UNITED STATES ANTIMONY CORP (UAMY) FY 2022 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. Management’s Discussion and Analysis and Results of Operations
The following discussion should be read in conjunction with our financial statements and related notes thereto as filed with this report.
SELECTED FINANCIAL DATA.
Statement of Operations Information:
| For the year ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||
| Revenues | $ | 11,044,707 | $ | 7,747,506 | ||||
| Costs of revenues | 9,048,517 | 6,908,901 | ||||||
| Gross profit | 1,996,190 | 838,605 | ||||||
| Total operating expenses | 1,647,985 | 1,498,862 | ||||||
| Income (loss) from operations | 348,205 | (660,257 | ) | |||||
| Other income (expense) | 96,529 | 599,788 | ||||||
| Income tax expense | (16,073 | ) | - | |||||
| NET INCOME (LOSS) | $ | 428,661 | $ | (60,469 | ) | |||
| Weighted average shares of common stock (basic) | 106,287,359 | 102,835,574 | ||||||
| Weighted average shares of common stock (diluted) | 106,287,359 | 102,835,574 |
Balance Sheet Information:
| December 31,2022 | December 31, 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| Working capital | $ | 19,397,489 | $ | 21,498,138 | ||||
| Total assets | 34,700,450 | 35,002,727 | ||||||
| Accumulated deficit | (33,070,332 | ) | (32,711,263 | ) | ||||
| Stockholders’ equity | 31,869,255 | 32,368,803 |
Overview
Company-wide
For the year ended December 31, 2022, the Company reported net income of $428,661 after depreciation and amortization of $909,220, compared to a net loss of $60,469 for 2021 after depreciation and amortization of $880,880.
During the year ending December 31, 2022, the most significant factors affecting our financial performance were as follows:
| · | A significant increase in the amount of sales of antimony, up 53% from the prior year. | |
|---|---|---|
| · | A purchase option agreement for the Wadley mines signed in June 2022 along with an 8-month mining and due diligence period providing exclusive rights to extracted mineral. Until June 2022, the Wadley mine had halted USAC’s ability to purchase ore. The purchase option agreement due diligence period has been extended to October 15, 2023. | |
| · | The continued efforts in mechanical improvements associated with sales of zeolite from Bear River Zeolite. | |
| · | Mitzi Hart’s replacement of Marilyn Sink as Plant Manager at U.S. Antimony. | |
| · | The hiring of Richard Lyon as Plant Supervisor at Bear River Zeolite along with the continued efforts in trucking coordination and sales management of Gretchen Lawrence | |
| · | Increased trucking prices and decreasing trucking availability. | |
| · | Difficulties in sourcing labor in the US and Mexico due to the Covid pandemic and government incentives resulting in a significantly smaller labor pool. | |
| · | The completion of payment and disposal for the removal of legacy slags at the smelters in Mexico and the United States. | |
| · | The sale of finished antimony ingots directly to customers from our Madero Smelting facility. | |
| · | The purchase of several large salt sheds for storage of ore at Bear River Zeolite in order to eliminate interruptions in production during winter and the wet seasons. | |
| · | The purchase of several key pieces of rolling stock equipment at Bear River Zeolite including: A Cat 235 excavator, a Cat 12H road grader, a Cat 740 articulated haul truck, a Cat D8T dozer with dual rippers. | |
| · | The purchase of a new modern 2.5-foot cone crusher to replace our older cone crusher at Bear River Zeolite. | |
| · | The construction of a 100’ by 50’ warehouse at Bear River Zeolite. |
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Our plan for 2023 is as follows:
| · | Continue processing the 2,000 tons of mined and shipped rock from the Los Juarez property at our Puerto Blanco flotation facility. | |
|---|---|---|
| · | Continue to process ores and concentrates at our Madero smelter facility. | |
| · | The purchase of new forklifts and scales at Madero smelter facility. | |
| · | The relining of several short rotary furnaces along with the repair of equipment at the Madero smelter facility | |
| · | The installation of two new electric furnaces at the Montana facility for increase production of antimony trisulfide. | |
| · | Additional mapping and additional geological studies at the Los Juarez property in order to ascertain more information about the mineralization indicated in our preliminary geophysical and geochemical work. | |
| · | The continued effort to source additional antimony from Honduras, Nicaragua, and especially Guatemala as well as sources in the United States, Canada, Alaska, and Mexico. | |
| · | Continuation of the mining of the Soyatal claims for the production of antimony trisulfide given that preliminary testing of the concentrates resulted in acceptable grade and acceptably low contaminants to achieve military specification. | |
| · | Continuation of the supply of sized antimony metal to Ambri in accordance with our letter of intent of 2020 and continued communication regarding potential of further cooperation. | |
| · | Continuation of the processing of Soyatal ore to produce concentrates with the goal of testing antimony grade and contaminant content for the potential of an auxiliary source of antimony trisulfide while the Sierra Guadalupe property is started into production as the primary source. If the Soyatal concentrates pass testing, the decision to retain the Soyatal claims will be made. |
In addition to the processing goals stated above, the Company intends to focus on and significantly increase its production, capacity, and sales of zeolite at its subsidiary Bear River Zeolite. The addition of two more winter-storage buildings (one located between the mine and the mill and the other located near the mine) is planned. Salt sheds for these ore storage locations are planned to eliminate the necessity of the use of tarps for keeping the zeolite dry during the winter and rainy seasons. The building near the mine also allows a location for the regular service maintenance of the mine equipment in winter and rainy months. The crushing rate is anticipated to increase 2-3 times with the addition of our new cone crusher and a host of improvements to the crushing equipment and parts downstream. This includes the updating of nearly all of our screens, along with likely the replacement of one of our hammermills with a crusher better suited for a more efficient production of our main product. These decisions will be aided by several sieve and aggregate flow studies. The Company plans to increase its efficiency and volume of crushed ore by means of the use of the new mining equipment purchased in 2022 along with improved blasting techniques and determination of the best balance between blasting and ripping. The enhancement of the dust collection and dust control also is planned and should enhance our ultra-fine production.
