United States Antimony' (UAMY) CEO John Lawrence on Q1 2016 Results - Earnings Call Transcript

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United States Antimony Corp. (NYSEMKT:UAMY)

Q1 2016 Earnings Conference Call

May 16, 2016, 04:00 PM ET

Executives

John C. Lawrence - President and Chief Executive Officer

Daniel L. Parks - Chief Financial Officer

Russell C. Lawrence - Executive Vice President of Latin America

John C. Gustavsen - Executive Vice President

Matthew E. Keane - Director of Sales

Operator

Good day and welcome to the United States Antimony Corporation Conference Call. Today’s conference is being recorded.

Before we begin our presentation, I would like to advise you that today’s call will include forward-looking statements within the meaning of the Federal Security Laws. Our presentation will include statements regarding our projections, estimates, expectations, beliefs and assumptions. These forward-looking statements will relate to among other things are revenues and productions.

These statements are qualified by important factors that could cause our actual results to differ materially from those reflected by the forward-looking statements including those factors set forth in the Risk Factors section of our 2015 10-K form and our current 10-Q if applicable. These reports also include glossaries of certain industry terms that may be used in today’s conference call. The forward-looking statements disclaimer is included in our press releases and this disclaimer is in effect for the duration of the call.

At this time, I would like to turn the conference over to Mr. John Lawrence. Please go ahead sir.

John C. Lawrence

Hey welcome to the First Quarter Investor Meeting 2016 of U.S. Antimony and we have five major points that we want to get through on this call. The first one is the actual antimony market we’ll cover that detail. Secondly is a record production of antimony. Third will be our precious metal production including a new source of gold. The fourth will be the permitting of low [indiscernible] for production and the fifth will be our Bear River sales, all of which are very positive.

Dan Parks our CFO is going to specifically run in on the financial information. Dan, go ahead.

Daniel L. Parks

Thank you John. For the first quarter of 2016, we recognized a net loss of $188,640 after depreciation and amortization of $261,150 on sales of $3,322,203, compared to a gain of $440,028 in the first quarter of 2015 on sales of $2,947,381. The profit in the first quarter of 2015 was primarily due to a negotiated settlement of $914,967 to the company’s cost of raw material to the company’s cost of raw materials.

The gain from the price adjustment was reported as other operating income in 2015. The loss in the first quarter of 2016 was primarily due to a decrease in the price of Antimony from $4.29 in quarter one of 2015 to $2.80 in quarter of 2016.

47% of our Antimony sold in quarter one of 2016 was from Mexico versus 21% in quarter one of 2015. The precious metals gross revenue in quarter of 2016 was $217,617 versus $122,665 for the same quarter of 2015. The precious metals net revenue was equal to approximately $0.20 per pound of Antimony sold.

For the first quarter of 2016 the EBITDA, the Earnings Before Income, Taxes, Depreciation and Amortization was $72510 compared to an EBITDA $66053 for the same period of 2015, but that was after the negotiated settlement of $914,967. The largest impediment to our profitability has been the decline in the price of Antimony from $8.11 per pound in April of 2011 to $2.27 per pound in January of 2016 a 72% decrease and the non production cost in Mexico.

In the first quarter of 2016 these non production costs were $195,642 and include the cost of mines and mills in Mexico that have been idle due to a lack of furnace capacity at the Madero smelter and metallurgical problems with the loss Los Juarez. Back to you John.

John C. Lawrence

Okay. Looking at the Antimony market, we've watched it since April of 2011 when our average or when Antimony actually peaked at $8.11 per pound and this was a Rotterdam quotation to the present low of Rotterdam which was $2.27 to 72% decrease. So we ask, what is going on here? What is the deal? And just in very a brief look at the supply side and no one really has a firm figure on what the world supply is, but sufficed to say that its somewhere between 160,000 and 200,000 metric tons basically 350,000 to 450,000 pounds per year.

