |   |   |                   |  
|Net loss per common share-basic      | $ | 0.04         |   | $ | 0.03       |   | $ | 0.19              |  
|                                     |   |              |   |   |            |   |   |                   |  
|Weighted average common              |   |              |   |   |            |   |   |                   |  
|shares outstanding-basic             |   | 26,298,167   |   |   | 22,114,878 |   |   | 15,791,857        |  

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

30

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|New Jersey Mining Company                                                              
|---------------------------------------------------------------------------------------
|(A Development Stage Company)                                                          
|Statement of Changes in Stockholders' Equity and
      Accumulated Comprehensive Income
|For the Years Ended December 31, 2005, and 2006, and for
      the Period              
|From Inception (July 18, 1996) Through December 31, 2006
      (unaudited)             

|                                                         |  |              |  |   |             |  |   |               |   |   | Accum. Other |  |   |               |   |   | Total    |  
|-------------------------------------------------------- |  | ------------ |  | - | ----------- |  | - | ------------- | - | - | ------------ |  | - | ------------- | - | - | -------- | -
|                                                         |  | Common Stock |  |   | Accumulated |  |   | Comprehensive |   |   | Treasury     |  |   | Stockholders' |  
|                                                         |  | Shares       |  |   | Amount      |  |   | Deficit       |   |   | Income       |  |   | Stock         |   |   | Equity   |  
|Issuance of common stock for:                            |  |              |  |   |             |  |   |               |   |   |              |  |   |               |   |   |          |  
|Assets and liabilities of New Jersey Joint
      Venture |  | 10,000,000   |  | $ | 207,968     |  | $ |               |   | $ |              |  | $ |               |   | $ | 207,968  |  
|Acquisition of Plainview
      Mining Company            |  | 1,487,748    |  |   | 148,000     |  |   |               |   |   |              |  |   |               |   |   | 148,000  |  
|Cash from sales                                          |  | 228,816      |  |   | 110,115     |  |   |               |   |   |              |  |   |               |   |   | 110,115  |  
|Services                                                 |  | 14,000       |  |   | -           |  |   |               |   |   |              |  |   |               |   |   |          |  
|Net loss                                                 |  |              |  |   |             |  |   | (44,174       | ) |   |              |  |   |               |   |   | (44,174  | )
|Balance, December 31, 1997                               |  | 11,730,564   |  |   | 466,083     |  |   | (44,174       | ) |   |              |  |   |               |   |   | 421,909  |  
|Issuance of common stock for:                            |  |              |  |   |             |  |   |               |   |   |              |  |   |               |   |   |          |  
|Acquisition of Plainview
      Mining Company            |  | 1,512,252    |  |   | 152,000     |  |   |               |   |   |              |  |   |               |   |   | 152,000  |  
|Cash from sales                                          |  | 117,218      |  |   | 29,753      |  |   |               |   |   |              |  |   |               |   |   | 29,753   |  
|Services                                                 |  | 18,000       |  |   | -           |  |   |               |   |   |              |  |   |               |   |   | -        |  
|Treasury stock acquired with Plainview acquisition       |  |              |  |   |             |  |   |               |   |   |              |  |   | (136,300      | ) |   | (136,300 | )
|Net loss                                                 |  |              |  |   |             |  |   | (30,705       | ) |   |              |  |   |               |   |   | (30,705  | )
|Balance, December 31, 1998                               |  | 13,378,034   |  |   | 647,836     |  |   | (74,879       | ) |   |              |  |   | (136,300      | ) |   | 436,657  |  
|Issuance of common stock for services                    |  | 79,300       |  |   | -           |  |   |               |   |   |              |  |   |               |   |   |          |  
|Net loss                                                 |  |              |  |   |             |  |   | (23,738       | ) |   |              |  |   |               |   |   | (23,738  | )
|Balance, December 31, 1999                               |  | 13,457,334   |  |   | 647,836     |  |   | (98,617       | ) |   |              |  |   | (136,300      | ) |   | 412,919  |  
|Issuance of common stock for:                            |  |              |  |   |             |  |   |               |   |   |              |  |   |               |   |   |          |  
|Silver Strand property                                   |  | 50,000       |  |   | 68,750      |  |   |               |   |   |              |  |   |               |   |   | 68,750   |  
|Services                                                 |  | 62,100       |  |   | 4,313       |  |   |               |   |   |              |  |   |               |   |   | 4,313    |  
|Net loss                                                 |  |              |  |   |             |  |   | (20,492       | ) |   |              |  |   |               |   |   | (20,492  | )
|Balance, December 31, 2000                               |  | 13,569,434   |  |   | 720,899     |  |   | (119,109      | ) |   |              |  |   | (136,300      | ) |   | 465,490  |  
|Issuance of common stock for:                            |  |              |  |   |             |  |   |               |   |   |              |  |   |               |   |   |          |  
|Grenfel lease                                            |  | 1,000,000    |  |   | 100,000     |  |   |               |   |   |              |  |   |               |   |   | 100,000  |  
|Lost Eagle property                                      |  | 50,000       |  |   | 5,000       |  |   |               |   |   |              |  |   |               |   |   | 5,000    |  
|Roughwater property                                      |  | 255,000      |  |   | 25,500      |  |   |               |   |   |              |  |   |               |   |   | 25,500   |  
|Services                                                 |  | 68,400       |  |   | 6,840       |  |   |               |   |   |              |  |   |               |   |   | 6,840    |  
|Net loss                                                 |  |              |  |   |             |  |   | (6,448        | ) |   |              |  |   |               |   |   | (6,448   | )
|Balance, December 31, 2001                               |  | 14,942,834   |  |   | 858,239     |  |   | (125,557      | ) |   |              |  |   | (136,300      | ) |   | 596,382  |  

Theaccompanyingnotes are anintegralpart of thesefinancialstatements.

31

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|New Jersey Mining Company                                                              
|---------------------------------------------------------------------------------------
|(A Development Stage Company)                                                          
|Statement of Changes in Stockholders' Equity and
      Comprehensive Income, continued:
|For the Years Ended December 31, 2005, and 2006, and for
      the Period              
|From Inception (July 18, 1996) Through December 31, 2006
      (unaudited)             

|                                                           |  |              |   |   |             |   |   |               |   |   | Accum. Other |  |   |               |   |   | Total     |  
|---------------------------------------------------------- |  | ------------ | - | - | ----------- | - | - | ------------- | - | - | ------------ |  | - | ------------- | - | - | --------- | -
|                                                           |  | Common Stock |   |   | Accumulated |   |   | Comprehensive |   |   | Treasury     |  |   | Stockholders' |  
|                                                           |  | Shares       |   |   | Amount      |   |   | Deficit       |   |   | Income       |  |   | Stock         |   |   | Equity    |  
|Balance, December 31, 2001                                 |  | 14,942,834   |   | $ | 858,239     |   | $ | (125,557      | ) | $ |              |  | $ | (136,300      | ) | $ | 596,382   |  
|Issuance of common stock for:                              |  |              |   |   |             |   |   |               |   |   |              |  |   |               |   |   |           |  
|Cash                                                       |  | 1,700,000    |   |   | 255,000     |   |   |               |   |   |              |  |   |               |   |   | 255,000   |  
|Services                                                   |  | 9,835        |   |   | 1,475       |   |   |               |   |   |              |  |   |               |   |   | 1,475     |  
|Directors fees                                            |  | 15,000       |   |   | 2,250       |   |   |               |   |   |              |  |   |               |   |   | 2,250     |  
|Acquisition of Gold Run Gulch Mining Company               |  | 1,916,250    |   |   | 273,954     |   |   |               |   |   |              |  |   |               |   |   | 273,954   |  
|Net loss, as previously reported                           |  |              |   |   |             |   |   | (51,307       | ) |   |              |  |   |               |   |   | (51,307   | )
|Balance, December 31, 2002, as previously reported         |  | 18,583,919   |   |   | 1,390,918   |   |   | (176,864      | ) |   |              |  |   | (136,300      | ) |   | 1,077,754 |  
|Change in accounting for exploration costs                 |  |              |   |   |             |   |   | (9,883        | ) |   |              |  |   |               |   |   | (9,883    | )
|Correction of error in accounting for stock issuance costs |  | (25,500      | ) |   | 25,500      |   |   |               |   |   |              |  |   |               |   |   |           |  
|Balance, December 31, 2002, restated                       |  | 18,583,919   |   |   | 1,365,418   |   |   | (161,247      | ) |   |              |  |   | (136,300      | ) |   | 1,067,871 |  
|Issuance of common stock for:                              |  |              |   |   |             |   |   |               |   |   |              |  |   |               |   |   |           |  
|Exercise of stock purchase
      warrants                  |  | 810,000      |   |   | 200,750     |   |   |               |   |   |              |  |   |               |   |   | 200,750   |  
|Cash, net of issuance costs                                |  | 795,000      |   |   | 318,000     |   |   |               |   |   |              |  |   |               |   |   | 318,000   |  
|Management and directors fees                             |  | 381,200      |   |   | 144,326     |   |   |               |   |   |              |  |   |               |   |   | 144,326   |  
|Equipment                                                  |  | 5,000        |   |   | 3,000       |   |   |               |   |   |              |  |   |               |   |   | 3,000     |  
|Services                                                   |  | 21,915       |   |   | 7,262       |   |   |               |   |   |              |  |   |               |   |   | 7,262     |  
|Exploration lease                                          |  | 20,000       |   |   | 8,000       |   |   |               |   |   |              |  |   |               |   |   | 8,000     |  
|Treasury stock cancelled                                   |  | (1,947,144   | ) |   | (136,300    | ) |   |               |   |   |              |  |   | 136,300       |   |   |           |  
|Net loss                                                   |  |              |   |   |             |   |   | (379,274      | ) |   |              |  |   |               |   |   | (379,274  | )
|Balance, December 31, 2003                                 |  | 18,669,890   |   |   | 1,910,456   |   |   | (540,521      | ) |   | -            |  |   |               |   |   | 1,369,935 |  
|Issuance of common stock for:                              |  |              |   |   |             |   |   |               |   |   |              |  |   |               |   |   |           |  
|Exercise of stock purchase
      warrants                  |  | 1,437,500    |   |   | 398,750     |   |   |               |   |   |              |  |   |               |   |   | 398,750   |  
|Cash                                                       |  | 1,184,550    |   |   | 511,440     |   |   |               |   |   |              |  |   |               |   |   | 511,440   |  
|Management and directors fees                             |  | 153,460      |   |   | 102,273     |   |   |               |   |   |              |  |   |               |   |   | 102,273   |  
|Equipment                                                  |  | 28,650       |   |   | 16,476      |   |   |               |   |   |              |  |   |               |   |   | 16,476    |  
|Services                                                   |  | 26,750       |   |   | 14,550      |   |   |               |   |   |              |  |   |               |   |   | 14,550    |  
|Exploration lease                                          |  | 20,000       |   |   | 12,000      |   |   |               |   |   |              |  |   |               |   |   | 12,000    |  
|Net loss                                                   |  |              |   |   |             |   |   | (922,555      | ) |   |              |  |   |               |   |   | (922,555  | )
|Balance, December 31, 2004                                 |  | 21,520,800   |   |   | 2,965,945   |   |   | (1,463,076    | ) |   | -            |  |   |               |   |   | 1,502,869 |  

