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

Thanks, Karen, and thanks to everyone for being on this U.S. Antimony Corporation call about our Q1 financial results for the period that closed on March 31, 2024. Joining me are Joe Bardswich, a Board member and co-CEO alongside me, and Rick Isaak, our Chief Financial Officer. This quarter marked our turnaround. We've managed to halt the bleeding, we believe. It's something our Board and management team are quite proud to share, and something I trust our loyal shareholders will value too. Let me note that revenues climbed. Cost of sales climbed by a smaller amount. As a result, gross profit rose substantially. Our standout asset, our cash position, grew somewhat and works out to $0.11 per share, which is essentially 1/2 of what our stock trades at. So the market isn't really crediting us much for our main assets located in the U.S., or for the funds we expect to get from Mexico through our divestiture there. I don't want to take away the moment from Rick Isaak, our CFO, so I'll let him walk through our first quarter financial report in greater detail. Rick?

Thanks, Gary. During the previous earnings call, we talked about closing down our Mexican operations during the first quarter and our plan to sell them. As of now, in our financials and the first quarter 10-Q, we've reported those Mexico operations as a discontinued operation across every reporting period. That makes it simpler to view and talk about what our continuing operations achieved. With that in mind, let's begin with several financial highlights from those continuing operations. First quarter sales rose 28% compared with the first quarter a year ago. Gross profit dollars for the first quarter were more than double those of last year's first quarter, and income from continuing operations for this year's first quarter came to $86,000. Cash provided by operating activities of our continuing operations during the first quarter was $350,000, while cash provided by our continuing operations overall was $327,000. On top of that, we moved more antimony and zeolite during the first quarter than we did in the first quarter a year ago. So where do we head next? At a high level: grow revenue profitably and boost cash flow, which is what I've said before. This management team, along with the Board and our employees, all contribute and never let up. Everyone shares ideas and pushes one another to get better, both personally and for our company. What specifically are we doing? To start, we're bringing experienced personnel into a group that's already strong. A solid illustration of this is our zeolite plant located in Idaho. We've added experienced personnel to a group that was already strong at BRZ, and we're transforming and reinforcing how we mine and process zeolite. It costs some money, yet the payoff is coming. Zeolite volume sold during the first quarter went up relative to the first quarter a year ago. Plus, we're now hitting the delivery timing our customers ask for more often than we did previously. Next, our Board is seasoned, experienced, and deeply engaged with our company. They hold connections to potential mineral reserves that haven't been claimed yet, as well as to mineral companies that might be up for sale. They also have government connections and are working to place our company so it can sell product to the U.S. government. Whether these initiatives pan out, I can't say, and sadly, the details aren't something we can share at this point. Still, rest assured, we're a team that keeps challenging the status quo and never lets up. Let's dig a bit deeper into our financials. Starting with cash flow. Cash flow from the operating activities of our continuing operations came in $1.4 million better in the first quarter versus the first quarter a year ago. That gain came mainly from improved working capital management, with stronger collections on receivables, better inventory management, and keeping a low amount due on royalties. Cash flow used by financing activities of our continuing operations came in $800,000 better in the first quarter versus 2023. The main reason for that was a dividend payment of nearly $800,000 made during the first quarter of last year to the holders of our Series D preferred stock. On the whole, like Gary said, cash and cash equivalents went up during the first quarter of 2024. Our cash balance stood at $11.9 million as of March 31, 2024. Now let's move on to the income statement. As I noted before, sales from continuing operations rose 28%, driven largely by stronger demand for antimony and zeolite. That bump in product sales is having a modest effect on our inventory levels. Zeolite inventory dropped roughly 20% during the quarter, while antimony inventory fell roughly 50% during the quarter. Over the years, we've obtained most of the antimony ore for our Montana plant from a business with headquarters in Canada, and there are a few additional antimony ore sources we're assessing right now; on top of that, we made some sales near the end of the first quarter, and receivables are clearly higher as of March 31, 2024, though those receivables have already been collected since then. Gross profit, as I mentioned, more than doubled in the first quarter compared with last year. Our antimony gross profit came in very strong during the first quarter; predicting that this will keep up is difficult. That said, one factor that boosts our gross profit is the rising antimony market price, which sits at roughly $7.44 right now, a 40% gain since the close of 2023; an antimony market price this high hasn't been seen in more than 5 years. Our zeolite business had a rough start to 2024 because of elevated repairs and maintenance costs along with other inefficient costs, yet we closed the quarter on a strong note, with older machinery, equipment, and vehicles that hadn't been maintained through the years, and that makes forecasting future costs of this kind hard. Even so, we've been working and continue to work on stopping near-term problems with our assets that led to these costs and downtime, while also developing a solid plan going forward. We'll keep both these streams moving ahead and share additional details on upcoming webcasts. Finally, operating expenses were up roughly $577,000 in the first quarter relative to last year's first quarter. Around $200,000 of that expense is higher than it ought to be moving forward; this expense is mostly tied to a portion of the stock compensation that was front loaded in the first quarter of 2024, plus audit and legal fees that were incurred later last year when we filed our 10-K. That's all for now. Gary, I'll hand it back to you.

