United States Antimony Corp Q2 FY2024 Earnings Call

Greetings. Welcome to United States Antimony Corporation's Second Quarter and Six Months Ended June 30, 2024, Operating and Financial Results Meeting Webcast. Please note this webcast is being recorded. I'll now turn the webcast over to your host, Gary C. Evans. You may begin.

Thank you for joining our conference call for the second quarter and six months ended. We've announced our financial results this morning. On the call with me are Rick Isaak, our Chief Financial Officer; Joe Bardswich, co-CEO and Board member; and Jonathan Miller, our new Vice President of Investor Relations and Global Sales Director. They will provide insights as I hand over specific segments of the call. I'll quickly summarize our financial results without taking away from Rick's detailed analysis. Overall, revenues increased by 26%, while the cost of sales only rose by 6%, allowing our gross profit to grow by 122%. We reported a net income from continuing operations of $30,000. This company is still undergoing a turnaround, and we'll discuss the ongoing changes in various divisions today. It's encouraging to see how our operational adjustments have positively impacted our financial statements. Now, I’ll hand it over to Rick for a deeper dive into our financial results and the developments in the second quarter and six months ended June 30.

Thanks, Gary. I'm going to review our consolidated results, then a few metrics at each of our businesses. And then a few key areas in our balance sheet and cash flow. So I'll start with the consolidated results of our continuing operations. Sales were $5.6 million for the first six months of this year, which, as Gary said, is an increase of 26% compared to last year. This increase was primarily related to a higher volume of our antimony sales and a higher price on our zeolite sales. Gross profit, as Gary mentioned, was $1.7 million for the first six months of this year, which is an increase of 122% over last year. This increase was primarily related to improved efficiencies with the higher volume in our antimony business, partially offset by more repairs, maintenance and other related costs with our zeolite business, both of which I'll talk a little bit about more later. Operating expenses were $2 million for the first six months of 2024, an increase of $1.1 million compared to 2023. This increase primarily related to about $300,000 of noncash stock compensation expense, $310,000 of project costs, $360,000 of salary and Board fee expenses, and $130,000 of 10-K and 10-Q costs that were incurred earlier this year given that we filed on time with the SEC. The $310,000 of project costs are part of our growth and improvement strategy for the company. We're unable to discuss several of these projects at this time. One that we can discuss is the mineral resource study we're performing on our zeolite business in Idaho, which we anticipate completing this year. Next, let's look at a few metrics related to each of our businesses. First, our antimony business. Sales from our antimony business for the first six months of this year increased by 36% over the prior year, and gross margin was more than 2x last year's gross margin. The gross margins we are achieving this year are higher due to efficiencies with the higher volume. We have seen even higher gross margins with higher volume in the past, but the increments are smaller at these levels. Our average antimony sales price per pound for the first six months of this year was $4.65, which mainly relates to antimony oxide sales. There are a couple of reasons this average price seems low compared to the antimony market price in the last year. This year, we processed some customer owned ore in the antimony trisulfide, which lowered our average sales price per pound compared to the market price and compared to last year. Also, the current antimony metal market price is around $10.54 per pound. However, if you look at it daily, this market price went above $6 per pound in early May 2024, and more of our second quarter sales were ordered prior to May, which is when we locked in the sales price. And all of our second quarter sales were ordered prior to June. The key is that we increased our gross profit and gross margin with the increased volume compared to last year. Next, our zeolite business. Sales from our zeolite business for the first six months of this year increased 26% over the prior year. Gross profit decreased by $397,000 compared to last year, and loss from operations was worse by about $540,000. However, more of the loss from operations was incurred in the first quarter of 2024, meaning we have been improving during the year. BRZ had a loss from operations of $432,000 in the first quarter of 2024 and a loss from operations of $148,000 in the second quarter of 2024. The higher loss in the first quarter was primarily due to increased repairs, maintenance and other related costs and repairing older equipment that we're saddled with, coupled with lower sales. Next, our subsidiary in Mexico. As discussed on prior earnings calls, we closed and discontinued our operations in Mexico on March 11, 2024. During the first six months of this year, we sold most of the antimony inventory on hand in Mexico, which generated $1.1 million of revenue. However, even with these higher sales and the closure, our discontinued operations in Mexico still generated a loss of $150,000 for the first six months of this year. Next, let's look at a few items on our balance sheet and cash flow. Inventory was lower at June 30, 2024, compared to the end of 2023, which was primarily related to our antimony inventory. Our main antimony supplier had some planned downtime towards the end of the second quarter. But it's delivering ore again, and we're working to meet demand and increase our inventory levels. We're also looking for other sources of antimony ore so we can grow sales and maintain a healthier supply of inventory on hand. Our receivables were higher at June 30, 2024, compared to the end of 2023, which again is primarily related to our antimony business. We shipped a lot of product at the end of the second quarter of 2024, and all of these receivables have since been collected. Cash and cash equivalents balance at June 30, 2024, was $12.4 million, an increase of $492,000 from December 31, 2023. Your management team and employees of our great company are focused on growing and improving the business every day. A little over 7 months ago, we ended 2023 and reported a large net loss for 2023, which included operations that have since been discontinued. In 2024, we reported a modest amount of income from the continuing operations. We're not claiming a victory. There's still a lot of work to be done. But it shows a team focused on turning the company around and making improvements with profitable growth.

