United States Antimony Corp Q4 FY2023 Earnings Call

Greetings. Welcome to the United States Antimony Corporation Calendar Year 2023 Results Webcast. Please note, this conference is being recorded. I will now turn the conference over to your host, Gary C. Evans, you may begin.

Hello. Thank you, operator, and thank all of you for dialing in this afternoon. We look forward to updating you on the activities at U.S. Antimony. I have with me today, Joe Bardswich, who is a Board member and my co-CEO; as well as Rick Isaak, who's our Senior VP and Chief Financial Officer. So there will be three of us today participating in this call from the management and the Board. Let me first start out by telling everyone, 2023 was truly a year of transition. To give you a few high points here, we added two new Board members to our corporate board, Mike McManus and Joe Carrabba. We also had four Board members resign: Russ Lawrence, the former President, Hart Baitis, Tim Hasara and Gustavsen. So there's been a major shift in the Board that occurred last year during different times. We currently have today a five-member Board, two of which are now management, being Joe Bardswich and myself. Russell Lawrence, the President, resigned in July. It wasn't until that time that really the Board took a much more active role in managing the company. Gustavsen, who's been with the company a long time, resigned as CEO and is now President of our Antimony division. Joe Bardswich is, as I mentioned, an existing board member, he's now co-CEO, along with myself. And of course, Rick, as I mentioned, joined as Senior VP and CFO. We also added a controller, a gentleman by the name of Mike Oztree, who came on board last year. We have a new Vice President and General Manager at Bear River, which is our zeolite facility up in Preston, Idaho. His name is Jeff Fink. We also have a new plant superintendent at Bear River by the name of Nick O'Neil, who just started about a week to ten days ago. Lots of changes at the Board and the management, and we think all of these changes are going to be for the benefit of our shareholders. I would like to take a minute now and talk about our financial performance for 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. And so with that, I'll turn it over to Rick Isaak, who will give us a presentation. Rick?

Thanks, Gary. As Gary described, we made some changes to our company that we believe improved it. Let me first talk about three of these changes before I get to the financials. On March 11, 2024, we shut down our Mexico operations, which was primarily our Madero and Port Blanco plants. After this shutdown, we terminated the majority of the employees, which cost about $40,000. The remaining 14 employees in Mexico are helping to close the operations, securing the buildings, closing the books, and performing other administrative functions. Once these functions are complete, we will have some additional terminations. Some of the factors that led to our decision to close our Mexico operations include the following: while our Mexico operations did contribute to our antimony sales, their contribution was under 15% in 2023. Additionally, we're finding new sources of antimony ore for our Montana processing plant. Finally, these operations in Mexico have been a drain on cash since inception of over $50 million. Alright. Second item, during 2023, we made additional investments of about $1.3 million to improve our machinery, equipment, and plant at our Bear River Zeolite facility in Idaho. This includes a new cone for a cone crusher, several salt sheds to store and keep ore dry before processing, which is especially important during winter. Several warehouses to store finished products for quicker customer shipments. Many building improvements like better lighting, heating, conveyors, and improvements to our shop where we perform repairs and maintenance on our vehicles. Third, as Gary mentioned, we added personnel to our staff, our management team, and our Board of Directors that we believe will help improve our company going forward. Our personnel are our most valued asset, and we have changed the focus of our personnel and our company to thoroughly analyze initiatives and move forward with initiatives that create shareholder value. These are just some of the changes we made to improve our company and more will follow in the future. Switching to the financials: let's first review our cash flow during 2023. Cash and cash equivalents and restricted cash decreased $7.2 million during 2023. $4.1 million of this decrease was due to cash drain from our Mexico operations, which relates primarily to operational losses of $5.9 million and inventory purchases of $1.8 million, partially offset by $3.6 million of noncash charges, which related primarily to inventory write-downs, VAT receivable reserves and depreciation and accretion expenses. These are the operations we shut down on March 11, 2024. Also, $1.1 million of the $7.2 million cash decrease was due to payments we made on liabilities that have been accumulating from prior years. The majority of this $1.1 million relates to a dividend paid to our Series D preferred stockholders. This preferred stock has been converted to common stock, and this dividend has been eliminated going forward. Finally, $1.5 million of the $7.2 million cash decrease related to CapEx spending. The majority of the spending was made to improve our machinery equipment and plant at our Bear River Zeolite facility in Idaho, as I mentioned earlier. Overall, we eliminated much of the drain on cash from 2023 and our cash position remained strong in the first quarter of 2024. Next, let's take a look at the income statement. Sales decreased 21% in 2023 compared to 2022. 44% of the sales decrease was due to the decrease in the sales price of our antimony sales in 2023 versus 2022, which was primarily due to the decrease of the antimony market price. Obviously, we don't control the antimony market price, but we do try to manage our costs in relation to it. The other 56% of the sales decrease was due to volume decreases which were primarily due to the decrease in the tons of zeolite sold. Our Bear River Zeolite plant had significant downtime in 2023, about 18 weeks, which caused lower sales in 2023. As I mentioned, we made investments in 2023 to strengthen our mining and processing of zeolite and prevent downtime, and we will continue to do this going forward. Gross profit decreased as well in 2023 compared to 2022. Obviously, the sales decline adversely impacted our gross profit in 2023. Also, our Mexico operations experienced higher processing costs in 2023 as they continued to process ore with a low percentage of contained antimony. This issue was eliminated with the shutdown of our Mexico operations. They also reserved for some VAT receivables in 2023. These higher processing costs and reserves decreased gross profit. In addition, our Bear River Zeolite plant incurred more inefficient maintenance and labor costs in 2023 due to the increased production time, which lowered gross profit. Our antimony plant in Montana had lower gross margin on sales of purchased antimony trioxide, which also lowered gross profit in 2023 versus 2022. That's it for now on the financials. I'll pass it back to you, Gary.