Theaccompanyingnotes are anintegralpart of thesefinancialstatements.

32

---

|New Jersey Mining Company                                                                          
|---------------------------------------------------------------------------------------------------
|(A Development Stage Company)                                                                      
|Statement of Changes in Stockholders' Equity and
      Accumulated Comprehensive Income, continued:
|For the Years Ended December 31, 2005, and 2006, and for
      the Period                          
|From Inception (July 18, 1996) Through December 31, 2006
      (unaudited)                         

|                                                    |  |              |  |   |             |  |   |               |   |   | Accum. Other |  |   |               |  |   | Total     |  
|--------------------------------------------------- |  | ------------ |  | - | ----------- |  | - | ------------- | - | - | ------------ |  | - | ------------- |  | - | --------- | -
|                                                    |  | Common Stock |  |   | Accumulated |  |   | Comprehensive |   |   | Treasury     |  |   | Stockholders' | 
|                                                    |  | Shares       |  |   | Amount      |  |   | Deficit       |   |   | Income       |  |   | Stock         |  |   | Equity    |  
|                                                    |  |              |  |   |             |  |   |               |   |   |              |  |   |               |  |   |           |  
|                                                    |  |              |  |   |             |  |   |               |   |   |              |  |   |               |  |   |           |  
|Balance, December 31, 2004                          |  | 21,520,800   |  | $ | 2,965,945   |  | $ | (1,463,076    | ) | $ |              |  | $ |               |  | $ | 1,502,869 |  
|Issuance of common stock for:                       |  |              |  |   |             |  |   |               |   |   |              |  |   |               |  |   |           |  
|Cash                                                |  | 309,100      |  |   | 125,000     |  |   |               |   |   |              |  |   |               |  |   | 125,000   |  
|Exercise of stock purchase warrants                 |  | 195,250      |  |   | 78,100      |  |   |               |   |   |              |  |   |               |  |   | 78,100    |  
|Management and directors fees                      |  | 334,275      |  |   | 132,725     |  |   |               |   |   |              |  |   |               |  |   | 132,725   |  
|Services                                            |  | 82,170       |  |   | 37,826      |  |   |               |   |   |              |  |   |               |  |   | 37,826    |  
|Exploration and lease                               |  | 149,400      |  |   | 74,321      |  |   |               |   |   |              |  |   |               |  |   | 74,321    |  
|Equipment                                           |  | 11,500       |  |   | 4,700       |  |   |               |   |   |              |  |   |               |  |   | 4,700     |  
|Value of shares issued in prior years               |  |              |  |   | 24,050      |  |   |               |   |   |              |  |   |               |  |   | 24,050    |  
|Net loss                                            |  |              |  |   |             |  |   | (590,485      | ) |   |              |  |   |               |  |   | (590,485  | )
|Balance, December 31, 2005                          |  | 22,602,495   |  |   | 3,442,667   |  | $ | (2,053,561    | ) |   |              |  |   |               |  | $ | 1,389,106 |  
|Issuance of common stock for:                       |  |              |  |   |             |  |   |               |   |   |              |  |   |               |  |   |           |  
|Cash                                                |  | 4,521,250    |  |   | 1,368,500   |  |   |               |   |   |              |  |   |               |  |   | 1,368,500 |  
|Management and directors fees                      |  | 236,480      |  |   | 127,063     |  |   |               |   |   |              |  |   |               |  |   | 127,063   |  
|Services                                            |  | 162,860      |  |   | 56,137      |  |   |               |   |   |              |  |   |               |  |   | 56,137    |  
|Exploration                                         |  | 10,000       |  |   | 5,750       |  |   |               |   |   |              |  |   |               |  |   | 5,750     |  
|Lease                                               |  | 30,000       |  |   | 15,000      |  |   |               |   |   |              |  |   |               |  |   | 15,000    |  
|Equipment                                           |  | 23,400       |  |   | 12,200      |  |   |               |   |   |              |  |   |               |  |   | 12,200    |  
|Unrealized gain in marketable equity
      security |  |              |  |   |             |  |   |               |   | $ | 911,250      |  |   |               |  |   | 911,250   |  
|Net loss                                            |  |              |  |   |             |  |   | (991,602      | ) |   |              |  |   |               |  |   | (991,602  | )
|Balance, December 31, 2006                          |  | 27,586,485   |  | $ | 5,027,317   |  | $ | (3,045,163    | ) | $ | 911,250      |  | $ | 0             |  | $ | 2,893,404 |  

Theaccompanyingnotes are anintegralpart of thesefinancialstatements.

33

---

|New Jersey Mining Company                                         
|------------------------------------------------------------------
|(A Development Stage Company)                                     
|Statements of Cash Flows                                          
|For the Years Ended December 31, 2006 and
      2005,             
|And from Inception (July 18, 1996) through
      December 31, 2006

