United States Antimony Corporation — 2015 Form 10-K
Business context and reporting period. The company produces antimony products through U.S. and Mexican operations and zeolite through Bear River Zeolite in Idaho. This annual report covers the fiscal year ended December 31, 2015, compared with 2014. The filing was signed March 30, 2016.
Key financial and operating metrics
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $13.11 million | $10.77 million |
| Gross profit (loss) | $(412,360) | $(339,341) |
| Net loss | $(838,531) | $(1,595,455) |
| Operating cash flow | $358,453 | $(1,036,375) |
| Capital expenditures | $1.70 million | $1.83 million |
| Cash and cash equivalents at year-end | $133,543 | $123,683 |
| Current assets / current liabilities | $2.14 million / $2.43 million | $2.30 million / $2.26 million |
| Total assets / total liabilities | $18.26 million / $5.80 million | $16.55 million / $3.55 million |
- Margins: Consolidated gross margin was approximately negative 3.1% and net margin approximately negative 6.4% in 2015. Antimony operations reported a $1.35 million loss; zeolite reported $511,403 net income.
- Antimony: Sales volume rose 44% to 2.49 million pounds; revenue rose about 21% to $9.86 million. Average realized price fell to $3.97 per pound from $4.71. The antimony division’s loss narrowed from $1.93 million to $1.35 million.
- Zeolite: Sales rose 44% to 15,901 tons and revenue increased to $2.75 million, despite the average price falling to $173.17 per ton from $195.83. Net income increased to $511,403 from $330,671.
- Debt and liquidity: Year-end long-term debt, including its current portion, was $1.90 million; bank notes payable were $130,672. The balance sheet also reports $1.25 million of Hillgrove advances payable. Net working capital was negative $293,504, compared with positive $48,261 at the start of the year. Total liabilities increased by about $2.25 million.
- Cash flow: Operating cash flow improved to positive $358,453, but was more than offset by capital spending. Financing provided $1.36 million, including $1.20 million of Hillgrove advances. Cash increased by only $9,860 during the year.
Material changes versus 2014
- Antimony sales volumes expanded substantially, primarily from Canadian and Hillgrove Australian concentrates processed through the company’s expanded Mexican smelter. Lower antimony prices limited the resulting revenue growth and continued to pressure profitability.
- Mexican antimony sales increased to 1.11 million pounds from about 586,000 pounds. The company said its Mexican smelter capacity was largely used for Australian feed, while Mexican mine and mill operations remained underused or in start-up and testing phases.
- Mexico non-production and holding costs rose to $1.09 million from $688,619. The filing attributes these costs to idle properties, metallurgical testing, plant start-up, and write-downs of previously mined material.
- Cash from operations improved from an outflow to an inflow, and the consolidated net loss narrowed. However, gross loss widened and current liabilities exceeded current assets at year-end.
- The company completed major additions to the Madero smelter, acquired the Guadalupe property, and achieved record zeolite sales. Property, plant and equipment, net, increased to $16.03 million from $13.51 million.
Outlook, risks, contingencies and unusual items
- Outlook: Management planned higher 2016 antimony production using feed from Canada, Australia, and Mexico; expected to restart Mexican property production and process Los Juarez concentrates; and intended to complete leach circuits and a larger Puerto Blanco flotation mill. These are plans and expectations, not quantified formal guidance. Los Juarez processing remained dependent on permits and successful execution.
- Hillgrove: Hillgrove suspended Australian mining in 2015. USAC expected to process available mill feed through the end of 2016, but anticipated reduced future concentrate receipts. The agreement gives Hillgrove discretion to suspend or terminate, and its repayment terms are contingent. The balance sheet reports $1.25 million payable, while the note describes $1.13 million due after an earned credit; investors should reconcile these figures.
- Unusual items: 2015 results included a $914,770 gain from a settlement of disputed Canadian supplier invoices and a $142,170 earned credit related to Hillgrove advances. These items supported reported results and are not necessarily recurring.
- Operating and market risks: Antimony prices are volatile and substantially affect revenue and earnings; the reported average selling price fell about 16%. The company relies on third-party raw-material supply and on a small number of customers: its three largest customers represented about 46.7% of 2015 revenue. Management reported no SEC-defined proven or probable reserves for its mineral properties.
- Controls and audit: Management concluded that internal control over financial reporting and disclosure controls were ineffective at year-end due to material weaknesses in financial-reporting design and monitoring, subsidiary and period-end controls, segregation of duties, and management oversight. The independent auditor issued an unqualified opinion on the financial statements.
- Contingencies: Environmental reclamation and asset-retirement liabilities totaled $260,327, but potential losses beyond accrued amounts could not be reasonably estimated; the company said it lacked environmental liability insurance. USAC’s investor-relations dispute includes claims and a counterclaim; management considered an unfavorable outcome remote and recorded no provision. Mexican tax authorities were auditing the subsidiary’s 2013 return.
- Preferred stock: The filing states a $5.88 million liquidation preference, including undeclared dividends, senior to common shareholders in a liquidation. No common dividends had been paid in the prior five years, and none were anticipated in the foreseeable future.
Important facts for investors to verify
- Reconcile the reported Hillgrove payable between the balance sheet and the related-party/advance note, and confirm the applicable repayment and earned-credit terms.
- Assess near-term liquidity and funding for planned capital projects given negative working capital, low unrestricted cash, and increased liabilities.
- Track actual 2016 Mexican mine and mill restarts, permit status, Los Juarez recovery performance, and whether production can replace reduced Hillgrove feed.
- Evaluate normalized earnings excluding the supplier-liability gain and Hillgrove earned credit, alongside the effect of antimony prices and Mexico’s excess production costs.
- Monitor remediation of the disclosed material weaknesses and the status and potential exposure of the investor-relations litigation and Mexican tax audit.
- Confirm the financial-statement and segment disclosures directly in the filed statements: the filing contains some inconsistent reported figures, including current-liability amounts in selected data versus the audited balance sheet and Hillgrove payable amounts in the notes.