Alright. Thanks, Rick. At this point I want to hand things over to Joe Bardswich, and he will discuss the Bear River Zeolite business we run in Preston, Idaho. Joe?

Appreciate that, Gary. A big piece of this is that MSHA — the federal Mine Safety and Health Administration — came at us with a tough inspection push across Q4 and into Q1 of this year. That brought temporary shutdown orders tied to dust issues plus significant repairs and rebuild work. Our whole-team mobilization got a boost from bringing in Jeff Fink, an experienced mechanical engineer, as our new General Manager, along with the addition of Joseph Carrabba — a veteran senior mining company executive — to the board. We also brought on Nick O'Neil as plant manager, someone who'd previously worked alongside Jeff, and he added more hands-on know-how. We engaged those on-site safety specialists to deliver extra workforce training, and we ran those sessions in both English and Spanish. Leadership communicated how absolutely central safety is to this company's success, and shifted the focus toward each employee's duty to safeguard themselves and their coworkers at all times, and that effort to embed a safety culture is ongoing. According to Jeff, there's been a real and favorable shift in attitude across the operations. That covers overcoming pushback against using PPE — personal protective equipment — and people asking for the right tools for the task before starting the task. On the physical side, upgrades at the plant involve putting new liners on the jaw crusher and fully rebuilding the cone crusher's support base. With this new base, the cone can run at the full speed the manufacturer recommends, free of the severe vibration we'd dealt with ever since this new cone was first bought and installed; we anticipate this will stop, or at minimum lessen, the recurring pattern of plant shutdowns seen over the past 15 months. As for the downstream impactors and final screening equipment, those are still the used units bought and installed when the plant was originally built, and they remain the bottleneck. Now that upstream production issues are fixed, we can turn our focus downstream. Even so, we haven't lost a single full day of production since March 6, which is itself a record. At this point we can align delivery dates with incoming orders. What I mean is, we can tell a customer their ship date at the very moment they order, and we haven't missed one yet. The pit has been running since day 1 without any defined ore body, nor a mine or reclamation plan. That's about to change. A drone survey has been commissioned, set for today if the weather cooperates; we're doing that survey with burn engineering. It'll give us a contour map of the whole property, and that becomes the foundation for the mining and reclamation plan. An ore definition drilling program — 80 drill holes — is set to kick off in mid-June. That will make it possible to produce an initial ore reserve estimate right when we start both the mining and the reclamation plan. This ore reserve estimate is going to satisfy the freshly adopted SEC rules for reporting reserves. As one component of the drill program, before this month is over we will submit a notice of operations to the Bureau of Land Management, which would allow us to expand the drill program on federal lands that the bureau administers. Later on, that will be followed by permitting so we can actually mine on BLM land. On that front, we are going to be far ahead of the curve instead of getting stalled at the very end. Gary, that covers everything I had ready to say.

