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

Greetings. Welcome to the United States Antimony Investor Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Gary C. Evans, you may begin.

Thank you, John, and thank all of you for joining. Good afternoon, and welcome to the United States Antimony Conference Call for the second quarter and first quarter of 2023. I'm Chairman of the Board. And with me today is another Board member, Joe Bardswich, who many of you have spoken with before, and Rick Isaak. This is his first attendance at one of our calls. He's our Senior VP and Chief Financial Officer. There will be no other management members on the call today. So first of all, I'd like to state that we're very proud to announce that our company is completely current with all our regulatory filings with the SEC, and that includes our first and second quarter Form 10-Qs and we plan on staying that way going forward. The people that were responsible for delays in these filings are no longer employed with the company. We've recently significantly beefed up our accounting staff with the addition of Rick Isaak who I just mentioned as well as David Welch, who is our new Controller, who started about a month ago, Rick's been on board a little over 2 months. I also wanted to mention that we today -- or I should say a couple of days ago, received a letter from the New York Stock Exchange, we're gaining our full compliance after being current with the filings of these 2 10-Qs. I'd like to now go into a financial overview of the 6 months predominantly comparing that period for the 6 months of 2022. Revenues were down $2.5 million or about 34% on a fully consolidated basis. Cost of goods sold was only down 7% or $352,000. So, that in itself is a problem because the cost of goods sold should have gone down similarly as to your revenues. And that problem really results into Mexico. The gross profit then turned into a loss of $239,000 or down $2.1 million compared to last year. So, operating expenses also rose $667,000, and that's due to a number of items, many are unusual items such as legal, some bad debt that we wrote off, the Wadley write-off that we'll talk about today and a few other things. EBITDA swing for the first 6 months of 2023 compared to the 6 months of 2022 was a negative $2.4 million. So, we swung $2.4 million downward on EBITDA. This is all 100% associated with Antimony. So, let's talk about inventory for a bit. There was a large inventory build of $1.16 million, most of which was done at a loss. And this is one of the problems that the new team is trying to fix. We actually wrote down $456,000 of inventory during the second quarter. Therefore, for the first 6 months of 2023, the company reported a net loss of $1.2 million versus a profit last year for the same 6-month period of $1.1 million. So, that's a swing of $2.4 million. It is important for everybody on this call to know though, that net income in the first 6 months of 2023 would have been $540,000, I say it again, $540,000 had it not been for Mexico. So, the company's problems lie totally within Mexico. And we're going to talk about that some more. So, let's now break down the 2 business lines of the company, which, as you know, our Antimony and Zeolite sales. For the first 6 months of June 30, 2023, compared to the same period last year, Antimony revenue decreased 40% or $2.1 million. Gross profit was a loss of $582,000 or a change of $2.1 million swing. Pounds of Antimony sold decreased 16%, and the average sales price per pound was down 28% or $1.85 per pound... [Technical Difficulty]

We seem to have lost Gary's line. Please continue to hold. Ladies and gentlemen, while we reconnect Gary, just one moment. Please continue to hold, ladies and gentlemen, while we reconnect Gary.