|                                                      |   |              |   |   |                 |   |   | From Inception    |  
|----------------------------------------------------- | - | ------------ | - | - | --------------- | - | - | ----------------- | -
|                                                      |   | Years Ended  |   |   | (July 18, 1996) |  
|                                                      |   | December 31, |   |   | through         |  
|                                                      |   |              |   |   |                 |   |   | December 31, 2006 |  
|                                                      |   | 2006         |   |   | 2005            |   |   | (Unaudited)       |  
|Cash flows from operating activities:                 |   |              |   |   |                 |   |   |                   |  
|Net loss                                              | $ | (991,602     | ) | $ | (590,485        | ) | $ | (3,045,163        | )
|Adjustments to reconcile
      net loss to net cash   |   |              |   |   |                 |   |   |                   |  
|used by operating
      activities:                   |   |              |   |   |                 |   |   |                   |  
|Depreciation
      and amortization                   |   | 122,785      |   |   | 57,790          |   |   | 180,575           |  
|Write-off of
      equipment                          |   |              |   |   | 11,272          |   |   | 11,272            |  
|Write-off
      of goodwill and investment            |   |              |   |   |                 |   |   | 120,950           |  
|Gain on sale
      of mineral property                |   | (90,000      | ) |   |                 |   |   | (90,000           | )
|Stock issued for:                                     |   |              |   |   |                 |   |   |                   |  
|Management
      and directors fees                  |   | 127,063      |   |   | 148,625         |   |   | 524,537           |  
|Services
      and other                              |   | 61,887       |   |   | 37,826          |   |   | 134,154           |  
|Exploration                                           |   |              |   |   | 16,321          |   |   | 36,321            |  
|Change in:                                            |   |              |   |   |                 |   |   |                   |  
|Inventories                                           |   | (63,276      | ) |   | (68,810         | ) |   | (132,086          | )
|Accounts
      receivable                             |   | (13,628      | ) |   |                 |   |   | (13,628           | )
|Other assets                                          |   | (2,500       | ) |   | 2,346           |   |   | (778              | )
|Accounts
      payable                                |   | 15,362       |   |   | 89,160          |   |   | 109,663           |  
|Accrued payroll
      and related payroll expense     |   | 22,520       |   |   | 3,286           |   |   | 31,521            |  
|Accounts
      payable to related party               |   |              |   |   |                 |   |   |                   |  
|Accrued reclamation
      costs                       |   | 5,500        |   |   |                 |   |   | 18,000            |  
|Net cash used by operating activities                 |   | (805,889     | ) |   | (292,669        | ) |   | (2,114,662        | )
|                                                      |   |              |   |   |                 |   |   |                   |  
|Cash flows from investing activities:                 |   |              |   |   |                 |   |   |                   |  
|Purchases of buildings and equipment                  |   | (384,972     | ) |   | (30,600         | ) |   | (784,440          | )
|Purchase of mineral property                          |   | (4,500       | ) |   |                 |   |   | (10,404           | )
|Proceeds from sale of mineral property                |   | 120,000      |   |   |                 |   |   | 120,000           |  
|Purchase of certificates
      of deposits            |   | (200,000     | ) |   |                 |   |   | (200,000          | )
|Purchase of marketable equity security                |   | (7,500       | ) |   |                 |   |   | (7,500            | )
|Cash of acquired companies                            |   |              |   |   |                 |   |   | 38,269            |  
|Deferral of development costs                         |   |              |   |   |                 |   |   | (225,535          | )
|Net cash used by investing activities                 |   | (476,972     | ) |   | (30,600         | ) |   | (1,069,610        | )
|                                                      |   |              |   |   |                 |   |   |                   |  
|Cash flows from financing activities:                 |   |              |   |   |                 |   |   |                   |  
|Exercise of stock purchase warrants                   |   |              |   |   | 78,100          |   |   | 677,600           |  
|Sales of common stock,
      net of issuance costs    |   | 1,368,500    |   |   | 125,000         |   |   | 2,692,307         |  
|Principal payments on capital lease                   |   | (21,286      | ) |   | (14,732         | ) |   | (84,419           | )
|Payments on notes payable
      to bank               |   | (4,395       | ) |   |                 |   |   | (24,395           | )
|Net cash provided
      by financing activities       |   | 1,342,819    |   |   | 188,368         |   |   | 3,261,093         |  
|                                                      |   |              |   |   |                 |   |   |                   |  
|Net change in cash                                    |   | 59,958       |   |   | (134,901        | ) |   | 76,821            |  
|Cash, beginning of period                             |   | 16,863       |   |   | 151,764         |   |   | 0                 |  
|Cash, end of period                                   | $ | 76,821       |   | $ | 16,863          |   | $ | 76,821            |  
|Interest paid in cash                                 | $ | 9,766        |   | $ | 7,516           |   | $ | 20,324            |  
|                                                      |   |              |   |   |                 |   |   |                   |  
|Non-cash investing and financing activities:          |   |              |   |   |                 |   |   |                   |  
|Common stock issued for:                              |   |              |   |   |                 |   |   |                   |  
|Equipment                                             | $ | 12,200       |   | $ | 5,850           |   | $ | 34,526            |  
|Mineral properties                                    | $ | 15,000       |   |   | 65,000          |   | $ | 279,300           |  
|Acquisitions
      of companies, excluding cash       |   |              |   |   |                 |   | $ | 743,653           |  
|Capital lease obligation for equipment
      acquired | $ | 67,828       |   | $ | 17,485          |   | $ | 178,588           |  
|Notes payable for equipment
      acquired            | $ | 45,287       |   | $ |                 |   | $ | 45,287            |  

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

34

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|1. | Description of Business
|-- | -----------------------

New Jersey Mining Company (the Company) was incorporated as
an Idaho corporation on July 18, 1996. The Company's primary business is
exploring for and developing gold, silver and base metal mineral resources in
the Greater Coeur dAlene Mining District of North Idaho and extending into
Western Montana.

The Company has started minor production from high grade
reserves located near the surface with the strategy to generate cash to be used
for additional exploration to discover major mineral resources on its
properties. The Company has not yet developed sufficient reserves to justify
investment in a major mine, thus it remains in the development stage.

|2. | Summary of Significant Accounting
      Policies
|-- | ------------------------------------------------

Development Stage EnterpriseThe Company's
financial statements are prepared pursuant to the provisions of Statement of
Financial Accounting Standards (SFAS) No. 7, Accounting for Development Stage
Enterprises, as it devotes substantially all of its efforts to acquiring and
developing mining interests that will eventually provide sufficient net profits
to sustain the Companys existence. Until such interests are engaged in major
commercial production, the Company will continue to prepare its financial
statements and related disclosures in accordance with entities in the
development stage.

Use of EstimatesThe preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.

Revenue RecognitionRevenue 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. The majority of the
Companys gold concentrate sales have been to Barrick Goldstrike Mines of
Carlin, Nevada. Recent concentrate shipments have been made through H & H
Metals Corp. of White Plains, New York to a smelter in Mexico.

InventoryDore' and concentrate inventories
are stated at the lower of cost or net realizable value determined by using a
weighted average method.

35

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|2. | Summary of Significant Accounting Policies,
      continued:
|-- | ------------------------------------------------------------

Income TaxesIncome taxes are accounted for
under the liability method. Under this method deferred income tax liabilities or
assets at the end of each period are determined using the tax rate expected to
be in effect when the taxes are expected to be paid or recovered. A valuation
allowance is recorded to reduce the deferred tax assets, if there is uncertainty
regarding their realization.

Fair Values of Financial InstrumentsThe
carrying amounts of financial instruments including cash and cash equivalents,
receivables, investment in marketable equity security, accounts payable,
obligations under capital lease and notes payable are approximated at their fair
values as of December 31, 2006 and 2005.

Investment in Marketable Equity SecurityIn
compliance with Statement of Financial Accountings Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS
115), marketable equity securities are classified as available for sale and are
valued at the market rate, including securities for which sale is restricted for
a period less than one year. Realized gains and losses on the sale of securities
are recognized on a specific identification basis. Unrealized gains and losses
are included as a component of accumulated other comprehensive income (loss),
unless a permanent impairment in value has occurred, which would then be charged
to current period net income (loss).

Net Loss Per ShareNet loss per share is
computed by dividing net loss by the weighted average number of common shares
outstanding during the year. Diluted net loss per share reflects the potential
dilution that could occur from common shares issuable through stock options,
warrants, and other convertible securities. For the years ended December 31,
2006 and 2005, the effect of the Companys potential issuance of shares from the
exercise of warrants would have been anti-dilutive. Accordingly, only basic net
loss per share has been presented.

Cash EquivalentsThe Company considers cash in
banks and other deposits with an original maturity of three months or less, that
can be liquidated without prior notice or penalty, to be cash and cash
equivalents.

Buildings and EquipmentBuildings and
equipment are stated at the lower of cost or estimated net realizable value.
Depreciation and amortization is based on the estimated useful lives of the
assets and is computed using straight-line and units-of-production methods. When
assets are retired or sold, the costs and related allowances for depreciation
and amortization are eliminated from the accounts and any resulting gain or loss
is reflected in operations.

36

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|2. | Summary of Significant Accounting Policies,
      continued:
|-- | ------------------------------------------------------------

Mineral PropertiesSignificant payments
related to the acquisition of mineral properties, mineral rights, and mineral
leases are capitalized.

If a commercially mineable ore body is discovered, such costs
are amortized when production begins using the units-of-production method based
on proven and probable reserves. If no commercially mineable ore body is
discovered, or such rights are otherwise determined to have no value, such costs
are expensed in the period in which it is determined the property has no future
economic value.

Mine Exploration and Development CostsThe
Company records exploration costs as such in the period they occur. Mine
development costs are capitalized after proven and probable reserves have been
identified. Amortization is calculated using the units-of-production method over
the expected life of the operation based on the estimated recoverable mineral
ounces.

Property EvaluationsAnnually, or more
frequently as circumstances require, the Company evaluates the carrying amounts
of its mineral properties, including deferred development costs, to assess
whether such amounts are recoverable. Estimated undiscounted future net cash
flows from each mineral property are calculated using estimated future
production, existing metals prices, operating capital and costs, and
reclamations costs. All costs used in the carrying value analyses are
un-escalated. Additionally in 2006, an operational certainty factor (OCF)
calculation and comparative sales evaluation were introduced. The OCF considers
risk factors that may be encountered in bringing a mineral property into
production. The risk factors include the probability of: acquiring necessary
permits, certainty of tonnage and grade, and technical and operating problems.
The comparative sales analysis estimates future value based upon a comparison of
known reserves and sales prices for comparable properties. An impairment loss is
recognized when the estimated future cash flows (undiscounted and without
interest) expected to result from the use of an asset are less than the carrying
amount of the asset. The Companys estimates of future cash flows are subject to
risks and uncertainties. It is reasonably possible that changes in estimates
could occur which may affect the expected recoverability of the Companys
investments in mineral properties.

