United States Antimony Corporation — FY 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014. This is an annual filing, not a standalone fourth-quarter report. The company produces and sells antimony and precious-metal products, and zeolite, with operations in the United States and Mexico.
Financial and operating results
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $10.77 million | $11.02 million |
| Gross profit (loss) | $(339,341); gross margin approximately (3.2%) | $(40,970); approximately (0.4%) |
| Operating loss | $(1.55) million | $(1.34) million |
| Net loss | $(1.60) million; $(0.03) per share | $(1.64) million; $(0.03) per share |
| Cash from operations | $(1.04) million | $234,820 |
| Capital expenditures | $1.83 million cash outflow | $2.73 million cash outflow |
| Year-end cash and cash equivalents | $123,683 | $20,343 |
| Current assets / current liabilities | $2.30 million / $2.29 million | $1.91 million / $2.48 million |
| Long-term debt, net of current portion | $715,328 | $1.00 million |
| Total liabilities | $3.55 million | $3.89 million |
Antimony sales volume rose 9.4% to 1.73 million pounds, but the average selling price fell 11.1%, from $5.30 to $4.71 per pound. Antimony revenue declined about 3% to $8.13 million, and the division’s gross loss widened to $703,474 from $492,926. Antimony production was reported as a record. Zeolite revenue fell about 1% to $2.17 million; reported segment net income was $330,671, versus $407,454 in 2013. Precious-metals revenue was $461,083, up from $369,706.
Cash and cash equivalents were low, though current assets slightly exceeded current liabilities at year-end, leaving working capital of only $11,029. Operations used cash, and the company funded investment primarily with $3.07 million of common-stock proceeds and Hillgrove advances. Common shares outstanding increased from 63.16 million to 66.03 million. The filing reports 2014 depreciation and amortization of $780,782.
Changes versus prior period
- Revenue decreased 2.3%; the gross loss widened substantially, reflecting weaker antimony pricing and production costs.
- Net loss narrowed slightly from $1.64 million to $1.60 million, although pretax loss increased. The comparison benefited from no income-tax expense in 2014, versus $229,451 of tax expense in 2013.
- Operating cash flow moved from $234,820 provided in 2013 to $1.04 million used in 2014, while capital spending declined from $2.73 million to $1.83 million.
- Year-end working capital improved from a deficit of $568,777 to a small surplus. Long-term debt declined, and the 2013 bank notes were repaid.
Outlook, management commentary, and risks
- Management planned 2015 antimony output of 4.0–4.5 million pounds, including approximately 1.2 million pounds under a Canadian offtake, more than 1 million pounds from Mexico, and up to 2.5 million pounds under the Australian Hillgrove arrangement. These are projections, not reported results.
- The Hillgrove agreement covers approximately 3 million pounds of antimony and 1,500 ounces of gold annually. Hillgrove advances fund capacity expansion; USAC expects a 9.5% profit on sales. The agreement allows Hillgrove to suspend or terminate shipments, and repayment terms for advances depend on the agreement’s provisions.
- Four additional Madero furnaces came online late in 2014. A natural-gas connection completed in late September was expected to reduce Mexican smelter fuel costs substantially; management said the delayed connection cost approximately $500,000 in potential 2014 savings. Further furnace permits and Los Juarez processing permits remained important execution steps.
- Management said a metallurgical issue at Los Juarez had been resolved and planned drilling and a production restart in 2015. The filing describes the project as not yet in production; it claims no SEC-defined reserves at Los Juarez or its other properties.
- Antimony pricing is a major risk: prices are volatile, China controls more than 90% of world supply, and production costs include substantial fixed costs. Three customers accounted for 56.7% of 2014 revenue. The company also remains exposed to foreign raw-material supply, mine and mill ramp-up, permitting, and environmental obligations.
- Environmental reclamation and asset-retirement liabilities totaled $255,190. The company said excess environmental losses could not be reasonably estimated and disclosed that it has no environmental liability insurance.
- The filing reports material weaknesses in financial-reporting controls, including inadequate control design and monitoring, insufficient segregation of duties, and ineffective management oversight and antifraud controls. Management deemed disclosure controls and internal control over financial reporting ineffective at year-end; the auditor issued an adverse opinion on internal control. The auditor gave an unqualified opinion on the financial statements.
- No material pending legal proceedings were reported. The company did not pay common-stock dividends and did not anticipate doing so in the foreseeable future.
Important facts for investors to verify
- Whether projected 2015 production, Hillgrove shipments, processing economics, and natural-gas cost savings were achieved.
- Current cash, operating cash flow, near-term financing needs, and progress on planned capital projects, given the small year-end working-capital surplus.
- Resolution of Los Juarez and Puerto Blanco permitting, production, and recovery issues; assess project assumptions carefully because the company reports no SEC-defined reserves.
- Hillgrove advance repayment terms and any suspension or termination developments; also verify the status of the missed January 2015 Soyatal payment and subsequent payment discussions.
- Remediation of the disclosed internal-control material weaknesses and the company’s progress in reducing customer concentration and dependence on external raw-material sources.