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

Hi there. Thanks, operator, and I appreciate everyone joining us this afternoon by phone; we're eager to share an update about what's happening at US Antimony. Joining me right now are Joe Bardswich, a member of the board who serves alongside me as Co-CEO, and Rick Isaak, our Senior VP and Chief Financial Officer. So from management and the board, three of us will be taking part in today's call. First, let me tell everybody that, as you know, 2023 was genuinely a transition year. Just to hit a few highlights, we brought on two new people to serve on our corporate board, Mike McManus and Joe Carrabba. We also saw four board members step down: Russ Lawrence, the former president, Hart Baitis, Tim Hasara, and Gus Gustavsen. So last year, at various points, there was a significant reshaping of the board. As of today, our board has five members, two of whom are also now part of management, namely Joe Bardswich and myself. Russ Lawrence, the president, stepped down in July, and only after that did the board really begin taking a far more active part in running the company. Gus Gustavsen, a longtime person at the company, gave up the CEO role and now serves as President of our antimony division. Joe Bardswich, as I said, was already on the board. Along with me, he's now Co-CEO. And naturally, Rick Isaak, as I noted, came aboard as Senior VP and CFO. We brought in a controller too, a man named Mike Ussery, who joined last year. At Bear River, our zeolite facility located in Preston, Idaho, we have a new Vice President and General Manager. He goes by Jeff Fink. And at Bear River we also have a new plant superintendent named Nick O'Neill, whose start date was roughly a week to 10 days ago. So there have been plenty of shifts at the board level and in management, and we believe every one of these shifts will end up benefiting our shareholders. Now I'd like to spend a minute discussing how we did financially in 2023; it wasn't a pretty picture, but the changes we've made will have dramatic effects going forward; we released this on Friday of last week. With that said, I'll hand things over to Rick Isaak, who'll give us a presentation. Rick?

Thanks, Gary. As Gary laid out, we've implemented certain adjustments at our company that we think make it better. Before diving into the financials, I want to address three of those adjustments first. On March 11th, 2024, we ceased operations in Mexico, which consisted mainly of our Madero and Puerto Blanco plants. Following that closure, we let go of most of the workforce, at a cost of roughly $40,000. The 14 employees who remain in Mexico are assisting with winding down the operations, protecting the buildings, finalizing the books, and handling other administrative tasks. After those tasks are finished, there will be further terminations. Among the reasons behind our choice to shut down our Mexico operations are the following. Although our Mexico operations did add to our antimony sales, their contribution came in below 15% in 2023; beyond that, we are locating new sources of antimony ore for our Montana processing plant. Lastly, since they began, these Mexico operations have consumed over $50 million in cash. All right. Item two, throughout 2023, we invested an additional roughly $1.3 million to upgrade our machinery, equipment, and plant at our Bear River Zeolite facility in Idaho. That covers a new cone for our cone crusher, multiple salt sheds for storing and keeping ore dry prior to processing, which matters greatly in winter, several warehouses for holding finished product so customer shipments go out faster, numerous building upgrades such as improved lighting, heating, conveyors, and enhancements to our shop where we handle repairs and maintenance on our vehicles. Third, as Gary noted, we brought in new people to our staff, our management team, and our board of directors who we expect will help make our company better moving forward. Our personnel are our most valued asset, and we have shifted the focus of our personnel and our company toward rigorously evaluating initiatives and advancing those that generate shareholder value. Those are only a few of the adjustments we've made to better our company, and additional ones will come later. Turning to the financials, let's begin by going over our cash flow for 2023. Cash and cash equivalents and restricted cash fell $7.2 million across 2023. $4.1 million of that decline came from cash drain at our Mexico operations, tied mainly to operational losses of $5.9 million and inventory purchases of $1.8 million, partly offset by $3.6 million of non-cash charges, which were tied primarily to inventory write-downs, VAT receivable reserves, and depreciation and accretion expenses. Those are the operations we closed on March 11th, 2024. In addition, $1.1 million of the $7.2 million cash decrease came from payments on liabilities that had built up from earlier years. Most of that $1.1 million is tied to a dividend paid to our Series D preferred stockholders. This preferred stock has been converted into common stock, and that dividend has been removed going forward. Lastly, $1.5 million of that $7.2 million cash decrease was tied to CapEx spending. Most of that outlay went toward upgrading the machinery, equipment, and plant at our Bear River Zeolite site in Idaho, as I noted previously. On the whole, we removed a large portion of the cash strain coming out of 2023, and our cash position stayed solid during the first quarter of 2024. Now let's turn to the income statement. Sales fell 21% in 2023 versus 2022. A 44% share of that sales decline came from a lower sales price on our antimony sales in 2023 compared with 2022, driven mainly by a drop in the antimony market price. Clearly, the antimony market price isn't something we control, but we do attempt to manage our costs relative to it. The remaining 56% of the sales decline resulted from lower volumes, mostly from a reduction in the tons of zeolite sold. Our Bear River zeolite plant saw substantial downtime in 2023, roughly 18 weeks, and that led to weaker sales in 2023. As I said, we made investments in 2023 aimed at strengthening our mining and processing of zeolite and preventing downtime, and we'll keep doing so moving forward. Gross profit also declined in 2023 relative to 2022. Naturally, the drop in sales hurt our gross profit in 2023. In addition, our Mexico operations faced higher processing costs in 2023, since they kept processing ore with a low percentage of contained antimony. That problem went away once our Mexico operations were shut down. They also set aside reserves for some VAT receivables in 2023; those higher processing costs and reserves brought gross profit down. Beyond that, our Bear River Zeolite plant took on more inefficient maintenance and labor costs in 2023 as production time increased, which pushed gross profit lower. Our antimony plant in Montana had a lower gross margin on sales of purchased antimony trioxide, which likewise brought gross profit down in 2023 versus 2022. That covers the financials for now. I'll hand it back to you, Gary.

