United States Antimony Corporation (UAMY) Earnings Call Transcript & Summary

Good afternoon, everyone, and thanks for joining our investor call. Our aim is to make this brief and direct. Then I'll hand the financial portion to our CFO, Dan Parks. Dan?

Thanks, John. In Q1 2020, we posted a net loss of $308,882, with sales reaching $1,742,991. That compares with a net loss of $707,460 during the first quarter of 2019, when sales were $2,456,365. Apart from normal operating costs, the 2020 first-quarter loss took a big hit from limited availability and a weaker market price for antimony. Our EBITDA for Q1 2020 — meaning earnings before income taxes, depreciation and amortization — was a negative $82,601, against a negative $484,187 for the same period in 2019. During Q1 2020, net noncash expense items totaled $260,185. That figure breaks down into $226,281 of depreciation and amortization, $31,250 in stock-based directors' compensation, plus $2,654 from other items. G&A expenses for the first quarter of 2020 reached $199,971, versus $205,174 in the comparable 2019 period. In the three months ending March 31, 2020, our antimony sales amounted to 295,453 pounds, down from 443,148 pounds in the three months ending March 31, 2019. Compared with the same quarter of 2019, raw material obtained from our North American supplier fell by roughly 67,000 pounds during the three months ended March 31, 2020. For Q1 2020, we brought in roughly 81,000 fewer pounds of raw material from Mexico than we did in the same quarter of 2019. That drop was mainly because we put our available cash toward completing the Puerto Blanco precious metals plant. Antimony's average selling price came in at $3.06 per pound across the three months ending March 31, 2020, versus $3.85 per pound a year earlier. As for precious metals during those three months ending March 31, 2020, income from North American sources reached $62,206, up from $24,527 in the comparable 2019 period. On the zeolite side, BRZ moved 2,809 tons during the three months that closed March 31, 2020. In the comparable stretch of 2019, the figure was 3,841 tons, which works out to a decline of 1,032 tons. For the first quarter of 2020, BRZ posted net income of $135,139, following depreciation of $49,190. A year earlier, in that same quarter, net income came in at $159,450, after depreciation of $46,301. Earnings before income taxes, depreciation and amortization for the three months ended March 31 reached $184,329 at BRZ, versus $205,571 during the matching period in 2019. Looking ahead, we expect every category of our zeolite sales to keep expanding this year. Also worth mentioning — in April 2020, we got a PPP loan totaling $443,000. The purpose was covering payroll and keeping our staff on board through the point when the coronavirus epidemic–driven shutdown comes to an end. For 2020, this loan eases pressure on our cash flow, and our expectation is that most of it will meet the criteria for debt forgiveness under the CARES Act. John, over to you.

Alright. I'll attempt to walk through where our cash flow is coming from. I'll keep this short; however, at the outset, it made me proud that our EBITDA dropped significantly even with pricing at lower levels, which shows cost discipline in Mexico as well as here. Another income stream is a grant from the DLA — that's the Defense Logistics Agency, part of the Department of Defense. The amount was $500-something thousand. There remain 3 installments ahead of us, each one $85,000 and change. The flagship effort, naturally, is the Los Juarez gold, silver, antimony project; and we've been adjusting and running trials on every piece of leach equipment down in Guanajuato, Mexico. As things stand now, the leach formula has been figured out extremely well; right now we're assembling something known as a thickener, which we're doing in order to speed up output through the leach plant. If you bought the thickener new, replacement cost would exceed $100,000. What we'll pay is under $20,000; we're putting it together in-house. The following point that arose is that reaching the plant's 100-ton per day capacity might require one additional leach tank, which we'll also construct ourselves at a very modest expense, and that becomes our upcoming undertaking. Regarding daily gross at 100 tons per day, we see 50 — approximately $53 per ton gold, $47 for silver, and around $31 for antimony, giving a gross somewhere between 125,000 and 132,000 — pardon me, $13,200 each day. The undertaking after that will be finishing the 400-ton mill. And I should mention that much of it has already been completed and paid for; that covers the primary electric — electricity needed to operate the plant; the crushing circuit, which is enormous; the concrete for the mill and location floor; and essentially, the ponds are entirely finished. So continuing construction once we hit the mill's 100-ton per day capacity won't be an enormous task. Funding will come mainly from production. Okay. Second, and this is somewhat of a wildcard, but we got this grant from the DLA to produce a product used in every centerfire primer for ordnance up to a 20-millimeter. And the problem is that the sole other large supplier, or sole other supplier at all, is Red China. Our grant began as, let's say, a 2-year project, and we were set to supply 6 samples so we could prove compliance with the mill spec. Later on, the project got shortened to 1 year; and lately, we're receiving calls nearly weekly asking about our progress, and they appear eager to get us moving. Word on the street is that once we clear the mill spec, we might get what's referred to as expansion money. That would likely fund building a facility to produce antimony trisulfide for the Department of Defense, plus to serve the commercial market here in the United States. Ever since we began this, we've received a lot of enthusiastic calls and interest from those who supply commercial ordnance producers. It's remarkable, and that interest also comes from Bavaria, Japan, Mexico, and some European users. What's the benefit of trisulfide? Right now we sell antimony oxide at around $3, $3.15. With trisulfide, we'd be selling block trisulfide in the $5 to $6 range, so that's nearly twice the price, and it makes the antimony segment extremely lucrative. Another point: antimony is a strategic metal, and our domestic stockpile was depleted roughly 15 or 20 years back. There is no metal in the United States stockpile; it's used in every kind of ordnance to harden lead, for hardening lead and batteries. The oxide serves as a flame retardant, extremely critical during any skirmishes. Item three, very briefly, is Bear River Zeolite. Bear River Zeolite has been profitable for a number of years now. So far, the virus hasn't truly affected our sales. But something is developing here, and it's been building for several years. Fly ash is one of the primary byproducts from coal-fired generators. Fly ash is a nasty material that contains heavy metals, mercury, radioactive elements. It's mainly used as a substitute for portland cement in highways, bridges and such, but it also gets used in the oilfield, or what we call hardening of the drill cuttings. And just recently, they announced it will no longer be available in Wyoming. Naturally, our plant sits right on the Wyoming border; so we're watching for a possible large order as a replacement for that. In the past, we were looked at for replacing fly ash at the plant over in Oregon, and I believe that could be the upcoming large market for our zeolite. The fourth item, obviously, is the antimony business, and we're in a sold-out situation. With a modest price increase, it would be quite good. Plus, with the trisulfide market on the horizon, I think it's going to be a winner. That sums up the 4 sources of our excitement about the company. I'll hand it over now for questions and answers, possibly.

Yes. I'm relieved that all of you appear to be doing okay where you are. When it comes to the virus, what's the situation in your county? Around the Washington, D.C. area, where I am, we're getting hit hard, and it's risky. What's it like over there?

Within Alaska — that is, the state of Montana — we're, I believe, the second safest state.

Mark Menzel (Sunrise Wealth Partners, Financial Advisor): All right, that's encouraging. So regarding your figures for 100 tons per day at Los Juarez, my understanding is that comes to roughly $13,000 daily in gross revenues, with around $8,000 in gross profit?

The gross figure is right. Being more conservative, I'd put the bottom line somewhere in the $6,000 to $8,000 range.

Mark Menzel, Sunrise Wealth Partners, Financial Advisor: All right. And you mentioned you have to — oh, and by the way, I really appreciate that you saved all that money by constructing that thickener on your own; that's quite a bargain. You said you have to put up one more leach plant. Could this be...

One more leach tank, Mark, maybe.