Thank you, Rick. I appreciate that. I'm going to spend a few minutes now discussing zeolite. After that, I will hand over the call to Joe Bardswich, who will cover antimony, and then we'll hear from Jonathan Miller. Zeolite has been a significant focus for us at Bear River. When I joined this company 1.5 years ago, I learned about the mine and the operational issues we faced, including challenges with regulators. It became clear that we needed a change in mindset and management. We hired a VP and General Manager at the beginning of this year, who then brought in a new plant supervisor and a new office manager. Now, all three top positions at Bear River are filled with new leadership from recent months or the start of the year. We recognized the necessary changes and understood we needed to invest money to address existing problems. It’s important to note that according to accounting rules, we are required to expense mechanical changes. We can only capitalize when we purchase new equipment. While working on improving our processing facility, we’ve been making repairs continuously. In the second quarter of 2024, our capital expenditure was $501,000, a significant increase from just $51,000 in the first quarter, highlighting our investment in optimizing the process. This effort resulted in a 94.3% run time, likely a record for the company. Additionally, we have improved our sales and are building inventory. In the first quarter of 2024, we sold 2,350 tons of zeolite, which increased to 3,746 tons in the second quarter—an impressive 59% rise. Sales revenue grew by 64% to $603,994, with capital spending also increasing to nearly half a million dollars. So, what is happening? We have addressed our backlog. At the end of the first quarter, we were about 7 weeks behind on delivering customer orders, but by the end of the second quarter, we were only 2 to 3 days behind and starting to build our inventory. As of now, we have no backlog and are continuing to increase our stock. This situation indicates that we need to focus on new sales. This is one reason we hired Jonathan and his corporate development team. Jeff Fink, our plant manager, is also assisting us in identifying opportunities with our customer base. We introduced a new product called CattleMax and have participated in cattle shows across Idaho and Oklahoma, with plans to be in San Antonio soon. We are in discussions with several universities about testing zeolite with their cattle herds. We are confident that proper education about zeolite's benefits will significantly boost our orders. To support this, we hired a lobbying firm in Washington, which began working with us in July. Melissa Pagen and I conducted a two-and-a-half-day trip to D.C. about two weeks ago, where we had around 12 to 14 meetings. Surprisingly, no one we spoke with—including House members and aides—was familiar with zeolite. We took the opportunity to educate them on its benefits and the reasons the U.S. government should consider stockpiling it. Zeolite is a vital tool for cleaning up nuclear waste and has been used in major incidents such as Chernobyl, Three Mile Island, and Fukushima. The prevalence of nuclear submarines and plants in the U.S. makes this a crucial issue, especially as the EPA introduces new regulations. Another important use for zeolite is in water treatment cleanup, an area where the U.S. government faces numerous challenges. Our lobbying team is making progress, as I will be in Idaho next week, meeting with local congressmen at our zeolite facility. The focus remains on educating stakeholders about the remarkable qualities of zeolite. We are much more confident in expanding our business due to the test holes drilled about 90 days ago, which confirmed an incredible resource of zeolite with a quality surpassing our competitors. This makes selling much easier, particularly since we have the reserves, quality, and capacity to deliver. Historically, we struggled to meet deadlines, causing us to lose significant business, particularly with large retailers like Costco, Home Depot, and Lowe's. They will not place orders if we cannot meet delivery expectations. Now that we have a clear understanding of our reserves and are working on a required reserve report, we anticipate completion by year-end. This will be essential for a mining company, and it’s surprising we managed without it for so long. We are now aware of our reserves, the high quality of our product, and our ability to maximize production. Obviously, this requires capital investment. As we become a more efficient operation, addressing all regulatory challenges related to dust control, we will feel more comfortable investing in additional equipment and production lines. During our meetings in Idaho next week, we also aim to launch two new products currently in development that are not yet on the market. Earlier this year, we announced Pete Bunger joining our Technical Advisory Board. Pete is a zeolite expert and operates a highly successful company himself, being one of our biggest customers. He has developed new products that we are patenting and preparing to launch, which are innovative offerings never seen before. The zeolite segment of our business is very encouraging. Given what we know today about our reserves' quantity and quality, we have great confidence in our capital expenditure plans. This is why we are actively lobbying, launching new products, attending trade shows, and taking all necessary steps. If we receive orders, we will be able to fulfill them now, which is a significant shift for our company. Joe, let's move on to discuss antimony.