Thanks, Rick. There's something I want to share with our shareholders: at BRZ, zeolite revenue for 2023 came in at $2,462,000, which was down $689,000 from 2022. But as Rick noted a moment ago, we lost 18 weeks — more than four months — of operating time. The cause was how management operated in the past, when BRZ was held together essentially by baling wire and band-aids, and we've been working to repair all of that. Without those 18 weeks offline, BRZ's revenue would have come in above 2022, which set a record at $3.151 million. So we're confident that in 2024 we won't face the same 18-week outage we endured last year. Like I said, two new, deeply experienced individuals are now running BRZ, and they're implementing changes every week. Each week we receive reports on every change being made, and we review the capital required to fund them. Doubling or tripling production at BRZ is our goal, and we believe that's very achievable across the coming 12 to 18 months. The customers are there; the demand is there. Fortunately, throughout that downtime, not a single customer was lost. We held onto all of them. You might ask, "How was that possible?" It's because the reserve quality at Bear River stands significantly above what our competitors have. Those customers stayed with us until our problems were resolved, and we've been working down that backlog of customer demand, so we're now very much caught up. As Rick noted, over the past year we also made decisions to strengthen our warehousing and storage so we'd have inventory on hand, and we're attempting to expand that even more, so that whenever downtime occurs, we can keep delivering product. So let me take a look. I'm someone who prefers looking forward rather than backward. So let's discuss our objectives beginning today and moving ahead. Five main objectives stand before us. First, we want to wipe out any cash burn and produce positive cash flow. That choice, as Rick pointed out, came together in March. To make sure everybody's clear, though, the actual call was made earlier — during November and December. Getting it done just required all that time to move through the right processes involving Mexico's government, the labor unions, and every other party we have to deal with before a shutdown can happen. Things don't operate the way they do in the United States. Employee protections under Mexican law are strong, so a huge amount of documentation and bargaining with multiple agencies had to be finished before we got to the stage where letting workers go became possible. Per Rick, an additional round of layoffs is coming as we get ourselves ready. What's the plan for the Mexican assets? I've now been interviewing, I believe, three firms in Mexico that would assist us in selling those assets. We've got international firms already asking about buying part or all of our assets in Mexico. The ideal outcome would be selling the corporate entities, and we're hoping that, you know, there will be some surprises on that front later in the year. We need a really focused push and to market it the right way, to buyers who are interested. So like I said, get rid of cash burn and bring in positive cash flow. We've reached that point. We hit that target, and my expectation is that going forward, the performance will be significantly stronger than anything we were able to deliver in 2023. Next, we need to protect the cash we have on hand; when the first quarter results come out, it will be clear that we're making solid progress there, and that obviously ties directly to eliminating the rate at which we're burning cash, so we want to guard that treasure as much as possible. Third, we need to increase output at Thompson Falls and Bear River. Those represent our two primary production sites — the antimony operation located in Thompson Falls and the zeolite operation located in Bear River. Achieving that will take some capital. We're nearly there. We're monitoring how and when we put that capital to work in a smart way. Our goal is straightforward: when we put $200,000 on the line, we expect output to rise. Simply deploying capital without a corresponding lift in production isn't something we're interested in. Unfortunately, the way these assets were operated previously means the price tag is higher than we'd expected, since proper management wasn't in place. We'll share more details on our capital plans for that area during upcoming calls. Alright, having said that, I’d like to hand things over to Joe before I return to wrap up my part of the presentation, so he can share more details about the adjustments we’ve implemented at Bear River and a few of our goals for 2024. Being offline for 18 weeks—more than 4 months—is something no one finds acceptable. We believe this issue is now behind us, and we’ve brought in strong new leadership with deep expertise in this field. Joe?