Sorry about that, everybody? I got disconnected, I'm in a foreign country and the cell service here is not quite as good as the United States. So I'm going to repeat, I think, where I lost everybody. This is concerning Antimony sales. The average sales price per pound was down 28% or $1.85 per pound to $4.81 per pound. So, this decrease was predominantly due to lower sales price per pound, which is largely in line with market rates for Antimony that we see on the big board. The decrease in pounds though was predominantly due to Antimony or supply shortages during the first quarter of 2023, and this was all related to a third-party supplier to add machinery and equipment failures as well as less demand coupled with increased competition. So, those are the explanations for the Antimony drop. Let's talk about Zeolite now. For the first 6 months ended June 30, 2023, compared to the same period in 2022, Zeolite revenue decreased 25% of $425,000. A combination of downtime, which was predominantly in our first quarter, almost 2 months, what we mentioned earlier and lower sales price per ton due to change in the mix of product sales was a factor that's contributing to this decline. And if you want to get some real granular detail, go to Page 18, the Form 10-Q, and we can provide a lot of detail and explanation. Total tonnage sold was only down about 9%. So, some hard numbers for people to know. Cash at June 30, 2023, was $13.7 million. We have not implemented any additional buybacks, and that's not contemplated right now concerning the stock repurchase until we cure this cash burn. We are going to fix that and that is #1 on our agenda. So, let's talk about Mexico for a minute since I mentioned that, that is where I think our real problem exists. I visited Mexico, actually several of our site locations a couple of weeks ago. Those include the Madero smelter in Coahuila, Mexico and the Puerto Blanco flotation mill over in Guanajuato, Mexico. And these 2 smelters basically take raw antimony material, is trucked in from other locations in Mexico, and we crush it, hammermill it, bake it and process antimony or crude oxide, which has been shipped elsewhere. Some of which is actually shipped to our Montana plant to reduce finished antimony products. It is important to note that both these smelters that I went to a couple of weeks ago in Mexico, nothing is mined there. These are strictly processing facilities, and all material is trucked into these locations. So, conclusion from looking and meeting the people and observing the operations is that both of these locations are poorly managed with very little, if any, management oversight either today or in the past. We need more cost analysis, which Rick and I are discussing and he's working on, completing to better understand how these 2 smelters can work in conjunction with Mexico. Understanding the potential cash flow with changes recently made regarding pricing of impound -- inbound raw material and quality of rock will help define the ultimate longevity of our Mexican operations. So it's important for investors to know that we have identified the problem, we're working on the problem, and we began fixing the problem with the first change to one of the sites, Wadley. Wadley as a property that we had a purchase agreement that was executed in August of 2022, and we had an option to acquire mining claims at this location in Mexico. We were paying $10,000 a month plus a VAT tax, the right to mine and conduct geological studies. The sellers of this property were given quite a bit of notice regarding items that we needed to have before entertaining the purchase of this property. None of that has been provided after several written letter requests. So we made a decision to get out of this potential agreement and we recognized a $100,000 loss in the second quarter related to the capitalized lease payments on this property as of June 30. So, we have begun our decisions on Mexico and Wadley was the first one that we made, and there will be others made in the oncoming months. So, let me kind of give you summary conclusion. It's important for everybody to know that the first and second quarters of 2023, the team that you're hearing from today was not involved. In other words, I said on the Board, I had no say so. Rick was not on board. Our former President is gone. So we feel like we took that information, we did a lot of homework trying to better understand the numbers, and we have begun making decisions off first and second quarter results to [ write ] this ship to get this company back to making money. So I think in summary, we've got our accounting and financial filings fixed. We found a lot of problems. We have implemented new requirements on personnel to fix those problems. We've got rid of people that were part of the problem. We've got this new management team, predominantly in the accounting area, which Rick leads. We know we can make money with Zeolite. Our operations in Bear River and over in Preston, Idaho continue to improve. We're more efficient than we were. We have much more storage. In fact, I give prior management credence for this. We built some storage facilities that are covered that will allow work to continue during the winter months. We've added automation, but there's a whole lot more automation that needs to be added. We're bidding on lots of new business. The part of the problem is making sure we can meet the demands of the new customers that we're bidding from. And we've increased pricing across the board. So that you won't really start seeing the results of that pricing increase until the third and fourth quarters. Antimony operations in Montana are profitable as well. And primarily, though, because we receive material from Montana from a third party, not from our company, not from our mines, but from a third party. So that again tells you that there is a problem in our costs with respect to our mining operations. Antimony operations in Mexico are really the Achilles heel of this company today. And so what have we done thus far, as I mentioned, Wadley has gone, pricing parameters on purchasing new raw material have been implemented. Rick has been great and helping tell management that you cannot buy except at this price and at this quality. The quality of the new source material has been implemented to meet minimum specific qualifications. So, we're not paying as much for new material from mines and we're getting higher quality, or we don't buy it. And part of the problem is Mexico has been running kind of a mess. We've built a significant amount of inventory down there. We actually had to take some write-offs of inventory, as I mentioned. We're continuing to do detailed cost analysis by project, by site and to see what other areas we can do to cut costs. Communication between managers is -- we're trying to improve that. I found that out of my trip is that managers of 2 smelters that were less than 100 miles apart, weren't even talking to one another, if they had a problem. So, more changes are coming prior to year-end, and we're going to make this right. Obviously, world events regarding Israel and Hamas, involving Russia and Ukraine are creating instability, which should continue to help antimony prices. And so, we want to be careful. We don't cut off our nose to spite our face regarding Mexico, but we got to get Mexico at a minimum to breaking even. And that is really what your management team and your Board is striving to do, and you'll see additional changes coming going forward. So I think we've accomplished a lot in a very short period of time. And we're getting this company back to where it needs to be. So with that, operator, I'd like to open up the floor to questions.

Absolutely. Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] One moment please while we poll for questions. [Operator Instructions] Okay. Your first question comes from Michael Floersch, Private Investor, Michael?

Yes. I saw that we had been approved by the DoD, DLA for antimony trisulfide, are we making any progress on that?

Joe, you want to respond to that?

