United States Antimony Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. USAC sells processed antimony, zeolite, and precious-metals products, with operations in the United States and Mexico. The interim financial statements are unaudited.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $2.31 million | $2.46 million | $7.03 million | $9.62 million |
| Gross profit (loss) | ($1.06 million) | $431,000 | ($1.30 million) | $2.29 million |
| Operating income (loss) | ($1.82 million) | $60,000 | ($3.35 million) | $1.20 million |
| Net income (loss) | ($1.64 million) | $50,000 | ($2.79 million) | $1.19 million |
| Gross margin | (45.9%) | 17.5% | (18.5%) | 23.7% |
| Operating cash flow | Not separately provided | Not separately provided | ($3.82 million) | $23,000 |
Q3 revenue declined about 6%; nine-month revenue declined about 27%. Nine-month EBITDA, a non-GAAP measure, was a loss of $2.07 million versus positive EBITDA of $1.89 million in 2022.
Liquidity, debt, and cash flow
- At September 30, cash and cash equivalents were $12.86 million; current assets were $16.63 million and current liabilities $1.28 million. Working capital was $15.35 million, down from $19.40 million at year-end 2022.
- Total debt was $242,000, including $62,000 current and $180,000 long-term, compared with $312,000 at December 31, 2022. Total liabilities were $1.85 million.
- Nine-month investing cash outflow was $1.52 million, primarily for property and equipment; financing cash outflow was $858,000, including $788,000 of dividends paid. Cash and restricted cash decreased $6.20 million to $12.92 million.
- Management believes operating cash flows and existing cash, together with potential equity sales or borrowings, are sufficient for planned operations and contractual obligations over the next 12 months.
Material changes and operating drivers
- Antimony: Nine-month revenue fell 30.5% to $4.84 million. Management attributed weaker gross profit mainly to lower antimony market prices and ore with a lower antimony concentration. Average selling price per pound fell 27.2%, while average cost per pound rose 25.7%; the segment recorded a $1.26 million gross loss.
- Zeolite: Nine-month revenue declined 22.0% to $1.94 million and the segment recorded a $195,000 gross loss. A main cone crusher failure curtailed production for approximately 14 weeks; management cited lower sales volume and higher maintenance and labor costs during downtime. A replacement cone was installed.
- Precious metals: Nine-month revenue increased 46.8% to $242,000, with gross profit of $159,000. There were no Q3 sales.
- Operating expenses rose to $2.05 million for the first nine months from $1.09 million, including increases in general and administrative expense, salaries and benefits, and professional fees.
Outlook, risks, and unusual items
- No quantified revenue or earnings guidance was provided. Management plans to invest in operational improvements intended to increase production, reduce costs, and support revenue growth.
- Inventory was written down to net realizable value by $883,000 for the first nine months, including $427,000 in Q3, related to Mexican operations whose production costs exceeded expected recovery from sales.
- BRZ received 12 significant and substantial MSHA citations in September and October 2023. Eight were rectified and terminated; four remained to be addressed. The outcome and any financial impact were unknown, and no related liability was accrued.
- A Mexican tax assessment was approximately $1.262 million at September 30, including tax, interest, and penalties. The company is appealing and recorded no accrual, while acknowledging a possible material adverse effect if the outcome differs from management’s expectation.
- In October 2023, USAC terminated its Wadley Property purchase option and expected a fourth-quarter loss on disposal of approximately $130,000.
- Disclosure controls were deemed ineffective due to material weaknesses involving segregation of accounting duties, which management attributed to the small accounting staff. Management relies on direct oversight and outside professionals as mitigation.
- Principal risks cited include commodity and input-cost volatility, foreign ore supply, regulatory and environmental requirements, Mexican tax and operating conditions, financing and potential dilution, and interruptions to operations.
Important facts for investors to verify
- The cover page marks “No” for whether the company filed all required reports during the preceding 12 months; verify the filing history and circumstances.
- Progress and financial effects, if any, of the four unresolved MSHA citations.
- Status and potential exposure of the Mexican tax appeal, for which no liability was accrued.
- Whether the replacement crusher restores zeolite production and improves unit costs.
- Antimony selling prices, ore quality, inventory valuation, and the company’s ability to reduce production costs and operating cash burn.
- Management’s stated liquidity outlook and potential need for equity or debt financing; 12.35 million warrants were outstanding at September 30, 2023.