Thanks. So, as Gary said, it's common knowledge that the plant was essentially assembled from leftover parts, and the financial statements and so on make the facility's unreliability clear. A significant acquisition we completed involved purchasing a new cone crusher. Sadly, that cone crusher likewise brought substantial downtime with it. A portion of that stemmed from an issue where the foundation it sat on hadn't been correctly engineered or correctly built, and the vibration coming off the cone grew so severe that operators decided on their own never to operate that cone above half speed. Beyond receiving only half the output through it, you're also running an extra load back through, meaning you get considerably below half of the capacity. A dust issue arose in December. MSHA issued us a shutdown order. In January, we engaged an independent team to inspect things, get that dust order lifted, and offer whatever other recommendations they could. At that point, 6 of the 6 dust collectors weren't functioning. Right now, all 6 are running. We still lack sufficient dust collection capacity to meet our goal of running a dust-free operation. And we're working on designing new additions at that end. Although every dust collector is functioning, the ductwork and everything tied to pulling dusty air into those dust collectors must all be rebuilt, and we're currently doing that work. For that cone base, we brought in professional engineers to design a replacement base. It will be installed before the month ends. Throughout that downtime with the cone, we arranged to bring in a portable impactor that has reduced the material from 6-inch down to the 1-inch minus we can feed into the remaining plant, so we avoid suffering the cone's downside. The jaw crusher was running, yet its plates had worn so badly that you wound up with a concave plate, so the machine simply wasn't performing as it ought to have. Those have been swapped out and are running now. One of the next key objectives involves optimizing the screening to cut dust and boost production. These screens are old; they were already used when bought. They've been welded. You've lost the metallurgical properties a screen ought to have. So that will be another step to handle there. We also plan to mechanize part of the packaging plant to lower costs and raise production at that stage. As for the mine, we hold the best deposit in the country, in my view. We intend to run a drill program to supply resource and reserve figures, with release likely by the third quarter. Alongside that, we'll have a mine plan and a mine reclamation plan that will guarantee greater efficiencies and reduced reclamation costs. Gary, I’ve got nothing further to add.