Reclamation and RemediationThe Companys
mineral properties have been, and are subject to, standards for mine reclamation
that have been established by various governmental agencies. The Company records
a liability for the present value of estimated environmental remediation costs
and the related asset created with it. The liability will be accreted and the
asset will be depreciated over the life of the related assets. Adjustments for
changes resulting from the passage of time and changes to either the timing or
amount of the original present value estimate underlying the obligation will be
made. If there is a current impairment of an assets carrying value and a
decision is made to permanently close the property, changes to the liability
will be recognized currently and charged to the provision for closed operations
and environmental matters.

37

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|2. | Summary of Significant Accounting Policies,
      continued:
|-- | ------------------------------------------------------------

Reclamation and Remediation, continued:For
non-operating properties, the Company accrues costs associated with
environmental remediation obligations when it is probable that such costs will
be incurred and they are reasonably estimable. Accruals for estimated losses
from environmental remediation obligations have historically been recognized no
later than completion of the remedial feasibility study for such facility and
are charged to provision for closed operations and environmental matters. Costs
of future expenditures for environmental remediation are not discounted to their
present value unless subject to a contractually obligated fixed payment
schedule. Such costs are based on managements estimate of amounts expected to
be incurred when the remediation work is to be performed within current laws and
regulations. Recoveries of environmental remediation costs from other parties
are recorded as assets when their receipt is deemed probable. It is reasonably
possible that, due to uncertainties associated with defining the nature and
extent of environmental contamination and the application of laws and
regulations by regulatory authorities and changes in reclamation or remediation
technology, the ultimate cost of reclamation and remediation could change in the
future. The Company periodically reviews accrued liabilities for such
reclamation and remediation costs as evidence becomes available indicating that
its liabilities have potentially changed.

Common Stock Issued Other than for CashAll
transactions in which goods or services are received for the issuance of shares
of the Companys common stock are accounted for based on the fair value of the
consideration received or the fair value of the common stock issued, whichever
is more reliably measurable.

In December 2004, the FASB issued SFAS No. 123(R), Share-Based
Payment to be implemented by small business issuers at the beginning of the
first interim or annual period beginning after December 15, 2005. This Statement
is a revision to SFAS No. 123, Accounting for Stock-Based Compensation, and
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees under
which guidance the intrinsic value method was prescribed for awards to employees
for services. SFAS No. 123(R) requires the measurement of the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award. The cost will be recognized over the period
during which an employee is required to provide service in exchange for the
award. No compensation cost is recognized for equity instruments for which
employees do not render service.

The Company adopted SFAS 123(R) using the modified prospective
transition method, which requires the application of the accounting standard as
of January 1, 2006. There was no impact on the financial statements as of and
for the year ended December 31, 2006 as a result of the adoption of SFAS 123(R).
In accordance with the modified prospective transition method, the financial
statements for prior periods have not been restated to reflect, and do not
include, the impact of SFAS 123(R).

38

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|2. | Summary of Significant Accounting Policies,
      continued:
|-- | ------------------------------------------------------------

Recent PronouncementsIn September 2006, the
FASB issued SFAS No. 157 Fair Value Measurements, which is effective for
fiscal years beginning after November 15, 2007, and for interim periods within
those years. SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and expands the related disclosure requirements. We are
currently evaluating the potential impact of this statement on our financial
statements and at this time we do not anticipate a material effect.

In February 2006, the FASB issued SFAS No. 155 Accounting for
Certain Hybrid Financial Instruments, which amends SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities and SFAS No. 140 Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
SFAS No. 155 resolves issues addressed in Statement 133 Implementation Issue No.
D1 Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets, and:

- Permits fair value remeasurement for any hybrid financial instrument that
  contains an embedded derivative that otherwise would require bifurcation;
- Clarifies which interest-only strips are not subject to the requirements
  of SFAS No. 133;
- Establishes a requirement to evaluate interests in securitized financial
  assets to identify interests that are freestanding derivatives or that are
  hybrid financial instruments that contain an embedded derivative requiring
  bifurcation;
- Clarifies that concentrations of credit risk in the form of subordination
  are not embedded derivatives; and
- Amends SFAS No. 140 to eliminate the prohibition on a qualifying
  special-purpose entity from holding a derivative financial instrument that
  pertains to a beneficial interest other than another derivative financial
  instrument.

SFAS No. 155 is effective for all financial instruments
acquired, issued or subject to a remeasurement event occurring after the
beginning of an entitys first fiscal year that begins after September 15, 2006.
Currently, the adoption of SFAS No. 155 is not expected to have a material
effect on our financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities which establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities. The standard requires companies to provide additional
information that will help investors and other users of financial statements to
more easily understand the effect of the companys choice to use fair value on
its earnings. It also requires entities to display the fair value of those
assets and liabilities for which the company has chosen to use fair value on the
face of the balance sheet. This Statement is effective as of the beginning of an
entitys first fiscal year beginning after November 15, 2007. The Company is
currently evaluating the potential impact of this statement on the financial
statements and at this time does not anticipate a material effect.

39

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|2. | Summary of Significant Accounting Policies,
      continued:
|-- | ------------------------------------------------------------

Recent Pronouncements, continued:In July
2006, the FASB issued FASB Interpretation No. 48 (FIN No. 48) Accounting for
Uncertainty in Income Taxes, which will become effective for us beginning
January 2007. FIN No. 48 clarifies the accounting for uncertainly in income
taxes recognized in accordance with SFAS No. 109 Accounting for Income Taxes,
prescribing a recognition threshold and measurement attribute for the
recognition and measurement of a tax position taken or expected to be taken in a
tax return. We are currently evaluating the effect that the adoption of FIN No.
48 will have on our results of operations, financial condition and disclosures.

|3. | Buildings and Equipment
|-- | -----------------------

Buildings and equipment at December 31, 2006 and 2005,
consisted of the following:

| |                                     |   | 2006      |   |   | 2005    |  
| | ----------------------------------- | - | --------- | - | - | ------- | -
| | Mill building at cost               | $ | 128,566   |   | $ | 55,689  |  
| | Milling equipment at cost           |   | 844,877   |   |   | 549,093 |  
| | Less
      accumulated depreciation |   | (46,959   | ) |   | (13,837 | )
| | Total mill                          | $ | 926,484   |   | $ | 590,945 |  
| |                                     |   |           |   |   |         |  
| | Building and equipment at cost      |   | 186,992   |   |   | 95,766  |  
| | Less
      accumulated depreciation |   | (52,412   | ) |   | (26,486 | )
| | Total building and equipment        |   | 134,580   |   |   | 69,280  |  
| | Total                               | $ | 1,061,064 |   | $ | 660,225 |  

At December 31, 2006 and 2005, milling and other equipment
included assets under capital lease amounting to $150,254 and $82,427,
respectively. The leases have been amortized over the terms of the respective
lease. Accumulated amortization at December 31, 2006 and 2005 was $36,573 and
$3,900, respectively. At December 31, 2006, the estimated future minimum lease
payments under capital leases were as follows:

| | Year                                            |   |         |  
| | ----------------------------------------------- | - | ------- | -
| | 2007                                            | $ | 47,861  |  
| | 2008                                            |   | 44,922  |  
| | 2009                                            |   | 30,532  |  
| | 2010                                            |   | 11,812  |  
| | 2011                                            |   | 11,048  |  
| | Total                                           |   | 146,175 |  
| | Less: Amounts representing interest costs       |   | (26,807 | )
| | Net present values                              |   | 119,368 |  
| | Less: Capital lease obligations-current portion |   | 35,472  |  
| | Long-term capital lease obligations             | $ | 83,896  |  

40

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|4. | Equipment Notes Payable
|-- | -----------------------

At December 31, 2006, equipment notes payable are as follows.

| | Kubota RTV 36 month note payable, 0.00%
      interest rate; collateralized |   |        | 
| | --------------------------------------------------------------------------- | - | ------ | 
| | by equipment with net carrying value of $10,864; monthly
      payments of  |   |        | 
| | $494                                                                        | $ | 11,366 | 
| |                                                                             |   |        | 
| | Dodge Pick Up 60 month note payable, 0.00%
      interest rate;             |   |        | 
| | collateralized by pick-up with net carrying value of
      $29,953; monthly |   |        | 
| | payments of $557                                                            |   | 29,527 | 
| |                                                                             |   |        | 
| | Total equipment notes payable                                               |   | 40,893 | 
| | Due within one year                                                         |   | 12,615 | 
| | Due after one year                                                          | $ | 28,278 | 

Maturities of long term debt outstanding at December 31, 2006
are as follows: $12,615 in 2007, $12,121 in 2008, $6,685 in 2009, $6,685 in
2010, and $2,787 in 2011.