Thank you, Rick. One point I'd like to make for our shareholders is that zeolite revenues up at BRZ in 2023 were $2,462,000. That was $689,000 lower than 2022. However, as Rick just mentioned, we had 18 weeks, which is over four months of downtime. That was due to past practices of management where BRZ was basically put together with makeshift repairs, and we have been addressing those problems. Had we not had those 18 weeks of downtime, revenues at BRZ would have exceeded 2022, which was a record at $3.151 million. So we feel confident that in 2024, we won't experience the same 18-week downtime that we suffered last year. As I mentioned, we have two new highly experienced individuals running BRZ and they're making changes weekly. We receive weekly reports on all the changes we're making, and we are evaluating the capital required to implement those changes. Our goal is to double or triple production at BRZ, and we believe that is very achievable over the next 12 to 18 months. We have the customers. We have the demand. Fortunately, during that downtime, we did not lose any customers. We were able to maintain them, and you might ask how we did that? It's because the quality of the reserves at Bear River is substantially superior to our competition. Those customers waited until we resolved our issues, and we have been diligently working on fulfilling that customer demand. Additionally, as Rick mentioned, we made some decisions over the past year to improve our warehousing and storage capabilities, so we would have inventory available, and we are trying to expand that further. This will enable us to continue product delivery even in the event of future downtime. I prefer to look forward rather than backward, so let’s talk about our objectives moving forward. I have five main objectives. Firstly, we intend to eliminate any cash burn and generate positive cash flow. As Rick noted, we made that decision in March. In fact, the decision was made back in November and December, but it took some time to navigate the necessary channels with the Mexican government, labor unions, and other parties to facilitate the shutdown. It's a much more complex process than in the United States due to the protective laws in Mexico for employees. Another layoff is expected as we prepare ourselves. Regarding the Mexican assets, I have been interviewing firms in Mexico to assist us in selling those assets, and we are already receiving inquiries from international companies regarding the potential purchase of some or all of our Mexican assets. Ideally, we'd like to sell the corporate entities, and we are hopeful for positive outcomes later this year. So to summarize, we aim to eliminate cash burn and generate positive cash flow. We are there, and I believe moving forward, you will see significantly improved results compared to what we achieved in 2023. Second, we want to protect our existing cash balance, and as you will see when we report our first-quarter numbers, we are doing a good job in this regard, which goes hand in hand with our efforts to eliminate cash burn. Third, we plan to increase production volumes at both Thompson Falls and Bear River, which are our two primary producing assets, the antimony facility in Thompson Falls and the zeolite facility at Bear River. This will require capital investment. We are closely monitoring when and how we allocate that capital, ensuring that for every $200,000 spent, we see a corresponding increase in production. We do not wish to invest without seeing results.

Thank you. As Gary mentioned, everyone knows the plant was constructed with a mix of resources, and the unreliability has been reflected in our financial reports. One of the major purchases we made was to acquire a new cone crusher, but unfortunately, that also resulted in significant downtime. A part of that was due to issues with the base upon which the crusher was placed, which was not properly engineered. The vibrations from the cone were so significant that operators opted to run it at no more than half speed. This not only reduced our production through it but led to material recycling, significantly decreasing efficiency. We faced a dust problem back in December, resulting in a shutdown order. In January, we brought in an independent team to inspect and lift that dust order and provide further recommendations. At that time, six out of six dust collectors were inoperable, but presently, all six are functioning. We are still short on dust collection capacity to meet our objective of being a dust-free operation. We are working on designs for new additions to address that. Although the dust collectors are working, the ductwork associated with drawing in the dusty air needs rebuilding, and we are in the process of that. Additionally, we engaged professional engineers to design a new base that will be completed before the end of the month. During the downtime with the cone, we arranged to bring in a portable impactor that has allowed us to process material from six inches down to one-inch minus, which we can then feed into the rest of the plant, thereby minimizing the impact of the cone's downtime. The jaw crusher was operational but had issues due to worn pipes, leading to inefficiencies. Those have been replaced and are now operational. Our next major focus is optimizing screening to reduce dust and increase production. The screens we currently have are old, were used upon purchase, and have been modified multiple times, losing their essential metallurgical properties. This will be addressed in our next steps.

