Business context and reporting period
United States Antimony Corporation (NYSE American: UAMY) filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2022. Its operations comprise antimony processing in the U.S. and Mexico, precious-metals recovery, and zeolite production in Idaho. The company reported no proven or probable antimony reserves and no zeolite reserves or resources.
Financial performance and condition
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $3.588 million | $2.276 million | $7.168 million | $3.529 million |
| Gross profit (margin) | $722,410 (20.1%) | $196,398 (8.6%) | $1.862 million (26.0%) | $408,555 (11.6%) |
| Operating income (loss) | $366,935 | $(232,190) | $1.147 million | $(573,916) |
| Net income | $361,223 | $337,141 | $1.147 million | $1,653 |
| Operating cash flow | Not separately presented | $745,038 | $(2.237) million |
Q2 revenue increased 57.7% year over year; six-month revenue more than doubled. Antimony was the largest contributor: revenue rose 73% in Q2 and 154% year to date. Management attributed improved antimony profitability principally to higher selling prices and increased sales volumes. Zeolite revenue rose 42% in Q2 and 37% year to date, but its six-month gross profit fell 15% as costs per ton grew faster than prices. Precious-metals revenue declined 27% in Q2 and 16% year to date.
Q2 operating margin improved to 10.2% from negative 10.2%; six-month operating margin was 16.0% versus negative 16.3%. Net income comparisons are affected by prior-year one-time gains: the 2021 period included $443,400 of CARES Act debt forgiveness and a $113,422 gain on settling a Hillgrove advance. In 2022, the company recorded a $93,458 investment fair-value loss and $60,775 of trademark and licensing income. Basic and diluted EPS were reported as Nil for Q2 and $0.01 for the first half of 2022.
At June 30, 2022, cash and cash equivalents were $8.312 million, restricted cash was $57,281, and current investments were $13.299 million. Working capital was $22.666 million, up from $21.548 million at year-end 2021. Total assets were $35.756 million and stockholders’ equity was $33.516 million. Total debt was $356,983, including $91,347 current. Six-month investing cash outflow of $13.776 million chiefly reflected investment purchases and operating-asset spending; financing cash outflow was $19,767. The company reported no significant off-balance-sheet arrangements.
Changes, outlook, risks and unusual items
- Antimony sales volume rose 7% in Q2 and 53% in the first half; average selling price per pound increased 62% and 66%, respectively. Zeolite tons sold increased 33% in Q2 and 22% year to date.
- Management plans to use funds raised in 2021 for improvements at Madero, Puerto Blanco, Bear River Zeolite and Thompson Falls, aiming to increase production and reduce costs. A new zeolite warehouse and shop were substantially complete and expected to enter service in Q3 2022; equipment purchases included a Cat 740 haul truck and delivery of a Cat 992.
- Management said existing cash, investments and operating cash flows are expected to fund planned operations and contractual obligations for the next 12 months, while also referring to potential equity sales and debt borrowings. No formal earnings or production guidance was provided.
- On August 8, 2022, after quarter-end, the company signed an option agreement for the Wadley mining property in Mexico. It requires eight monthly payments of $11,600 for exploration and study rights; if exercised after due diligence, the option calls for $2.23 million plus seven annual payments of $1.16 million.
- Risks include COVID-related workforce, supply and operating disruptions; reliance on foreign raw-material sources; commodity-price volatility; exploration, permitting and environmental uncertainty; and potential need for additional capital. The filing says COVID’s future financial impact cannot be estimated and could be material.
- Disclosure controls and procedures were deemed ineffective due to material weaknesses that management attributed to the small accounting staff and limited segregation of duties. Management relies on direct oversight and external professionals to mitigate the limitations.
- Zeolite royalty obligations vary from 8% to 13% of sales; accrued royalties payable were $409,887, and the company was negotiating changes to certain royalty agreements. MSHA assessment accruals were $1,270. No material legal proceedings were reported.
Important facts for investors to verify
- Reconcile the reported $13.299 million balance-sheet investment amount with the investment-note fair value and the MD&A description of the managed account, including cash held in that account.
- Track whether antimony price and volume gains continue to offset rising unit costs, and whether the Mexico segment’s six-month operating loss improves.
- Verify completion and operating contribution of the zeolite facilities and equipment projects, given weaker year-to-date zeolite gross profit per ton.
- Review the Wadley option’s due-diligence results, exercise decision and potential payment commitments.
- Monitor remediation of material weaknesses in disclosure controls and the status of royalty negotiations and accrued obligations.
- Consider dilution exposure: 12.49 million common-stock warrants and 1.69 million convertible preferred shares were excluded from diluted EPS as anti-dilutive at June 30, 2022.