Very briefly of that 200,000, 50,000 or 60,000 are coming from secondary wedge smelters, in other words the battery recycling companies are providing that much antimony. The second largest source would be primary wedge smelters where antimony is a byproduct of led production and that would account for may be 30,000 to 40,000 tons a year.

The balance which amounts to say 55,000 or 60,000 pounds is China and we look at the main mine Hunan Province, Huachang. The government part accounts for maybe 15,000 tons a year. The private sector may be another 15,000 and then the non-Hunan Chinese production 25,000. So China is probably on the order of 60,000 may be 75,000 tons a year.

The next two, one is an Australian mine by the name of Mandalay about 7,000 tons a year, Siberia 7,000 tons, Tajikistan 6,000 tons, Miramar 5,000 tons. And the rest include Turkey, Bolivia, Mexico, Peru. So what we’ve seen here on the supply side is a contraction and we’ve lost one mine in South Africa that was prominent Con Murchison.

We’ve lost for instance in New Finland supply and also various mines, prominent mines in Bolivia, Mexico were bringing back ourselves. So we’re seeing a contraction in the supply side, but we’re seeing a steady demand and Matt can verify that at the present time, we’re sold out. The demand is very strong especially for domestic producer.

So what is happening right now is although we hit low, I think our sale price hit low of $2.10 for antimony oxide and $2.32 for metal. We’re now talking pricing of oxide in the $2.45 range and since it only contains 83% antimony that makes the metal $2.95 and we’re talking metal at $2.69. So if this is the case and we understand that the inventory in Europe has been dim.

We’ve been told, we all know that Chinese production has been as much as a dollar below costs. So this could be the bottom and this could be the turnaround. And if it is, I can’t tell you how important it would be that this company, it would be unbelievable.

Turning to production of antimony. I’m going to turn this over to Russ, but very briefly we’re doing about 150,000 pounds of antimony per month and that’s contained antimony from Madero. Our North American supply is amounting to maybe 130,000 pounds and we’re transitioning to pick-up our own mines in Mexico right now and they are accounting for about 60,000 pounds. So our aggregate appears to be over 300,000 and this is consistent with the first quarter and apparently for April.

The two biggest headwinds we’ve had as Dan mentioned, one is the price and hopefully that’s resolved. And secondly is the category what we call non-production Mexican expenses and that amounted to a very significant cost in our production by bringing Wadley, Soyatol and Los Suarez in the production that will vanish. So I think we’ve got everything going for us right now.

Russ, I’m going to turn it over to you for your update on Madero.

Russell C. Lawrence

Okay. Well in this overview we have currently 14 small rotary furnaces in production and one great giant furnace. The giant furnace can only handle higher sulfide cons that we have got from Hill Groves and Los Suarez and the Guadalupe mine. And we can handle the higher sulfide grade in all of the small rotary furnaces as well, but we enjoy some increased production and a recovery figure when we process the high sulfide tune LRF and I touched on those in the last couple of investor calls.

But we also have three SRFs on deck and most of the infrastructure is in place in Mexico. In fact one of them almost finished building its line with refractory, we just have to wire it and stand the ducting up and paint and it will be up. The other two largely scavenge for parts, but we still have the majority of the parts there in all the natural gas lines and all-in-all I guess it’s just a matter of putting it together.

We also finished a majority of the [Costa] (Ph) leech circuits we are handling Slags, the I guess we could or actually profess everything by saying my production is highly sensitive to the input grade of the feed that we’re talking about. That said, we split the production of the small furnaces right now to handle the recovery of the precious metals from the [Hugo Slag] (Ph) and doing that in six and sometimes seven furnaces and for recipes that required us to get a quite a bit of soda ash to dot.

But on shipping, current rate one truck per week that’s got a split bauxite from Wadely to Montana for sale and use for their purposes of recovering the goal that can also about half of the weight of each truck 20,000 pounds in antimony metal that contains the precious metals that they then guess and John will cover up there in Montana.