Thank you, Joe. I also want to stress that during 2024's first quarter, Bear River had at least 30 days of downtime. And after that quarter closed, I believe we haven't had even one day down. So I know April turned out to be an outstanding month for us, and once the second quarter figures are finalized, we'll be eager to share them. Let's turn to antimony. That word is our company's name, and it has played a major role in our history. Over just the past couple of days, President Biden increased tariffs on Chinese steel and AI technology. He described these inexpensive goods as flooding our market, all backed by Chinese government subsidies. He said, in effect, that the goal is to drive all competitors under and then seize the market. And you know something? That is exactly the pattern we have seen for a long time in antimony, a critical mineral — which is why antimony has abruptly become such a sought-after commodity. As Rick pointed out, its price has gained over 40% since the start of this year and now sits at close to $7.50 a pound. So what is behind such a steep, swift, and dramatic increase? The answer: China and Russia, which jointly hold more than 90% of the world's antimony supply, have reduced the amount they make available. So, yeah, they went out and bought up reserves all over the globe. And these days, America needs antimony that comes from within the U.S. for primers and bullets — stuff our military depends on to harden lead and to make primers. That's the part that fires the shell. So as a company, what are we doing to fill that gap? Because, as you're aware, we closed down Mexico, and rightly so — with what it cost to mine antimony there, we just couldn't see any way forward. For roughly four months, we've been pushing hard to find additional antimony deposits in a secure nation such as the United States. We succeeded in that effort, and right now we're in the process of leasing those properties. Naturally, we aren't able to go into specifics at this point, though it's got us energized. As Joe referenced, another member of our Board shares that enthusiasm, given the background he brings from this industry. So ideally, we'll be able to share more before long. I'd also like to bring up our Thompson Falls facility — we've been receiving a number of notable inquiries. Gus, the person in charge of that processing plant of ours, received requests only a few days back from four separate large clients, all wanting full truckloads of the antimony oxide we produce. From our perspective, that signals a serious scarcity exists in the marketplace, and it opens the door for us to offer what we make to whoever pays the most. We're now hearing from buyers that had been silent toward us for quite some time. Our product is being sold at prices ranging from $6.75 to $7 per pound. It's obvious that the stock we can draw on is limited, and that is exactly the situation we're working hard to fix via these new leasing arrangements, as well as additional efforts we already have in motion. During our prior conference call on April 17, I noted that your management team, together with the Board, is chasing not just additional mineral leasing for antimony and zeolite, but acquisitions too. Given the need for confidentiality and the competitive nature of all these ongoing efforts, we aren't able to reveal them at this point. Trust me, we'd like to; we're eager to share these various activities with you, yet we just can't right now. Therefore, my response to everyone on this matter is patience, grasshopper. We're putting in serious effort, and I believe you'll be happy once we can reveal these activities. Before we open the line to our listeners for questions, I should also note that an Annual Shareholder Meeting has been planned for some point in July. As you're aware, last year's annual shareholder meeting took place right around the close of December. So, since we're striving to boost speed across our operations, holding the shareholder meeting earlier in the year is among those objectives. Once we qualify to file a Universal Shelf Registration statement, we absolutely intend to do so, and that will probably happen in July too. So Karen, I'd like to hand the call over now to our first question; we would certainly welcome any kind of grant injection. As I said on our previous call, I've been actively traveling to Washington, and we're in discussions with other parties there about assisting us. One factor delaying that is the leasing activity I referenced. Once it's finished, which ought to be shortly, we'll have a bit more substance to bring back to Washington and pursue some of this funding. I think the reality that antimony prices have risen so dramatically, that China is cutting antimony supply globally, that we're financing a couple of wars—the Israeli-Hamas situation plus the Ukrainian-Russian situation—and that we're depleting our supply, believe me, is drawing attention. We hold the sole antimony smelter in the United States. That point matters a lot, and we can't wait to get back to Washington, though we'd rather wait until we've wrapped up this leasing work so there's more for us to talk about, given that it involves other parts of the country as well. Rick, would you like to take that question?

Right. So, as I mentioned before, zeolite has encountered certain challenges, which others have also noted, related to aging machinery and equipment, aging vehicles, and during Q1, we experienced some of that in the form of downtime. Naturally, when downtime occurs, you get inefficient costs. Therefore, as reflected in the press release and the 10-Q, they currently sit in a loss position. Based on what Joe discussed and what Jeff is carrying out at BRZ, there are definitely indications of progress. Pinpointing the exact moment when sales and costs align is hard to forecast. I believe we keep steadily making headway. The machinery and equipment, I think, is something we inherited, and as you might expect, unexpected costs arise. That was a long-winded response, but I think the — predicting when that will reverse is difficult. However, we know that we are addressing it daily in an effort to reach profitability.

To build on what Rick mentioned, keep in mind that losing a third of your production capability within one quarter hits anyone's capacity to create positive cash flow hard. Like we've stated, there's been no downtime at all since the first quarter wrapped up. My expectation is that Q2 figures are going to appear significantly improved, and with luck, show a profit. I take that to refer to the stock. The response to what you're asking is definitely yes. This morning I was at a Tiger 21 gathering — sort of an investment club event — right here in Dallas, from 8:00 until 2:00. I handed out 12 Antimony business cards since folks kept asking what I've been up to, and many of these individuals I've known for a long time. At least 2 or 3 of them I'm sure about, and these are people controlling capital ranging from $40 million up to $2 billion. A couple of them, I know for certain, were purchasing stock that afternoon. So it isn't a tough pitch when half your share price is in cash, you're witnessing profitability along with better operations, and you're in a — you're working with a mineral classified as critical that the government is after. Therefore, as I've said before, among the challenges of marketing to institutions is our share price along with our market cap. Getting an institution enthusiastic about a company with a $24 million market cap is difficult; so as we keep delivering on financial results and the operational changes we're implementing, plus being able to announce some of the items I've referenced, I believe without a doubt, we'll manage to market to institutions; we aren't there just yet, but it's going to occur this year. Following question. Joe, I'll have you answer that one.