|5. | Mineral Properties
|-- | ------------------

Mineral properties and deferred development costs are as
follows:

| |                  |   |            |   |   | December 31, 2006 |   |   |             |  
| | ---------------- | - | ---------- | - | - | ----------------- | - | - | ----------- | -
| |                  |   |            |   |   | Deferred          |   |   | Capitalized |  
| |                  |   | Properties |   |   | Costs             |   |   | Development |  
| | New Jersey Mine  |   |            |   |   |                   |   |   |             |  
| | Grenfel/Coleman  | $ | 365,000    |   | $ | 228,770           |   | $ | 4,681       |  
| | Golden Chest     |   | 65,000     |   |   |                   |   |   | 45,718      |  
| | Silver Strand    |   | 74,704     |   |   | 58,300            |   |   |             |  
| | Roughwater       |   | 25,500     |   |   |                   |   |   |             |  
| | Lost Eagle       |   | 5,000      |   |   |                   |   |   |             |  
| | Revett Niagara   |   | 19,500     |   |   |                   |   |   |             |  
| | Less Accumulated |   |            |   |   |                   |   |   |             |  
| | Amortization     |   | (47,467    | ) |   | (1,764            | ) |   | (31,972     | )
| | Total            | $ | 507,237    |   | $ | 285,306           |   | $ | 18,427      |  

41

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|5. | Mineral Properties, continued:
|-- | ------------------------------

| |                  |   | December 31, 2005 |  
| | ---------------- | - | ----------------- | -
| |                  |   |                   |  
| |                  |   | Properties        |  
| | New Jersey Mine  |   |                   |  
| | Grenfel          | $ | 100,000           |  
| | Coleman          |   | 265,000           |  
| | Golden Chest     |   | 65,000            |  
| | Silver Strand    |   | 74,704            |  
| | CAMP             |   | 30,000            |  
| | Roughwater       |   | 25,500            |  
| | Lost Eagle       |   | 5,000             |  
| | Less Accumulated |   |                   |  
| | Amortization     |   | (17,467           | )
| | Total            | $ | 547,737           |  

GrenfelThe Company's Grenfel property is a
leasehold interest covering the mineral rights of 68 acres located at the New
Jersey Mine Area of Interest. The lease was acquired from Mine Systems Design
("MSD") in 2001 in exchange for 1,000,000 shares of the Companys common stock.
The 1,000,000 shares were valued at $0.10 per share, which approximated the
market price for the restricted common stock on the date of the lease. MSD is
also a major shareholder of the Company and is owned by Fred Brackebusch and
Grant Brackebusch, officers and directors of the Company. The lease has a
fifteen year term, and includes a 3% Net Smelter Return ("NSR") royalty that
will be paid to MSD on any production achieved from the property.

ColemanThe Coleman property is located at the
New Jersey Mine Area of Interest and consists of 62 acres of patented mining
claims, mineral rights to 108 acres of fee land, and approximately 130 acres of
unpatented mining claims. The Coleman property was acquired in October 2002,
with the acquisition of Gold Run Gulch Mining Company.

Silver StrandThe Silver Strand mine consists
of 15 unpatented claims and was acquired from Trend Mining Company (Trend) in
2000. The property was purchased in exchange for 50,000 shares of the Companys
common stock and a 1.5% NSR royalty initially capped at $50,000 and then
decreasing to 0.5% . In July of 2001, MSD assumed Trends position in the
agreement, and retained the NSR royalty interest. The Company valued the
property at $74,704 which represented the estimated market value of the property
at the date of acquisition.

Niagara ProjectThe Company signed an
Exploration Agreement with Revett Metals Associates (RMA) in December 2006.
The Exploration Agreement has a term of five years, beginning on December 2,
2006, and is for nine unpatented claims that cover the deposit. In addition, the
Exploration

42

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|5. | Mineral Properties, continued:
|-- | ------------------------------

Niagara Project continued:Agreement covers an
Area of Mutual Interest within 1⁄2 mile of the property excluding property valued
primarily for its gold mineralization. Upon signing the Agreement, the Company
issued 30,000 shares of restricted common stock valued at $.050 to RMA and paid
$4,500. At each anniversary of the signing, the Company has agreed to pay $3,000
and issue 30,000 shares of restricted common stock to RMA. Any time prior to the
expiration of the Exploration Agreement, the Company can exercise an option to
convert the Exploration Agreement to a Mining Agreement. If exercised, the
Mining Agreement would have a term of 25 years, and the Company would pay a NSR
to RMA of 3.0% on ores or concentrates mined on the property. The Company is
granted the option to purchase 90% of the NSR from RMA for $2,500,000 which
would leave a remaining royalty of 0.3% .

Roughwater/Silver ButtonThe Silver Button
claim is the remaining property of the ten claims acquired from Roughwater
Mining Company. During 2005, the other nine Roughwater unpatented claims were
dropped. In 2001, the Company purchased the property through the issuance of
255,000 shares of its common stock to Roughwater Mining Company. The shares were
valued at $0.10 per share, for a total acquisition cost of $25,500.

Lost EagleLost Eagle is a gold and silver
exploration project consisting of five claims covering 100 acres of federal land
administered by the U.S. Forest Service. In 2001, the Company issued 50,000
shares of stock to an individual to acquire the property. The shares were valued
at $0.10 per share for a total acquisition cost of $5,000.

Wisconsin TeddyThe Wisconsin Teddy is an
exploration project that lies north of the New Jersey Mine and covers 83 acres
of unpatented claims on federal land administered by the U.S. Bureau of Land
Management. The project has no carrying value.

Zanetti Mining LeaseThe Company has been
assigned a mining lease with William Zanetti. The lease provides for the
Company's exploration, development and mining of minerals on fee land through
October 2008 and thereafter, as long as mining operations are deemed continuous.
The lease provides for production royalties of 5% of net sales of ores or
concentrates. Additional production royalties of 1% to 5% are due if gold
exceeds a certain price per troy ounce as adjusted annually by the Consumer
Price Index. At December 31, 2006, the gold price that would cause additional
production royalties to be payable was $670 per troy ounce. Also, advance
royalties of $500 are required annually under the lease. These advance royalties
are charged to expense as incurred, but are still accumulated and will be
credited against production royalty obligations if and when production ensues.
The lessors may terminate the lease upon the Company's failure to perform under
the terms of the lease; and the Company has the right to terminate the lease at
any time.

43

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|5. | Mineral Properties, continued
|-- | -----------------------------

Golden Chest Mining LeasesOn September 5,
2003, the Company entered into an exploration agreement and lease option with
Paymaster Resources, Inc. (Paymaster) to explore the Golden Chest property.
The exploration agreement, with option to lease, was subsequently assigned to
Metaline Contact Mines (Metaline) in February 2004. The term of the
exploration agreement was 21⁄2 years, commencing June 13, 2003. Pursuant to the
terms of the agreement, the Company conducted an economic study of the Golden
Chest open pit resource. As consideration for the agreement, the Company issued
Paymaster (Metaline) 10,000 shares of its common stock during every six-month
period of the exploration agreement.

Under this exploration agreement, 20,000 shares were issued in
both 2004 and 2003. During 2004 and 2003, the Company recorded $12,000 and
$8,000, respectively of exploration expense in connection with these issuances
based upon its estimate of the fair value of the shares of common stock issued.

On November 7, 2003, the Company signed an exploration
agreement and lease option with Prichard Creek Resource Partners LLC
(Prichard) to explore Prichards property, which is adjacent to the Golden
Chest. The term of the exploration agreement was 21⁄2 years commencing June 13,
2003. On January 3, 2005, the Company exercised the Option to Lease the Golden
Chest mine in accordance with the exploration agreements with Metaline and
Prichard, thus terminating the exploration agreements. The terms of both lease
agreements are 15 years. The Company issued 130,000 shares of restricted common
stock upon the signing of these leases. Each lease requires the Company to pay
either Metaline or Prichard, depending on which claims the production came from,
a royalty of 3% of net smelter returns. Both leases also have an additional NSR
of up to another 3% tied to a sliding scale gold price indexed to the June 2003
Consumer Price Index (CPI). Using the December 2006 CPI, the gold trigger prices
for additional net smelter royalties were as follows: less than $439=no
additional royalty, $439 to $494=1.0%, $494 to $549=1.5%, $549 to $604=2.0%, and
greater than $604=3.0% . Thus, the maximum NSR that can be paid is 6%. For the
year ending December 31, 2006, 672 ounces of gold were sold and $15,985 in
royalties were paid to Metaline.

In addition to the royalty, the Company is obligated to pay
50,000 shares of its common stock to Metaline after each successive increment of
10,000 troy ounces of gold sold from the property and a one-time payment of
30,000 shares to Prichard upon commencement of commercial production.

44

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|6. | Income Taxes
|-- | ------------

The Company did not record an income tax provision for the years
  ended December 31, 2006 or 2005, as it had no taxable income. At December 31,
  2006 and 2005, the Company had federal net operating loss carry forwards available
  for income tax purposes of approximately $2,990,000 and $2,000,000, respectively,
  which will expire through 2026, and associated deferred tax assets of approximately
  $1,016,600 and $680,000, respectively. The deferred tax assets were calculated
  assuming a 34% marginal tax rate, and have been fully reserved as management
  believes it is more likely than not that the deferred tax assets will not be
  utilized.