Okay. Well, we're certainly cognizant of the worldwide shortage of antimony and we're taking several steps to improve our position. John Gustafson, President of the antimony division is the recognized antimony expert in this country. And we've recently hired geochemist Aaron Tenesch as Vice President of the antimony division. John is particularly strong in pyrometallurgy, in other words, fire smelting, et cetera. And Aaron brings expertise in the hydrometallurgy section of the industry and in particular, froth flotation. Froth flotation is a standard milling process for upgrading both mineral ores in this country, copper, nickel, lead, zinc, et cetera. Utilizing specific chemicals attuned to the nature of the specific mineral one is trying to collect, it's possible to separate the deleterious materials from the desired mineral. In this case, we're trying to get the antimony trisulfide upgraded. Aaron and I have worked together on other projects for other companies and I know he'll be an asset to United States Antimony. In our search for additional antimony supplies, we recognize worldwide that the bulk of the deposits are small, often labor-intensive, underground operations without beneficiation facilities. Generally, this looks good. We'll put it in that bag and throw this away because it doesn't look so good. Our facilities in Thompson Falls are geared to the final upgrading to bring material to a final state meeting the specification of the customer. Without a high enough grade, we cannot process these lower-grade ores. Aaron will help us in our attempts to upgrade the subpar antimony trisulfide material to the state that is acceptable to our Thompson Falls facility. For antimony trioxide and antimony metal, our primary source of antimony is from the waste byproduct of a Canadian lead-zinc smelter. Supply is directly proportional to the quantity of material smelter. Again, we have searched worldwide for other smelters that might have sodium antimonate. So far, we've not been successful, as most smelters either have a different ore or a different process that does not produce antimony. We continue to look for sources of antimony and any other critical mineral on nonfederal lands in the U.S. and Canada. Nonfederal lands because it's been our experience that permitting on federal lands is a long drawn out task with no guarantee of success. We are making progress in identifying other possible sources. But at this time, we have nothing definitive to report.

Thank you, Joe. I want to make a brief comment about antimony and zeolite in relation to our company. We have a good supply of zeolite and are in need of new customers since we have caught up on our supply. However, for antimony, we have more buyers than we can meet with our current production. The two minerals present different challenges. As Joe mentioned, we recently hired Aaron Tenesch about a month and a half ago, who has been reaching out to countries worldwide regarding antimony supplies. We are aware that we need to address flotation, and we have been in discussions with various companies to find a solution, which we hope to have news about soon. This is a key reason we haven't pursued government funding for antimony yet; we want to ensure everything is organized first. Currently, we operate the only smelter in the United States and are hopeful about adding flotation capabilities in the near future. We are also working on securing both our supply and potential imports we could process. Our aim is to position ourselves uniquely to capture the attention of the U.S. government, which we believe is increasingly interested, as evidenced by our upcoming meetings and communications with officials. We are diligently focusing on both of these critical minerals to expand the company significantly. Additionally, we held our shareholder vote at the end of July where all existing directors were reelected, and seven resolutions were passed unanimously. I want to express my gratitude to shareholders for their trust and confidence in our management team and Board, which will be invaluable as we continue to grow. One thing we haven't done much of since I joined is shareholder marketing, as we needed to show real progress first. Now, I feel confident in our story, which is why we brought Jonathan on board. He has collaborated with me on other transactions in the past. Marketing today, especially through social media and online platforms, is very different from what I experienced in the past decades. We are working to modernize our approach and are committed to staying very active through the end of the year. Jonathan, why don't you introduce yourself and discuss your role in investor relations for U.S. Antimony?