Sorry, I was on mute there. The big problem there is the cartels really control the area where the Guadalupe mine is. We've had real problems getting our people into their safely, et cetera. Going forward, the intent is to try and get assistance from both the Mexican government and the U.S. government in terms of safety of the site and improvement in the infrastructure and basically then we move that into a production status.

I understand we have antimony trisulfide in the warehouse. Is that true?

Not that I'm aware of.

The next question comes from [ Neel Shah ] with United States Antimony Corporation. [ Neel ]?

Yes. Yes, sir. So, my question is that like going forward for quarter 3 and quarter 4, do you assume that we can be better on antimony side? We know zeolite will be a good one, but what do you think for the future of the antimony? And the second thing, like, do you think for you -- after getting the DoD approval, like what lies behind [indiscernible]? Like are we getting any grants or anything like as our competitor like per Perpetua Resources, they are getting like $25 million grant, right? But we are not getting anything. We still have a lot of entry money. So if you can answer both the questions will be great.

Rick, if you'll do the first one, I'll try on the second one, okay?

Sure. So on the first question, your repeat your question for Q3 and Q4 with antimony? I didn't catch that as part of it.

Yes. So like -- yes, Q3, Q4, are you assuming we will be in a better place on selling on the antimony side, if the price will be the same price right now? Do you think the balance sheet will be better at the end of the year?

With the -- with antimony, it is difficult. We haven't really provided guidance into Q3 and Q4. And I think the comments that Gary made about the various things that are going on in the world could help that. But there are other things. The UAW strike and things that have also caused it to kind of go the other way. So it's a tough one to predict into Q3 and Q4. Know that the supplier issue that happened in Q1 is, for the most part, over at this point. And they continue to supply antimony and we're ready for business. So we're hopeful, but it is a tough one to predict into the last 6 months of the year.

And on the second part, we obviously are trying our best to get government funding. There has been some funding to one of our competitors. And that funding, though, I don't think that company is at least a couple of years away from actually producing the product. So, we think we're in a unique position because of our expertise in antimony and because of our activity. But as Joe said, one of the best antimony mines we have in Mexico has definitely got a problem with respect to safety. And we're trying our best to get the government if you really want this product to help us. They've done that before for the companies and give us security and give us the kind of safety we need for our people to be able to access this mine and this ore. So that's why we -- if you could just say, hey, let's get out of Mexico completely. We're trying to do it very methodically. We're trying to take it step by step, be sure that we know what we're doing, and we're doing it intelligently. The company historically has not had the proper kind of accounting and cost analysis by project to be able to make any intelligent decisions, in my opinion. And part of this is new people trying to learn what the company has done in the past. The 2 smelters I went to, I kept saying, well, why are they here? Why are they located in these areas in Mexico? And nobody could explain that is just like, okay, let's build a smelter here. So you pay for trucking. So we're trying to figure out ways that we can keep cutting the cost to be able to at least keep the option value of antimony in Mexico without completely exiting. Whether we can do that or not, I can't tell you today because we don't know, but we are making significant progress. And as I mentioned earlier, the decision to get out Wadley saves the company quite a bit of money and gets us out of what we consider to be a problem situation. So hopefully, I answered your question.

So sir, just like to add to that, like do you assume in 2024, we are able to supply DoD? Like what they are demanding for the quantity or anything you can like give us some insight or you're like what you think on that on 2024?

It would depend on what the contract is. So it's hard to say, well, can we supply something that we've never seen a contract before. So I think if we were to get a contract and with some of the conditions that we would need to accept that contract, I think it's a real possibility. But it's -- we can't speculate on that because we don't have anything to hang our hat on. the next -- operator, next question.

[Operator Instructions] Okay. The next question comes from John Noble, private investor, John?

I'm going to be very frank with you. All I hear is a lot of excuses. You've been on this board for some time now. You should know how this operation operates. I don't care about hearing what previous management did or did not do. They got you to this point. The other thing is, does this company have a GSA account with the United States government? Do you have a GSA number?

Well, first of all, I don't -- I've only been on this Board since November, and I've only been in the chamber of the Board...

Sir, excuse me. I ran the company for some years. I don't take excuses. I'm asking you one more question. I'm asking you sir, is this company...

I'm not giving you excuse, I'm giving you the fact. So you want to speculate on...

I'm asking you questions, sir. I'm asking, does this company have a GSA number with the United States government? You have an account.

Joe, do you know the answer to that question?

Well, if you plan on selling to the United States government, you should already know, Mr. Evans, you can't sell without it.

We sell antimony trisulfide to a company that then has to grind it to meet the manufacturing spec. So our product has been approved by U.S. Department of Defense to go into the grinding operations that end up going into the munition.

Again, again. Do you have...

We'll take the next question. Operator, let's take the next question.