The Companys net operating loss carry forwards expire as
follows:

| | Year  |   | Carry Forward |  | 
| | ----- | - | ------------- |  | 
| | 2017  | $ | 33,000        |  | 
| | 2018  |   | 27,000        |  | 
| | 2021  |   | 4,000         |  | 
| | 2022  |   | 36,000        |  | 
| | 2023  |   | 380,000       |  | 
| | 2024  |   | 930,000       |  | 
| | 2025  |   | 590,000       |  | 
| | 2026  |   | 990,000       |  | 
| | Total | $ | 2,990,000     |  | 

|7. | Equity
|-- | ------

The Company has authorized 50,000,000 shares of no par common
stock. In addition, the Company has authorized 1,000,000 shares of no par
preferred stock, none of which had been issued at December 31, 2006 or 2005.

Private PlacementsOn April 13, 2006, the
Company completed an offering of units consisting of its common stock and common
stock purchase warrants, in a non-brokered private placement, to certain
investors pursuant to Regulation D, Rule 506. The Company sold 4,400,000 units
at $0.30 per unit and generated $1,320,000 in net proceeds. Each unit consisted
of one share of the Companys restricted common stock plus one warrant, whereby
each warrant could purchase one share of the companys restricted common stock
at $0.50 per share until March 1, 2008.

Exercise of WarrantsDuring 2005 common stock
purchase warrants were exercised by warrant holders that had purchased units of
common stock and common stock purchase warrants during the Company's previous
private placement offerings. During 2005, the Company issued 200,250 shares of
its restricted common stock at prices ranging from $0.70 to$0.85 per share,
generating net proceeds of $150,525 pursuant to the exercise of these warrants.
No warrants were exercised in 2006.

45

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|7. | Equity, continued:
|-- | ------------------

Stock Purchase Warrants
OutstandingTransactions in common stock purchase warrants for the
years ended December 31, 2006, 2005, are as follows:

| |                                                       |  | Number of |     |   | Exercise  | 
| | ----------------------------------------------------- |  | --------- | --- | - | --------- | 
| |                                                       |  | Warrants  |     |   | Prices    | 
| | Balance, December 31, 2004                            |  | 1,505,225 |     | $ | 0.60-0.85 | 
| | Issued in connection with warrants
      exercised(1) |  | 200,250   |     |   | 0.60      | 
| | Issued in connection with
      private placement     |  | 309,550   |     |   | 0.60-0.85 | 
| | Exercised                                             |  | (200,250  | )   |   | 0.40      | 
| | Expired                                               |  | (750,625  | )   |   | 0.60-0.70 | 
| | Balance, December 31, 2005                            |  | 1,064,150 |     |   | 0.60-0.85 | 
| | Issued in connection with
      private placements    |  | 4,593,625 |     |   | 0.50-0.55 | 
| | Expired                                               |  | (568,900  | )   |   | 0.70-0.85 | 
| | Balance, December 31, 2006                            |  | 5,088,875 | (2) |   | 0.50-0.60 | 

| | (1) | During 2005, the Company issued 200,250 stock purchase
      warrants to investors as an inducement to exercise warrants previously
      granted.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                   
| | (2) | These warrants expire as
follows:                                                                                                                 

| | Shares    | Price | Expiration Date  
| | --------- | ----- | -----------------
| | 200,000   | $0.60 | April 1, 2007    
| | 4,533,000 | $0.50 | March 1, 2008    
| | 60,625    | $0.55 | December 31, 2008
| | 295,250   | $0.60 | June 1, 2010     
| | 5,088,875 |       |                  

Common Stock Issued for Buildings and
EquipmentDuring 2006 and 2005, the Company issued 23,400 and 11,500 shares, respectively,
  of its restricted common stock for Buildings and Equipment purchased. The Company
  recorded $12,200 and $4,700, respectively, during 2006 and 2005, based upon
  the value of the equipment purchased and shares issued.

Common Stock Issued for ServicesDuring 2006
and 2005, the Company issued 162,860 and 82,170 shares, respectively, of its
restricted common stock for services rendered the Company. The Company recorded
$56,138 and $37,826, respectively, based upon the value of the services rendered
and the shares issued.

46

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|8. | Related Party Transactions
|-- | --------------------------

Fred Brackebusch is President, Treasurer, and a Director of the
Company. Grant Brackebusch, Fred Brackebusch's son, is the Vice-President and a
Director of the Company. Grant Brackebusch's wife, Tina Brackebusch, is the
Company's Corporate Secretary. Fred Brackebusch and Grant Brackebusch own 89.6%
and 10.4%, respectively of Mine Systems Design, Inc. ("MSD"), a firm that has
various related party transactions with the Company.

In addition to the related party transactions described in Note
4, the Company had the following transactions with related parties:

- During the years ended December 31, 2006 and 2005, the Company issued
  116,480 and 274,275 shares, respectively, of its restricted common stock
  valued at $61,063 and $111,125, respectively, to Fred Brackebusch for
  management services. During 2006 and 2005 the Company issued 20,000 and 10,000
  shares respectively, of its restricted stock valued at $11,000 and $3,600,
  respectively, to Tina Brackebusch for services as the Corporate Secretary.
- During the years ended December 31, 2006 and 2005, the Company issued
  100,000 and 50,000 shares, respectively, of its restricted common stock to
  members of the Board of Directors for their services as directors. Fred and
  Grant Brackebusch each received 20,000 shares in 2006 and 10,000 shares in
  2005 as Directors of the Company. These stock awards were recorded as
  directors' fees of $55,000 and $18,000, respectively, based upon the estimated
  value of the shares issued and services rendered.
- During the year ended December 31, 2006, the Company paid $6,000 to MSD for
  office rent. During the year ended December 31, 2005, the Company issued
  11,700 shares of its restricted common stock valued at $4,500 to Mine Systems
  Design, Inc. (MSD) for office rent, and also issued 6,650 shares of its
  restricted common stock valued at $2,658 to MSD for equipment. The Company
  paid $1,500 to MSD for office rent in the first quarter of 2005.

|9. | Commitments and Contingencies
|-- | -----------------------------

At December 31, 2006 and 2005, the Company had accrued $18,000
and $12,500 respectively relating to a reclamation liability at the New Jersey
Mine site based on management's estimate of the disturbed area existing at the
property and the related costs to reclaim the area. It is likely that in the
near-term the Company will become responsible for additional reclamation
liabilities as it continues in the development of its properties and eventually
begins commercial production.

The Company owns or leases several mineral properties located
in the Coeur dAlene River Basin. In recent years, certain other companies
involved in mining activities on property interests upland of the Coeur d' Alene
River Basin have been identified as potentially responsible parties under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA), and have entered into consent decrees with the Environmental
Protection Agency and the state of Idaho, concerning environmental remediation
obligations and damages to or loss

47

---

|New Jersey Mining Company    
|-----------------------------
|(A Development Stage Company)
|Notes to Financial Statements

|9. | Commitments and Contingencies continued:
|-- | ----------------------------------------

of natural resources in the Coeur d' Alene River Basin. The
Company has not received any notification of a pending action or proceeding
against the Company relating to environmental claims or assessments. It is
possible, however, that the Companys obligation could change in the near or
longer term, and the resultant liability or claim for damages could have a
material adverse effect on the Company.

|10. | **Investment in
      Marketable Security**
|--- | -------------------------------------------

In August of 2006, the Company purchased 1,875,000 shares of
Niagara Mining and Development Inc. (Niagara) common stock for $7,500. Niagara
was a private company created in 2005. Also in August 2006, Niagara was acquired
by Silver Crest Resources, Inc. (Silver Crest). One share of Niagara was
exchanged for one share of Silver Crest. Silver Crest subsequently changed its
name to Gold Crest Mines, Inc. (Gold Crest). The shares were issued with a
restriction that prohibits sale of the shares on the open market for one year
from the date of issuance. The Company plans to sell these shares during 2007
after the restriction has expired.

At December 31, 2006, the market price for Gold Crest as listed
on the Pink Sheet Quotation Service was $0.49 for a total market value of the
Companys 1,875,000 shares of $918,750. The excess market over the $7,500
original cost is $911,250 and is recognized as accumulated other comprehensive
income in the Equity section of the balance sheet.

|11. | **Subsequent
      Events**
|--- | ---------------------------

As of December 31, 2006 the Company sold 121,250 units of
common stock for $48,500 in connection with a non brokered private placement of
stock. This private placement was for units at a price of $0.40 per unit with
each unit consisting of one share of restricted common stock plus one half
warrant whereby each whole warrant could purchase one share of the Company's
restricted common stock at $0.55 per share until December 31, 2008. On February
12, 2007, the Company completed this offering with the sale of an additional
2,563,335 units for $1,025,334. The offering was made in a non-brokered private
placement to certain investors pursuant to Regulation D, Rule 506.

[The balance of this page has been intentionally left
blank.]

48

---

ITEM 8

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 8A.

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and
proceduresWe maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms, and
that such information is accumulated and communicated to management, as
appropriate, to allow timely decisions regarding required disclosure. Our
president and principal accounting officer conducted an evaluation of the
effectiveness of the Companys disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of
December 31, 2006.