And I could believe that tiers worth of production rates that we split the overall production right now between the LRF handles the high grade sulfides. I have 12 lots on hand of growth of their unroasted and they have another four or five batches of lots coming from Australia until July. I

I have 63 unprocessed lots of slag that contain the precious metal and that’s what I’m using the six or seven LR small furnaces to catch up on. The rest are doing Wadley and roasting Eadely for oxide. And the average grade of the oxide that I’m sending to Montana probably is around 78%.

We’ve been tapering with all sorts of things, but one is the furnace temperature and gas pressures and that’s going to constant [indiscernible] but we’re zeroing in on both the LRF and we’re making grade strike less the SRF. That’s [indiscernible] if John I could say something if you want about transitioning from the Wadely oxide to the Guadalupe.

John C. Lawrence

[Indiscernible]

Russell C. Lawrence

Okay. Well, in a way this production that we’ve been doing has been a great precursor to what I deem to be real advantage that we’re going to have which is nigh sulfide cons from two sources that are our own. One is Los Suarez it contains some gold and silver and the other one is Guadalupe which is a mine that we acquired I guess a set off mines right three of them.

And so what I’ve been doing there with the furnaces in the Madero is a great advantage to us because by the time we get up with the Guadalupe mine, I'll be more or less have the furnacing technique and recipes and cycle times in treatment while just its down. Basically that’s what I wanted to say about that.

John, that’s all I really have.

John C. Lawrence

Okay, great. The Guadalupe concentrate incidentally we’ve run to compete 65% to 70% antimony where the Australian concentrates are in the 57%, 58% range. So Guadalupe could be a premium concentrate. Some of which, we think we’re going to end up selling to the friction break industry in Australia, we’re working on that.

Let me turn briefly now to our precious metal production and Gus, I’ll let you cover that one it in brief however in looking at what we have from Australia, those concentrates will last us through the end of this year. And at that point, we will have also received somewhere in the neighborhood of 1,800 ounces of gold and Gus has been working on the gold circuit one for recovery, which looks excellent and secondly to increased production. Gus go ahead.

John C. Gustavsen

Okay, thanks John. I think it’s important to say that we’ve trained second person to be able to do this precious metals refining. And in fact in the last probably two weeks, he has been doing most of the work himself while I have been helping get some other stuff together here in the office. So it’s not a one man show anymore, we got a guy who is really good at it.

John mentioned the amount of gold that we should having in the Australian concentrates by the end to run there and I might just mentioned the precious metal sales for first quarter 2016 were $217,617. This compares to 2015 first quarter of $122,665 and that’s an increase of 77.4%, we’re working to increase that even more. Back to you John.

John C. Lawrence

Okay. Turning now to our big target, which is Los Suarez. We have finished the engineering and most of the cost analysis to put a cyanide leach plan to leach the tailings from the Los Suarez flotation mill. It’s important, because our recovery of the gold was only on the order of 30%. We’ve run additional cyanide test work, which has indicated very high gold recovery and not quite as high silver, but in the 90% category.

The permit and that will be just for the cyanide plant, should be submitted hopefully this month and that will include what’s call the risk analysis, which we’ve done here. Basically the model is to very carefully methodically start testing with perhaps one leach tank. And then with that smooth and with the rest of the circuit installed, we’ll gear up to 100 metric tons per day. It is hard grind, the mill is accelerated 150 tons but to be conservative we’re saying 100.

And with the leach circuit, we could recover on the order of 250 ounces based on the global average to the deposit and perhaps three to five ounces of gold per day. When that smooth, when Russ is running the concentrates also at Madero, we will then look to the 500 ton mill. 500 ton mill is already permitted for Madero, a lot of the infrastructure is already there, the concrete floor et cetera.

Matthew E. Keane

You mean at Puerto Blanco right, John?