Great. Good afternoon, everyone. I'm Jonathan Miller, Vice President of Investor Relations and Global Sales Director at United States Antimony. I've spent the last 7 years working with hundreds of public companies as a change agent for digitization and automation in the evolving investor relations landscape. I'm excited to bring my knowledge, experience and relationships to UAMY and speak with you today and bring you up to speed on the strategic initiatives that we're focusing on as we continue to drive growth and strengthen our position in the market. First, I want to highlight our recent OTC Markets virtual presentation that took place on July 23, where we shared our progress and future plans. If you missed it, I encourage you to watch the recording available on our website. We also have several upcoming events where we'll be presenting our story. On August 14 at 1:00 p.m. Eastern, we'll be at the Sidoti Virtual Investor Conference. On September 25, at a time to be determined, we'll be participating in the Noble Capital Markets Virtual event. These platforms provide great opportunities for us to connect with the investment community, and I look forward to engaging with many of you there. I'm also pleased to announce the launch of our new corporate profiles on LinkedIn and Twitter, now known as X. These channels will be key in keeping you updated with real-time information. So please go ahead and follow us to stay informed about our latest developments and insights. Our optimism is further fueled by our restructuring of our management and operations teams, which has positioned us to not just be profitable, but also to become a dominant force globally in the antimony and zeolite markets. Our outreach and market awareness strategy is another critical area of focus. As Gary mentioned, we are meeting with top lobbying firms and congressional leadership in D.C. and actively partnering with analysts and firms to enhance our visibility and attract institutional investors. This is part of our broader initiative to secure government grants and play a vital role in strengthening America's critical mineral pipelines and infrastructure. These efforts are not only pivotal for our growth but also aligned with national priorities, making us a strategic player in this space. In conclusion, the community should be excited about our new direction and the many opportunities we look to capitalize on. I look forward to discussing these topics in more detail during our Q&A session, and thank you for your continued support and interest in United States Antimony Corporation.

Thank you, Jonathan. I want to emphasize that Jonathan has been an invaluable partner for me, and together we have the potential to achieve much more in the upcoming months. I’d like to share a brief update. We are in a safe position and anticipate making a public announcement about one of our new ventures within the next 10 days. This venture is new and exciting for us, having received approval from our board of directors yesterday. We are currently finalizing the definitive agreements. I expect that we will be able to provide more details about this next week. We know there are listeners with questions, so I would like the operator to start taking our first question so we can address them.

Our first question is about Bear River Zeolite. With the recent upgrades in equipment and personnel, what is the potential for growth in this segment of your business and what timeframe are you anticipating?

Well, it's a great question, something we ask ourselves every day. Look, it all depends on the business. We are going after big business. We're not going after little business. So when I say that, I think only 5% of the cattle in the United States are being fed zeolite, and that's a huge growth opportunity. We know water treatment facilities could use zeolite. We know nuclear waste, as I said earlier, the government ought to be stockpiling our zeolite for the next nuclear disaster. So that's what we're doing. We're educating these various parties about why this is such a great product. We're not going to build the facility out until we know the business is coming. We have a good sense, and we'll know a whole lot more, I think, over the next 30, 60, 90 days. To answer your question, it could be huge. We've got the reserves. Those reserves are going to be here long before anybody on this call is still alive. They'll be here 200, 300, 400 years. We've got a great resource, we've got good people, and we have the ability to grow. As soon as we get the comfort that we have the kind of orders so we need to spend more capital on this facility, we'll be doing it. I can promise you, the people up there are chomping at the bit to build out more capacity.

Your next question is, how do you plan to be successful with CattleMax while other companies, including one of your customers, has a product serving the segment? Won't you alienate your customer? Do you plan on taking market share from others who are trying to grow the total addressable market?

Good question. We will still sell to the existing parties we sell to. We're trying to attract new customers, new cattlemen, new feedlots that are currently not using zeolite at all. That's really going to be through nutritionists. Nutritionists are the ones that cattlemen listen to. We have a specific targeting method of soliciting nutritionists. I don't see there being any conflict because even if a distributor came to us and said, 'Hey, we'd love just to be selling your zeolite with our own label.' No problem. We'll cut a deal and have their zeolite compete with CattleMax. So we're not concerned about that, and we would never undercut our existing customers.

Your next question is, regarding zeolite, I thought there was tremendous potential selling into mining companies for air filtration after blasting. Do we have anyone trying to grow this business, especially in Canada?