Based upon this evaluation, it was determined that there were
material weaknesses affecting our internal control over financial reporting and,
as a result of those weaknesses, our disclosure controls and procedures were not
effective as of December 31, 2006. These material weaknesses are as follows:

- The Company lacks proper segregation of duties. As with any company the
  size of this Company, this lack of segregation of duties is due to limited
  resources.
- The Company lacks accounting personnel with sufficient skills and
  experience to ensure proper accounting for complex, non-routine transactions.

Managements Remediation InitiativesWe are
aware of these material weaknesses and have procedures in place to ensure that
independent review of material transactions is performed. In addition, we plan
to consult with independent experts when complex transactions are entered into.

Changes in internal control over financial
reporting.Except as noted above, there have been no changes during the quarter ended
  December 31, 2006 in the Companys internal controls over financial reporting
  that have materially affected, or are reasonably likely to materially affect,
  internal controls over financial reporting.

ITEM 8B

OTHER INFORMATION

None.

49

---

PART III

ITEM 9.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGEACT

Name & Address
      Age
    Position
    Date First ElectedFred W. Brackebusch P.O. Box 1019 Kellogg, Idaho
      83837
      62
    President, Director & Treasurer
    7/18/1996Grant A. Brackebusch P.O. Box 131 Silverton, ID
      83867
      37
    Vice President & Director
    7/18/1996Ivan R. Linscott 7150 Burke Road Wallace, ID 83873
      64
    Director
    9/21/2004William C. Rust (1) P.O. Box 648 Wallace, ID 83873
      60
    Director
    9/21/2004M. Kathleen Sims (1) 2745 Seltice Way Coeur
      dAlene, ID 83814
      62
    Director
    9/25/2003Tina C. Brackebusch P.O. Box 131 Silverton, ID
      83867
      37
    Secretary
    1/1/1997


(1) Member of the Audit Committee

Directors are elected by shareholders at each annual
shareholders meeting to hold office until the next annual meeting of
shareholders or until their respective successors are elected and qualified.

Fred W. Brackebusch, P.E. is the President and a
Director of the Company. He has a B.S. and an M.S. in Geological Engineering
both from the University of Idaho. He is a consulting engineer with extensive
experience in mine development, mine backfill, mine management, permitting,
process control and mine feasibility studies. He has over 35 years of experience
in the Coeur d'Alene Mining District about half of which was with Hecla Mining
Co. He has been the principal owner of Mine Systems Design, Inc., a mining
consulting business, since 1987.

Grant A. Brackebusch, P.E. is the Vice President and a
Director of the Company. He holds a B.S. in Mining Engineering from the
University of Idaho. He worked for Newmont Gold Co. on the Carlin Trend in open
pit mine planning and pit supervision for three years. He also has worked with
Mine Systems Design, Inc. performing various engineering and geotechnical tasks.
He has worked for New Jersey Mining Company since 1996; he supervises the daily
operations of the various mining operations, mill operations, and also performs
various engineering tasks. He is also responsible for the Companys
environmental monitoring and permitting.

Ivan R. Linscott, PhDis a director of the company.
Heis a physicist at Stanford University. He is a Senior Research
Associate for radioscience spacecraft instrument development and is
Co-Investigator

50

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and Science Team Member for the New Horizons Mission to
encounter the planet Pluto. Dr. Linscott has a strong interest in doing research
on exploration techniques in the Coeur dAlene Mining District. He has made
significant contributions to the Companys exploration program through the
innovative use of geophysical techniques.

William C. Rust is a director of the company. He is a
metallurgical engineer with extensive experience in the Silver Valley. He worked
for Asarco as Chief Metallurgist. Later he worked for CoCa mines at Grouse Creek
in Central Idaho and for McCulley, Frick, and Gilman, an environmental
consulting firm. He was with Getchell Gold Inc. in Nevada where he was Mill
Manager and Senior Metallurgist for a 3,200 ton/day gold plant. Currently, Mr.
Rust is self-employed as a metallurgical engineering consultant. Mr. Rust is a
member of the Audit Committee.

M. Kathleen Sims is a director of the Company. She is a
successful businesswoman who is majority owner of a car dealership. She is a
former State Senator in the Idaho Legislature. She is a former member of the
State of Idaho Human Rights Commission and is active in the Idaho Republican
Party. She has extensive experience in starting a business with all the
necessary experience in financing, business plans and management. Ms. Sims is a
member of the Audit Committee.

Tina C. Brackebuschis Secretary of the Company. She has
served as Office Manager for the Company. She holds a B.S. in Secondary
Education from the University of Idaho.

Family RelationshipsFred W.
Brackebusch is the father of Grant A. Brackebusch. Tina C. Brackebusch is the
wife of Grant A. Brackebusch.

Legal ProceedingsNo Director or
Officer has been involved in any legal action involving the Company for the past
five years.

Section 16(a) Beneficial Ownership Reporting
ComplianceBased solely upon a review of forms 3 and 4 and
amendments thereto furnished to the Registrant pursuant to Section 240.16a -3
during the most recent fiscal year, and Form 5 and amendments thereto furnished
to the Registrant with respect to the most recent fiscal year, no person who at
any time during the fiscal year was a director, officer, or beneficial owner of
more than ten percent of any class of equity securities of the Registrant
registered pursuant to Section 12 of the Exchange Act, or any other person
subject to Section 16 of the Exchange Act with respect to the Registrant because
of the requirements of Section 30 of the Investment Company Act or Section 17 of
the Public Utility Holding Company Act (A reporting person) failed to file on a
timely basis, as disclosed in the above Forms, reports required by Section 16(a)
of the Exchange Act during the most recent fiscal year.

Code of EthicsThe Company adopted a
Code of Ethics at a Board of Directors meeting on December 9, 2003, that applies
to the Company's executive officers. It can be found at the Companys website
www.newjerseymining.com

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Board CommitteeAt a Board of
Directors meeting on September 21, 2004, the Directors approved an audit
committee comprised of William C. Rust and M. Kathleen Sims. Each member of the
audit committee is deemed to be an independent director as that term is defined
in Rule 4200(a)(14) of the NASDs listing standards. M. Kathleen Sims is the
Audit Committee Financial Expert as defined by Section 407 of the Sarbanes-Oxley
Act. The Board adopted an audit committee pre-approval policy. The audit
committee is required to pre-approve the audit and non-audit services performed
by the independent auditor in order to assure that the provision of such
services do not impair the auditors independence.

ITEM 10.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

Name & Principal Position
    Year
    Salary ($)
    Bonus ($)
    Other Annual Comp. ($)
    Restricted Stock Awards ($)
    Securities Underlying Options (#)
    LTIP Payouts ($)
    All Other Compensation ($)Fred Brackebusch President
    2004
    36,000
    0
    0
    41,754
    0
    0
    02005
    36,000
    0
    0
    114,725
    0
    0
    02006
    66,000
    0
    0
    61,063
    0
    0
    0Grant Brackebusch Vice Pres.
    2004
    72,000
    0
    0
    7,000
    0
    0
    02005
    72,000
    0
    0
    3,600
    0
    0
    02006
    84,000
    0
    0
    11,000
    0
    0
    0Ivan R. Linscott Director
    2004
    0
    0
    0
    7,000
    0
    0
    02005
    0
    0
    0
    3,600
    0
    0
    02006
    0
    0
    0
    11,000
    0
    0
    0William C. Rust Director
    2004
    0
    0
    0
    7,000
    0
    0
    02005
    0
    0
    0
    3,600
    0
    0
    02006
    0
    0
    0
    11,000
    0
    0
    0M. Kathleen Sims Director
    2004
    0
    0
    0
    7,000
    0
    0
    02005
    0
    0
    0
    3,600
    0
    0
    02006
    0
    0
    0
    11,000
    0
    0
    0Tina C. Brackebusch Secretary
    2004
    2,070
    0
    0
    7,000
    0
    0
    02005
      0
    0
    0
    3,600
    0
    0
    02006
      0
    0
    0
    11,000
    0
    0
    0


At a Board of Directors meeting on April 27, 2006, the
Directors approved an increase in compensation for President Fred W.
Brackebusch, to $5,500 per month for management for 25 hours per week. Any time
over 25 hours per week is compensated with restricted stock at a rate of $125
per hour. The number of shares is calculated quarterly using the average bid
price for the quarter as quoted by the OTC Bulletin Board. Also, at the Board of
Directors meeting on April 27, 2006, the Directors approved a fulltime salary
for Grant A. Brackebusch of $7,000 per month for management duties.

At a Board of Directors meeting on September 8, 2006, the
Directors approved an increase in compensation for the Board of Directors. It
was approved to increase the Directors annual compensation to 20,000 common
shares of restricted stock, commencing in 2006.

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Officers and Directors were paid for their services with 10,000
shares of restricted common stock in 2004 and 2005 and 20,000 shares of
restricted common stock in 2006. A value of $0.70 per share was ascribed to the
shares in 2004, $0.36 per share in 2005, and $0.55 in 2006.

ITEM 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information on the ownership of
the Company's voting securities by Officers, Directors and major shareholders as
those who own beneficially more than five percent of the Company's common stock
through the most current date-March 1, 2006.