John C. Lawrence

Excuse me correct in Puerto Blanco. So that’s going to really balance us out with substantial silver and gold production in addition to our North American supply in addition to Australia. We’re quite excited about it. I would like to turn now to our Bear River Zeolite operation in Preston, Idaho. Matt are you on board?

Matthew E. Keane

I am, John. Did you want to talk about the first quarter first before I go on to just current state of affairs. Okay.

John C. Lawrence

Yes, that’ll be good.

Matthew E. Keane

Yes. You want to talk about the first quarter.

John C. Lawrence

No, you go ahead if you want.

Matthew E. Keane

Okay. I'll go about the current status and for April and May we have. April we sold 1282 tons and in May I believe we’re going to sell about 1,600 tons, but with the orders that are on books we have a gross potential of selling about 2,600 tons. Reasoning there is that real bad weather we had in the early part of the year that got us a little bit behind with customers and we’ve got a lot of customers waiting for product, but we should be caught up with that in a couple of weeks and then no real problem over the beyond that.

John wanted to get while we all wanted to get prices up just a little bit, so at the first of the year we started to raise prices on Zeolite and what we did there was with our old customers, old reliable customers we just tried to take a a5% increase in sales and with any new customers it was approximately a 10% increase and we’ve done that and have had absolutely no push back at all, everything is just fine with the customer base and raising prices.

The two big sales areas still remain to be water filtration and ag, I measure that by the tons that we’ve sold in those areas. The new customers was acquired in those area an also the dollars, the dollar value of those customers. That seems to be the two big areas of water filtration and the whole ag industry is still real strong. So I think we’re going to have a real good year once we get caught up in a couple of weeks, it’s going continue to be strong.

John did you want to do quarter one a little recap.

John C. Lawrence

Yes, Dan mentioned the numbers and we showed a $29,000 profit as appose to 2015 for the first quarter we reported the loss of $18,900 dollars and the EBITDA for Q1 was $86,000 compared to a $37 EBITDA loss for 2015. So the overall synopsis, we did obtain a new order in a mining sector that promises to be potentially a very strong market and its related to the removal of ammonium from underground water.

It happens at this point primarily gold mines and we’re servicing right now four different mines and the blasting agent is what we call [indiscernible] ammonium nitrate fuel only and the ammonium reports to the ground water, which kills fish, creates real headache problems underground.

So this is rapidly expanding and we just took this 1,400 ton order on couple of weeks ago and it has increased our weekly production by a 160 metric tons. So it’s very substantial and we look at it as a major factor for helping us on the Los Suarez project as well as getting our payables down. It will continue for some time, we’re possibly on the break of two to three other launch for the same purpose all in Northern Canada.

At this point turn it over to questions.

Matthew E. Keane

Hi John, I just say one thing before we go.

John C. Lawrence

Yes. Sure.

Matthew E. Keane

This is Matt. You said we just got that order couple of weeks ago and we did, we got the order and then started producing for it and we’ve already shipped 224 metric tons on that 1,400 ton order. So that’s a real good production there. And I wanted to mention some current news on antimony that I just got recently.

And you talked about the low for last quarter, but the low for this quarter so far was in May on metal and that low was 240. And currently we’re hearing prices of you had mentioned 269, but we’re hearing prices all away from 269 to 301 on metal. And for oxide that low also occurred in May at 210 which you mentioned. But now we’re hearing as of today 242 to 275 for oxide and I’ll be nailing down couple of orders probably tomorrow two to three orders for future delivery at those higher prices. That’s all I wanted to add.

John C. Lawrence

This is a great news Matt. And as we’ve pointed out when this turn occurs historically it’s been very fast as is the case now and usually a sharp increase, we can only hope for that, but it would set us up tremendously. Well will go ahead at this point for questions.

Question-and-Answer Session

Operator

John C. Lawrence

Okay. Fine, I appreciate it everyone for the participation.

Operator

Thank you for your participation. This does conclude today’s call.

John C. Lawrence

Yes. Thanks a lot.

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