Thanks, Joe. Like Joe mentioned, based on our own examination of other zeolite deposits and properties across the nation, we've determined that during the past six months, ours is the best-quality zeolite resource in North America. There's simply no question about it. Our customers constantly confirm this to us too. So my fourth point—which Joe partly previewed—concerns our inaugural mine reserve report. This company has never possessed reserve reports of any type for its resources. Having spent nearly 40 years as an oil and gas person, I honestly cannot fathom operating a company without understanding what your resources are. So we'll conduct some drill tests with the goal of completing a reserve report by the end of 2024. That will merely be a starting point, since I believe that report can be built upon over the years. My fifth point, then, is expanding this business externally through acquisitions and leasing of new properties. I personally devote the vast majority of my time to this effort. We're hoping to share some quite compelling and significant deals with everyone at some point this year. Right now we're actively assessing and leasing properties in two additional areas. For clear confidentiality reasons, we can't yet speak about these areas. They encompass both antimony and zeolite reserves in regions where the company has never operated before. Nothing here is international. It's all domestic. My sixth point—I suppose I ended up with six rather than five—is continuing our lobbying efforts in Washington, D.C. That means senators, congressmen, governors, and various governmental agencies. I spent three days in Washington only a few months back, collaborating with lobbyists to get us introduced. I was completely stunned that not one person we met with—and there were probably 20 different individuals—had any clue who we were or what we do. That was shocking to me, given we're the sole antimony processing facility in North America. The congressman from Montana, Honorable Ryan Zinke, who resides just up the road from Thompson Falls, was astonished that we operate the only US Antimony processing facility, and that it sits right near him. He intends to visit our site this summer. So, as most of you are aware, antimony appears on the U.S. Critical Minerals list, and this year we've submitted two formal grant applications with governmental agencies. The first was rejected, while the other remains pending. Both were done jointly and in partnership with other mining companies. We hope to report our expanded efforts in this area later this year. These new efforts will probably involve seeking grants solely for our own account instead of partnering with other companies. So, to wrap up before we move to Q&A, US Antimony is genuinely a new company. With the board reshuffle and the fresh faces brought on, along with shifts in the management team, our attention is on expanding this company and the enterprise across both zeolite and antimony output. We're quite busy on the M&A side and with new mineral properties too; right now we have 5 distinct deals in progress across 4 states. We're also pursuing government grants and the low-interest lending options that our business can access in Washington; we've put an end to the cash bleed that has always come from our southern border; these assets, as I mentioned before, are going to be marketed this year in a professional and orderly manner, with the goal of getting as much money as we can for them. Going forward we'll be producing cash instead of burning through it. That's a big shift for this company; we're engaged with 2 kinds of mineral assets and deposits that are in strong demand, antimony and zeolite, from our customers as well as the U.S. government. We intend to be a far larger part of that future supply moving ahead; so with that, operator, I'd like to open things up for our listeners to pose questions to management. Good question. And yes, that's the answer. Through those talks I had over 3 days in Washington, I really figured out what the hot buttons were for getting those grants. And we've shaped our activities so we can hit those hot buttons; so yes is the answer. BRZ is completely up and running today. Based on the reports I see, I think we're producing more zeolite than perhaps ever before. Our, our new managers up there, both of whom have relocated to the area, so they aren't absentee management; they're there on site daily, they keep us updated, and they understand that we're, we're keeping close watch on them, that we expect major changes; and we are seeing those changes. It's been a long time in coming. Our downtime lately has been essentially zero; and when downtime does occur, we usually recover it very fast. So, up there we're operating like a well-tuned machine. But as mentioned earlier, there are further capital expenditures that must be made, and we're handling those gradually. We've actually got an engineering firm doing additional work for us to provide some other ideas; we may need to install a new line. But, we know the chance for higher sales there is real, and it only, it isn't happening because we haven't gotten those production volumes to a point that would permit doubling or tripling of production. Good, another good question. Yes is the answer. We do realize that at times the middlemen wind up earning a better margin than we do. Alongside certain other M&A initiatives that we're hoping to reveal before too long, we're going to implement some major shifts in that area, among them bringing on board extremely experienced sales staff. Up until now, we've had no salesperson at all beyond someone picking up the phone when it rings and accepting an order. Marketing outreach has never been something we've done. Through examining the other zeolite businesses we've acquired during the last 12 months, we've gained considerable insight into the identity of our competitors and the prices they command for their product. Without a doubt, there's a chance for us to obtain and secure a portion of that intermediary margin. We also have certain ideas and strategies in that regard. Joe, you're likely in a better position to address that question than I am.

As a result, we became the sole North American provider of antimony trisulfide to the U.S. Department of Defense. Sadly, our supply came from Mexico, and we're actively looking for alternative suppliers so we could restart those deliveries; we do possess the technology—likely the finest in the nation, or at minimum, in my view, it's the finest in the nation—for making antimony products. The issue is, we require a dependable source of material so we could more effectively serve the market. Thank you.

Perpetua is really one of a kind. I'll talk about that for a moment, and then I'll invite Joe to chime in too. As everyone is aware and as all of us have seen, Perpetua has had a great deal of luck when it comes to grants. In fact, they recently even made an announcement about a sizable loan. My understanding is that it hasn't been approved yet, but it's a matter they're actively pursuing — a very substantial loan coming from one of the departments, whether that's the Department of Energy or Department of Defense; from where we stand, Perpetua remains several years out from having any product available to sell. That's essentially what has pushed us to go looking for additional sources of antimony, so that we're able to close that gap and, we think, offer a supply at a lower cost. So on the grants front, Perpetua has performed extremely well. That said, as is clear once you go through all the details, they are still many years from actually putting product on the market. They've expressed interest in doing certain things with us, but we've kept our cards held tight. My sense is that there will be some chances to work with Perpetua, though I believe those are further off. Joe, is there anything you'd like to add?

If you examine Perpetua's EIS document, once their permit is granted there's still a complete 24-month construction phase ahead of them before operations can begin. After that, antimony would come out as a secondary output alongside the gold they mine. That means their focus is going to fall on whichever zone holds the richest gold. So some ramp-up period will be needed before antimony output from that particular source reaches its ceiling. As part of our efforts to identify additional supply sources, one avenue we're pursuing involves patented property, both in Arizona and elsewhere, since plenty of acreage across various states belongs to the states themselves. Should we manage to sidestep the federal approvals process that's currently creating delays for Perpetua, you'd effectively gain a major head start. When federal permitting is unavoidable, the timeline can stretch considerably, something Resolution Copper in Arizona demonstrates, and Perpetua serves as yet another illustration of.