Thank you, Joe. As Joe noted, from our own review of other zeolite properties throughout the country over the last six months, we own the highest quality zeolite resource in North America. There's simply no doubt about it, and our customers frequently affirm this. My fourth item, which Joe somewhat anticipated, is our first mine reserve report. This company has never had any reserve reports on its resources. With my experience in oil and gas for nearly 40 years, I find it hard to believe a company can operate without knowing its resources, so we will conduct drill tests aimed at producing a reserve report by the end of 2024. This will just be the beginning, as I expect that report will be expandable in the future. My fifth item is to grow this business externally through acquisitions and the leasing of new properties. I am personally dedicating significant time to this effort, and we're optimistic about having some notable transactions to announce later this year. We are actively evaluating and leasing properties in two new areas, and while for confidentiality reasons, we can't disclose those areas yet, they do include both antimony and zeolite reserves in regions we have never explored before, though everything is domestic. Lastly, I also plan to continue our lobbying efforts in Washington D.C. with senators, congressmen, governors, and various governmental agencies. Several months ago, I spent three days in Washington working with lobbyists to facilitate our introductions. I was genuinely shocked that very few of the people I met had any idea who we were and what we do. This was surprising, especially as we are the only antimony processing facility in North America. Congressman Ryan Zinke from Montana, who lives nearby, was astonished that our facility is in his district and plans to visit our site this summer. As most of you know, antimony is on the U.S. critical minerals list, and we have submitted two formal applications for grants with governmental agencies this year—one of which was denied while the other is still pending. Both applications were submitted in conjunction with partnering mining companies. We hope to report on our expanded efforts in this area later this year. We aim to seek grants solely for our account in the future rather than through partnerships. To summarize before we go into Q&A, U.S. Antimony is genuinely evolving into a new company. With Board member changes and new additions, as well as shifts in our management team, we are focused on expanding our business in both zeolite and antimony production. We are actively engaged in M&A activities, as well as pursuing new mineral property opportunities. We currently have five different transactions underway across four states. Additionally, we are pursuing government grant opportunities and low-interest lending options available in Washington. We have successfully curtailed the cash drain from our southern border. These assets, as I mentioned earlier, will be marketed this year professionally and in an organized manner, aiming to secure the best possible compensation for them. We are now moving toward generating cash rather than depleting our resources. That's a substantial change for this company. We are engaged with two types of high-demand mineral assets and deposits: antimony and zeolite. Our customers, as well as the U.S. government, are demanding these resources. We anticipate becoming a much larger contributor to that supply going forward. With that said, operator, I would like to open the floor for our listeners to pose questions to management.

Our first question is about what management has learned from your recent lobbying efforts in Washington, D.C., regarding government grants and loans on strategic metals and materials. Has the company modified its approach or game plan in this area?

Good question, and the answer is yes. Through those discussions I had for three days in Washington, I learned what the key factors are for receiving the grants. Consequently, we have tailored our activities to align with those factors. So yes, we have adjusted our plans.

The next question is, when do you expect BRZ to be fully operational with these improvements?

BRZ is fully operational today. Based on the reports, we're producing more zeolite than we may have ever before. Our new managers, who have relocated to the area, are not absentee management; they are present every day, and we are closely monitoring their operations to ensure significant changes occur. We are witnessing those changes. Our downtime recently has been nearly non-existent, and when we do encounter downtime, we typically recover quickly. We are currently operating efficiently, but as previously stated, additional capital expenditures are necessary, and we are managing those gradually. We may need to invest in a new production line, but we recognize the opportunity for greater sales, which is restricted only by our current production volumes.

The next question pertains to zeolite. It seems that buyers of the raw product for various uses are making significant margins, while UAMY does not. Has the company identified this issue, and if so, are there plans to address it?

That's a valid point, and the answer is yes. We acknowledge that middlemen often garner better margins than we do. In conjunction with our M&A efforts, which we expect to announce soon, we are planning significant changes, including hiring highly experienced sales personnel. Historically, we have operated without proactively marketing our product; we simply responded to incoming orders. However, by studying other zeolite companies over the past year, we've gained insights into our competition and their pricing strategies. There is certainly an opportunity for us to capture a greater share of that margin, and we have several strategies in mind to achieve that.

