United States Antimony Corporation — 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. This is an annual report, not a standalone fourth-quarter report. The company produces antimony and precious metals in the United States and Mexico, and zeolite in Idaho.
Financial performance
| Metric | 2016 | 2015 |
|---|---|---|
| Revenue | $11.89 million | $13.11 million |
| Gross profit (loss) | $536,651 | ($412,360) |
| Net loss | ($1.31 million) | ($838,531) |
| Net loss per common share | ($0.02) | ($0.01) |
| Cash from operations | $425,837 | $358,453 |
| Capital expenditures | $595,839 cash outflow | $1.71 million cash outflow |
| Cash and cash equivalents at year-end | $10,057 | $133,543 |
| Working capital | ($1.69 million) | ($293,504) |
- Company-wide gross margin was approximately 4.5%, compared with a gross loss in 2015. The company nevertheless reported an operating loss of $816,522 and a net loss of $1.31 million. The 2016 tax provision was $298,138.
- Antimony sales volume rose 18% to 2.94 million pounds, but average selling price fell 25% to $2.98 per pound. Antimony revenue declined 11% to $8.74 million; the division reported a $1.54 million net loss.
- Zeolite revenue declined 10% to $2.47 million as sales volume fell 17% to 13,143 tons. Average price increased 9% to $188.17 per ton. Zeolite net income fell to $233,907 from $511,403.
- Precious-metals revenue increased to $672,871 from $491,426.
- Reported debt included $1.86 million of long-term debt, including current maturities, $167,317 in bank notes, and $1.13 million payable to Hillgrove. Total liabilities were $6.42 million. The filing reports $410,510 accrued for a Mexican tax assessment.
Changes versus 2015
- Revenue fell approximately 9%, but gross results improved by about $949,000, from a $412,360 gross loss to a $536,651 gross profit. Net loss widened by about $471,000. The 2015 comparison included a one-time $914,770 gain from a supplier liability adjustment; 2016 did not.
- Antimony volume increased, while lower prices drove revenue down. The company said it had stopped processing Hillgrove concentrates by year-end and was shifting toward production from its own Mexican properties.
- Zeolite earnings declined with lower volume and higher operating expenses, notwithstanding improved average selling prices.
- Operating cash flow rose modestly, but year-end cash fell by $123,486. The company attributed 2016 operating cash generation in part to a roughly $239,000 reduction in inventories.
Outlook, risks and unusual items
- Going concern: Management disclosed substantial liquidity concerns: negative working capital of approximately $1.7 million, accumulated deficit of $25.4 million, and losses in each of the prior three years. It said these conditions may raise doubt about the company’s ability to continue as a going concern over the next 12 months, while expressing belief that planned actions would support continued operations.
- Management outlook: Management cited an antimony price near $4.00 per pound in late March 2017 versus the 2016 average of $2.98, planned cost reductions, and a ramp-up of Mexican mine output. It expected 17 small rotating furnaces to be operating by the second quarter of 2017 and planned further work at the Madero and Thompson Falls smelters and Puerto Blanco leach circuit. These are forward-looking plans, not results.
- Production and market risks: Antimony prices are volatile, and the company relies on outside suppliers as well as its Mexican properties. The Puerto Blanco mill operated at less than 10% of capacity in 2016. Management cited metallurgical issues, idle facilities and excess Mexican production costs; it said a caustic-leach process had resolved the Los Juarez concentrate problem, with pilot work to resume.
- Customer concentration: The three largest customers accounted for 39.8% of total revenue in 2016, down from 46.7%. Loss of a major customer could affect profitability.
- Tax dispute: Mexican tax authorities assessed approximately $666,400 at December 31, 2016, including interest and penalties, for the subsidiary’s 2013 return. The company disputed the findings, appealed, and accrued $410,510 as its best estimate; the outcome and final amount could differ. The assessment was approximately $712,000 by March 17, 2017.
- Other obligations: Environmental and asset-retirement accruals totaled $265,782. The company said potential environmental losses beyond accrued amounts could not be reasonably estimated and that it had no environmental liability insurance. The company also disclosed that a $100,000 Soyatal payment due in January 2015 was not made; it had been making $5,000 monthly payments while negotiating future terms.
- Controls and audit: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing material weaknesses in financial-statement controls, monitoring and segregation of duties. The independent auditor gave an unqualified opinion on the financial statements.
- Resources: The company stated it had no SEC-defined proven or probable reserves for its antimony or zeolite properties.
Key facts investors should verify
- Whether Mexican mine and smelter production ramped as planned, and whether the Los Juarez process performs reliably at operating scale.
- Whether higher antimony prices translated into sustainable margins and operating cash flow after raw-material costs.
- How the company funded obligations and investment needs given minimal cash, negative working capital and going-concern uncertainty.
- The final result and payment exposure from the Mexican tax appeal, and any changes to accrued liabilities.
- Whether the Soyatal payment terms were resolved, and whether the company’s material control weaknesses were remediated.
- The status of environmental obligations, customer concentration and the absence of SEC-defined mineral reserves.