United States Antimony Corporation — FY 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed April 2, 2018. The company produces antimony and precious-metals products and zeolite, with operations in the United States and Mexico. This is an annual report, not a standalone fourth-quarter report.
Financial performance and position
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $10.23 million | $11.89 million |
| Gross profit | $161,400 | $536,651 |
| Gross margin | 1.6% | 4.5% |
| Net loss | $1.13 million | $1.31 million |
| Net loss per common share | $0.02 | $0.02 |
| Operating cash flow | $716,705 | $425,837 |
| Capital expenditures | $365,541 | $595,839 |
| Year-end cash and cash equivalents | $27,987 | $10,057 |
| Working capital | Negative $2.37 million | Negative $1.69 million |
- Total antimony sales fell 36% to 1.89 million pounds, while the average selling price increased 35% to $4.01 per pound. Antimony revenue declined to $7.59 million from $8.74 million, and the division reported a $1.78 million net loss.
- Zeolite revenue decreased to $2.27 million from $2.47 million. Zeolite net income increased to $331,472 from $233,907; sales volume was down 6% and average price per ton declined about 3%.
- Precious-metals revenue declined to $374,872 from $672,871. The filing reports 107 ounces of gold and 32,021 ounces of silver shipped in 2017.
- Cash provided by operations increased, but remained below capital spending and scheduled debt principal payments. Current liabilities were $3.93 million versus current assets of $1.56 million.
- Year-end debt included $1.79 million of long-term debt, including its current portion; bank notes payable were $192,565. The company also reported $1.13 million payable to Hillgrove, classified as long-term.
Material changes and operating developments
- Management attributed lower antimony sales primarily to losing Australian Hillgrove concentrate supply. Mexican properties supplied about 530,000 pounds of antimony production in 2017; the filing says 2016 had no production from the company’s Mexican mines while Hillgrove concentrates were being processed.
- Antimony cost of sales declined to $8.15 million from $9.17 million, but remained above antimony revenue. Management reported an antimony net loss of $0.94 per pound sold, versus $0.74 in 2016.
- The Puerto Blanco mill in Mexico operated at less than 10% of capacity in 2017 and 2016. The company completed installation of a leach circuit at Madero and reported that it had addressed metallurgical issues with Los Juarez concentrates.
- Three customers represented 56.5% of 2017 revenue, up from 39.8% in 2016. Management said losing one large customer could be manageable in the short term, but losing all three could affect profitability.
Outlook, risks and unusual items
- Management planned to ramp up production from its Mexican antimony properties and bring the Puerto Blanco leach circuit into operation during 2018. It expected lower production costs following a November 2017 sodium antimonite supply-agreement renegotiation, labor and other cost reductions, and changes to Madero operations. These are management expectations, not guaranteed outcomes.
- The company reported negative working capital of about $2.4 million, an accumulated deficit of about $26.5 million, and losses in each of the prior three years. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern for the next twelve months; management believed cost reductions and operating plans would support continued operations.
- A Mexican tax assessment related to USAMSA’s 2013 return was approximately $699,000 at year-end 2017. The company had accrued $410,510, was contesting the assessment, and expected a court ruling in 2018. The final amount and timing remain uncertain.
- Environmental reclamation and asset-retirement accruals totaled $271,572. The company said potential losses beyond accrued amounts could not be reasonably estimated and disclosed that it had no environmental liability insurance.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses involving financial-reporting control design, monitoring, segregation of duties, and management oversight. The auditor expressed an unqualified opinion on the financial statements but did not audit or opine on internal-control effectiveness.
- The company reported no proven or probable mineral reserves under SEC definitions. It also disclosed that raw-material supply, antimony prices, customer concentration, Mexican operations, environmental obligations, and foreign-exchange movements could affect results.
Most important facts for investors to verify
- Whether 2018 Mexican mine production and Puerto Blanco processing ramped up as planned, and whether the leach circuit delivered expected recoveries and cost savings.
- Whether antimony pricing and supply improved enough to reduce the division’s losses and support the company’s liquidity and debt payments.
- Cash availability and working-capital developments, including the company’s reliance on operating cash flow, factoring, and supplier payments.
- The court outcome and ultimate payment exposure from the Mexican tax assessment compared with the $410,510 accrual.
- Progress in remediating the disclosed internal-control material weaknesses and any changes to environmental obligations or estimates.