Security Ownership of Certain Beneficial Owners and
Management

Title of Class
    Name and Address Of Beneficial Owner
    Amount and Nature of Beneficial Owner
    Percent of Class (1)Common
    Fred W. Brackebusch P.O. Box 1019
      Kellogg, Idaho 83837
    7,915,757 indirect (a) 
        713,555 direct
    28.56%Common
    Grant A. Brackebusch P.O. Box 131
      Silverton, ID 83837
    918,793 indirect (b) 279,136 direct
    3.96%Common
    Terry & Marguerite Tyson County Road U
      Lipscomb, TX 79056
    1,650,000 direct(c) 
        901,900 indirect
    8.44%Common
    Ivan R. Linscott, Director 7150 Burke Road
      Wallace, ID 83873
    70,500
    0.23%Common
    Constance Meisel 105 East Atlantic Avenue
      Delray Beach, FL 33444
    2,000,000 (d)
    6.62%Common
    William C. Rust, Director P.O. Box 648
      Wallace, ID 83873
    40,000
    0.13%Common
    M. Kathleen Sims, Director 2745 Seltice Way
      Coeur dAlene, ID 83814
    43,000
    0.14%Common
    Tina C. Brackebusch, Secretary P.O. Box
      131 Silverton, ID 83867
    58,000
    0.19%Common
    All Directors and Officers as a group (6
      individuals)
    10,038,741
    33.22%


(1)Based upon 30,219,319 outstanding shares of common stock at
March 1, 2006.

(a) Fred Brackebusch owns 89.6% of Mine Systems Design, Inc.
(MSD) which is an S corporation that owns 8,834,550 common shares of the
Company. Neither MSD nor Fred Brackebusch have the right to acquire any
securities pursuant to options, warrants, conversion privileges or other rights.

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(b) Grant Brackebusch owns 10.4% of Mine Systems Design, Inc.
(MSD) which is an S corporation that owns 8,834,550 common shares of the
Company. Neither MSD nor Grant Brackebusch have the right to acquire any
securities pursuant to options, warrants, conversion privileges or other rights.

(c) Terry and Marguerite Tyson hold 300,000 warrants
exercisable at a price of $0.55 until December 31, 2008.

(d) Constance Miesel holds 1,666,667 warrants exercisable at
prices ranging from $0.50 to $0.55 and expiration dates ranging from March 31,
2008 to December 31, 2008.

None of the Directors or Officers have the right to acquire any
securities pursuant to options, warrants, conversion privileges or other rights.

ITEM 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

Certain Relationships and Related
TransactionsDuring the years ended December 31, 2006 and 2005, the
Company issued 120,000 and 60,000 shares, respectively, of its restricted common
stock to members of the Board of Directors and Officers for their services.
These stock awards were recorded as directors' fees of $55,000 and $18,000,
respectively, for directors and $11,000 and $3,600, respectively, for management
based upon the estimated value of the shares issued and services rendered. Fred,
Grant, and Tina Brackebusch each received 20,000 shares in 2006 and 10,000
shares in 2005 as Directors or Officers in each respective year.

During the years ended December 31, 2006 and 2005, the Company
issued 116,480 and 274,275 shares, respectively, of its restricted common stock
valued at $61,063 and $111,125, respectively, to Fred Brackebusch for management
services.

During the year ended December 31, 2006 the Company paid $6,000
to MSD for office rent. During the year ended December 31, 2005, the Company
issued 11,700 shares of its restricted common stock valued at $4,500 to Mine
Systems Design, Inc. (MSD) for office rent, and also issued 6,650 shares of its
restricted common stock valued at $2,658 to MSD for equipment. The Company paid
$1,500 to MSD for office rent in the first quarter of 2005.

Director IndependenceDirectors Ivan R.
Linscott, William C. Rust and M. Kathleen Sims are deemed to be independent
directors as that term is defined in Rule 4200(a)(14) of the NASDs listing
standards. These three directors comprise a majority of the Board of Directors.

The Board of Directors does not have separately designated
nominating or compensation committees. The entire Board performs these
functions. At a Board of Directors meeting on September 21, 2004, the Directors
approved an audit committee comprised of William C. Rust and M. Kathleen Sims.
Each member of the audit committee is deemed to be an independent director as
that term is defined in Rule 4200(a)(14) of the NASDs listing standards. M.
Kathleen Sims is the Audit Committee Financial Expert as defined by Section 407
of the Sarbanes-Oxley Act.

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ITEM 13.

EXHIBITS

(3)(i)
      Articles of
          Incorporation-Filed as an exhibit to the registrant's registration statement
          on Form 10-SB (Commission File No. 000-28837) and incorporated by reference
          herein.(3)(ii)
      Bylaws-Filed as an exhibit
          to the registrant's registration statement on Form 10-SB (Commission
          File No. 000-28837) and incorporated by reference herein.(10)(1)
      Lease Agreement
          with William Zanetti-Filed as an exhibit to the registrant's registration
          statement on Form 10-SB (Commission File No. 000-28837) and incorporated
          by reference herein.(10)(2)
      Articles of Merger For Plainview
          Mining Company Inc. and New Jersey Mining Co.-Filed as an exhibit to
          the registrant's registration statement on Form 10-SB (Commission File
          No. 000-28837) and incorporated by reference herein.(10)(3)
      Lease Agreement
          with Mine Systems Design, Inc.-Filed as an exhibit to the registrant's
          annual report on Form 10-KSB for the year ended December 31, 2001 and
          incorporated by reference herein.(10)(4)
      Articles of Merger for Gold
          Run Gulch Mining Company and New Jersey Mining Co.- Filed as an exhibit
          to the registrant's annual report on Form 10-KSB for the year ended
          December 31, 2002 and incorporated by reference herein.(10)(5)
      Exploration
          Agreement and Option to Lease between Paymaster Resources, Inc. and
          New Jersey Mining Company with the approval of J.W. Beasley Interests
          LLC.-Filed as an exhibit to the registrants annual report on Form
          10-KSB for the year ended December 31, 2003 and incorporated by reference
          herein.(10)(6)
      Exploration Agreement and Option
          to Lease between Prichard Creek Resource Partners LLC and New Jersey
          Mining Company.-Filed as an exhibit to the registrants annual
          report on Form 10-KSB for the year ended December 31, 2003 and incorporated
          by reference herein.(10)(7)
      Exploration
          Agreement and Option to Convert to Mining Agreement between Revett Metals
          Associates and New Jersey Mining Company. Filed as an exhibit to the
          registrants annual report on Form 10-KSB for the year ended December
          31, 2006.(14)
      Code of Ethics.-Filed as an
          exhibit to the registrants annual report on Form 10-KSB for the
          year ended December 31, 2003, and incorporated by reference herein.(16)
      Letter on Change
          in Certifying Accountant.-Filed as an 8-K report on December 10, 2003
          and later filed as an 8-K/A on February 2, 2004, and incorporated by
          reference herein.(31)
      Rule
          13a-14(a)/15d-14(a) Certifications(31)(i)
      Certification
          of Fred W. Brackebusch(32)
      Section
          1350 Certifications(32)(i)
      Certification
          of Fred W. Brackebusch(99)(i)
      Audit Committee Pre-Approval
          Policies.-Filed as an exhibit to the registrants annual report
          on Form 10-KSB for the year ended December 31, 2003 and incorporated
          by reference herein.


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ITEM 14

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Board of Directors has adopted an audit committee
pre-approval policy. The audit committee is required to pre-approve the audit
and non-audit services performed by the independent auditor in order to assure
that the provision of such services do not impair the auditors independence.

Audit FeesThe aggregate fees billed for
professional services rendered by the Companys principal accountant for the
audit of the Companys annual financial statements for the fiscal years ended
December 31, 2006 and 2005 and the review for the financial statements included
in the Companys quarterly reports on Form 10-QSB during those fiscal years were
$50,055 and $17,755 respectively.

Audit Related FeesThe Company incurred no
fees during the last two fiscal years for assurance and related services by the
Companys principal accountant that were reasonably related to the performance
of the audit or review of the Companys financial statements, and not reported
under Audit Fees above.

Tax FeesThe Company incurred no fees during
the last two fiscal years for professional services rendered by the Companys
principal accountant for tax compliance, tax advice and tax planning.

All Other FeesThe Company incurred no other
fees during the last two fiscal years for products and services rendered by the
Companys principal accountant.

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SIGNATURES

In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

New Jersey Mining Company

|Date: March 26, 2007  | By/s/FRED W. BRACKEBUSCH   
|--------------------- | ---------------------------
|                      |                            
|                      |                            
|Date: March26,2007    | By /s/ GRANT A. BRACKEBUSCH
|                      |                            
|                      |                            
|Date: March, 26, 2007 | By/s/IVAN R. LINSCOTT      
|                      |                            
|                      |                            
|Date: March26,2007    | By/s/WILLIAM C. RUST       
|                      |                            
|                      |                            
|Date: March26,2007    | By/s/M. KATHLEEN SIMS      
|                      |                            

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