We do have a salesman in Canada. We have an operation up there, and we shipped quite a bit of material to Canada. There's no question we could improve the marketing and sales efforts we have in Canada, and we've been discussing that internally. Joe, you might comment a little bit about how zeolite is used in that business?

Okay. Basically, using explosives underground, in particular, the cheapest way to go was ammonium nitrate fuel oil. The ammonium that detonated with a booster cap or whatever, it produces a lot of ammonia gas that ends up in the mine water and in the mine environment from an air quality point of view, etc. The practice is to take the 1440 zeolite, meaning minus 14 mesh, plus 40 mesh. Spread that on the ground just before the blast. The blasted material ends up on top of that zeolite, and the zeolite absorbs the ammonia before it has the chance to get into the air and water. Another use underground is in removing metal ions from discharged water, both from the mine and from milling facilities. A specialized market, but lots of potential to grow in my opinion. Back to you, Gary.

Yes, it's another market that you've specifically identified and is another area that we will continue looking at.

Your next question is, what can you tell us about zeolite acquisitions, which were an initiative mentioned last August 9, exactly one year ago?

That's a good question. I will just be upfront. We have been working on an acquisition. We actually weren't invited in until closer to December, so 8 months now, and we've done a lot of work on it. We found some problems. I don't know whether those problems will be insurmountable or not. I would say, the status of us as of this week is we're in standby mode. We've given the seller the conditions of which they would have to meet in order for us to move forward on an agreement. We are not comfortable that those conditions will ever be met.

Your next question is, how do we bring back the BRZ business back to profitability?

Say that one more time?

Your next question is, how will you bring back the BRZ business back to profitability?

We reported profitability this quarter, which is straightforward: increased run time and more business. As I mentioned, we spent $0.5 million on capital improvements in the second quarter. If we hadn't spent that amount, we would have had an additional $0.5 million in profit. As we resolve our issues, there's no doubt that economies of scale will benefit this business. We can double production without doubling costs, although our costs could increase by 10%, 20%, or 30%. This means our margins will continue to grow in this area. Regarding another zeolite business, we are currently negotiating a second transaction. We are actively pursuing multiple deals and should have updates soon. We've made significant progress, and we need to boost sales and get everything sorted out to minimize capital spending, which will lead to increased profits.

Your next question is, are you still able to make trisulfide to military specification? My memory is that the original batches depended on the low lead materials from the inaccessible part of Mexico.

Joe, do you want to respond to that?

I think that statement is correct. The material that we produced for the military that met their specs came from the Guadalupe mine in Mexico. We were also able to meet the military specs from the Soyatel mine in Mexico. Both of those operations are unreliable, and we are looking for another source of resources. I'm sorry, we have demonstrated the ability, and that will be enhanced in the future with the addition of Aaron and the expertise in the flotation.

I want to say, Joe, that even though the material that we processed was from our Mexican operations that we've shut down, we're confident that we can also get material from other sources at a cheaper price and make money. The difference between Mexico and the U.S. is that we could not make any money. The relationship that we've formed with the DoD has been good. As I said, we've had some conversations with them actually this week and even more planned next week. You have to understand, our government unfortunately is in a pickle. They don't have enough antimony to meet the demands of the U.S. military, and there are mandates to figure out how to fix that. We're obviously one of the companies that could hopefully fill that void. Next question.

Your next question is, what is the probability of a reverse split?

We received all necessary approvals at the shareholder meeting, and during the board meeting yesterday, that was not a topic of discussion. So what does that indicate?

We have reached the end of the question-and-answer session. I will now turn the call over to Gary C. Evans for closing remarks.

Okay. Well, just under an hour, thank all of you for taking the time. I know it's a Friday afternoon, but we wanted to get the numbers out. We're proud of what we reported this quarter in the six months, but there's a lot more room to go. This group of employees now and officers and directors are working extremely well together. We have so many irons in the fire that I can't even begin to tell you. When you have that much activity and you're going in all these kinds of directions that we're going, things are going to click. I mentioned we've got one getting ready to click that we'll be announcing soon. We're excited about the new direction. We're excited about the team effort. We're excited about all the new people that are helping us. They bring a wealth of knowledge, experience, and contacts that we've never had. Instead of being a sleepy mining company run like a private company, we're an exciting growing public company that's fixed its cash flow issues, that treats its cash like gold and is going to be positioned to show some exciting future opportunities in the not too distant future. Thank you all. Have a good weekend.

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