The next question is regarding the samples sent to the Department of Defense which were approved. What transpired there?

Joe, you may be better suited to address that.

We are currently the only North American supplier of antimony trisulfide to the U.S. Department of Defense. Unfortunately, our supply chain was based in Mexico, and we are actively seeking alternative sources to resume shipments. We do possess advanced technology to produce ammonia products, which is among the best in the country, but we need a reliable source of materials to fulfill the market demand.

Let's hold for a moment to allow for additional questions. We have one question in the meantime for you, are you still in conversation with Perpetua?

Perpetua represents a unique opportunity. I'll offer some remarks regarding this, and then let Joe elaborate. Perpetua has been fortunate in securing grants, recently announcing a substantial loan, although it remains in the approval stages. We believe Perpetua is still years away from having a sellable product. This extended timeline has prompted us to seek new sources of antimony that can meet market needs more quickly and at a lower cost. While Perpetua’s grant efforts are commendable, they are still far from generating any actual sales. Though we remain open to partnerships with Perpetua, we are vigilant about pursuing our own opportunities. Joe, do you have anything further to add?

Based on the EIS statement from Perpetua, even after they secure their permits, a complete buildout will take an additional 24 months before they can operate. Their focus will be on maximizing gold production, thus delaying significant antimony output. We are exploring other sources, particularly patented properties in Arizona and other states, where state-owned lands may allow us to bypass federal permitting, which could significantly expedite our progress compared to Perpetua, which is facing lengthy federal approvals.

Has the company identified a domestic new source of antimony?

Yes, we currently have some leads.

Any update on Ambri?

We are still in a position where John Gustavsen is a key contact for supplying high-quality antimony to Ambri. Personally, I believe Ambri has fallen behind on their projected timelines; however, this is speculative on my part. I had expected a quicker transition from laboratory work and prototypes to actual production.

Yes, and we continue to supply products to Ambri, though the volume is not substantial.

The critical element for Ambri is the quality of the antimony, particularly the purity levels. Our operations in Thompson Falls, especially under John Gustavsen, allow us to provide the cleanest antimony available.

In July 2023, you discussed attracting institutional investors. What progress can we report?

I have communicated with around seven or eight investment banking firms with which I have previously worked in the oil and gas sector. The primary challenge we face is our size and stock price. We are categorized as a micro-cap company, despite listing on the New York Stock Exchange. Major mining banks, like the Bank of Montreal and Canaccord, typically do not deal in antimony or zeolite as their clients focus on gold, silver, and copper. Therefore, we are refocusing our efforts toward more mid-market firms and actively pursuing discussions in that direction. Before we make any substantial effort, we want to achieve some of the objectives I've previously mentioned. We are concentrating on making ourselves more appealing to the investment banking community and equity research sector.

What excites you most for the future?

I have been involved with this board for just over a year, and when I first joined, the outlook was rather dim. Today, however, I see a bright light at the end of that tunnel. I attribute this to the changes in the Board, shifts in our management, and the operational enhancements we are implementing—whether it be through improvements at BRZ, addressing our issues in Mexico, or pursuing valuable M&A opportunities. We have an incredibly talented Board, and I firmly believe that the direction we are heading will make our shareholders exceedingly happy. I would personally be buying stock if it were allowable; however, due to insider restrictions, I am unable to do so. We have made significant progress in a short time frame, and many more changes are on the horizon. I wish I could discuss them now, but we simply cannot as of yet. It is crucial for you to understand that everyone involved shares a common goal; there is no discord. We're united in our efforts to build a company of which our shareholders can be proud, and this requires us to elevate our stock to an acceptable level. That is our ultimate goal.

Yes, Gary, I echo those sentiments. I would further add that the excitement lies in the team that you and others have assembled; everyone is open to new ideas and focused on making improvements, and our initiatives are geared toward creating shareholder value. All those factors contribute to a newfound excitement, and as you mentioned, we will continue implementing meaningful changes.

Yes, I would summarize further by noting that this company is dealing with two unique minerals, antimony and zeolite, which are both in high demand. Therefore, it is essential for us to identify strategies to meet that growing demand. It would be quite different if we were producing a product without value. The prices of both antimony and zeolite remain elevated, and we successfully initiated a 10% increase on zeolite prices in late 2023. We clearly understand our positioning in comparison with other companies and see ample opportunities for expanding our customer base, which we intend to pursue throughout this year. I fully expect that as of April 17, 2024, we will present a significantly different outlook than we had on December 31, 2023.

I think that's it for the questions.

I would like to thank all of you for your time and unwavering support. We are committed to transforming the experience of being a shareholder. Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.