The following are highlights of the significant changes during 2022:
Antimony
| · | The sale of antimony during 2022 was 1,394,036 pounds compared to 911,079 pounds in 2021, an increase of 53.0%. | |
|---|---|---|
| · | The average sales price of antimony during 2022 was $5.47/lb. compared with $5.29/lb. in 2021, an increase of $0.18/lb. (a 3.5% increase). During the beginning of 2023, the Rotterdam price of antimony is approximately $5.15/lb. per pound. | |
| · | We are producing and buying raw materials, which will allow us to ensure a steady flow of products for sale. Our smelter at Madero, Mexico, was processing primarily ores from the Wadley mines in 2022 under a clause that accompanies a purchase option agreement. Our smelter in Montana was producing material from both Mexico and our North American sources in 2022. Raw materials from our North American supplier were reduced in 2022 due to plant maintenance, an unexpected equipment failure, the effects of Covid, labor supply shortages, and shipping difficulties across the border due to political reasons. | |
| · | We produced and sold three truckloads of ingots of antimony metal, each containing 20 metric tons, in the first half of 2022 that were shipped directly to customers in the United States from our Madero smelter. This will significantly reduce our production and shipping costs compared to finishing the ingots in Montana. | |
| · | We are proceeding with further mapping and geological work to augment our initial geophysical, geochemical, and geological survey of the Los Juarez property to better understand its potential value. |
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Zeolite
During 2022, the Company sold 13,047 tons of zeolite compared to 11,747 tons in 2021, an increase of 1,300 tons (11.1%). Bear River Zeolite (“BRZ”) realized a gross profit of $339,907 (10.8% of zeolite sales) in 2022 compared to a gross profit of $340,806 (13.1% of sales) in 2021. Net income for the BRZ segment was $141,496 for the year ended December 31, 2022 compared to $193,674 for the year ended December 31, 2021. The increase in production but decrease in profit were attributable to outpacing of costs to increase in pricing. As an example, the price of packaging materials, diesel, labor, electricity, oil, etc. all increased substantially in 2022. To address this, the Company plans to increase its price per ton of offered zeolite and concentrate its efforts more on bulk orders that minimize the focus of labor on packaging. Additionally, the Company plans to increase production volumes at Bear River Zeolite in 2023 to address growing customer demands.
Corporate-wide
During the year ending December 31, 2022, the following transactions had a material impact on the Company’s financial performance:
| · | The signing of a purchase option agreement for the exclusive rights to all extracted mineral from the Wadley mines for an 8-month period allowing the Company to acquire antimony ore and ascertain grade and tonnages in advance of a decision to purchase affording the Company to accumulate more lots of antimony at its smelting facility in Madero than have ever been accumulated. | |
|---|---|---|
| · | The hiring of Richard Lyon as Plant Supervisor at Bear River Zeolite providing far better and more consistent oversight of personnel and operations with guidance from management in conjunction with the use of funds to substantially update and improve plant infrastructure. | |
| · | The sustained and favorable increased price of antimony. | |
| · | The purchase of a new and modern cone crusher and a host of new equipment at Bear River Zeolite to improve production and performance. | |
| · | The re-initiation of payments towards the acquisition of the Sierra Guadalupe property. | |
| · | The appointment of 3 new members to the Company’s Board of Directors, Tim Hasara, John C. Gustavsen, and Gary C. Evans. |
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Results of Operations
Operational and financial performance
Antimony
Financial and operational metrics of antimony for the year ended December 31, 2022 and 2021 was as follows:
| Year ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Antimony - Combined USA and Mexico | 2022 | 2021 | $ Change | % Change | ||||||||||||
| Total revenue -antimony | $ | 7,532,922 | $ | 4,815,524 | $ | 2,717,398 | 56.4 | % | ||||||||
| Revenue - processing | 98,748 | - | 98,748 | N/A | ||||||||||||
| Total revenue – antimony segment | $ | 7,631,670 | $ | 4,815,524 | 2,816,146 | 58.5 | % | |||||||||
| Gross profit - antimony | $ | 1,505,116 | $ | 266,722 | 1,238,394 | 464.3 | % | |||||||||
| Total lbs. of antimony metal sold | 1,394,036 | 911,079 | 482,957 | 53.0 | % | |||||||||||
| Average sales price/lb. metal | $ | 5.47 | $ | 5.29 | $ | 0.18 | 3.5 | % | ||||||||
| Average cost/lb. metal | $ | 4.39 | $ | 4.99 | $ | (0.60 | ) | (11.9 | %) | |||||||
| Average gross profit/lb. metal | $ | 1.08 | $ | 0.30 | $ | 0.78 | 259.9 | % |
During the year ended December 31, 2022, the average sales price for antimony increased $0.18 per pound compared to the year ended December 31, 2021. Gross profit per pound increased $0.78 per pound over the year ended December 31, 2021.
Due to its antimony production and sales along with a favorable antimony price, the Company enjoyed its first profitable year since 2018. We cut costs by selling finished ingots directly to customers in the United States from our Mexican smelter eliminating additional shipping and processing costs at our Montana facility.
The first two quarters of 2022 each recognized more net profit than any previous year in the Company’s history. The Company experienced a decrease in production in the third quarter due to a temporary decrease in feed for two reasons. First, there was a scheduled shut-down by our North American supplier that was followed by equipment failure at their facility. In addition to this, the supplier reported having difficulties with labor supply. Second, the decrease in supply corresponded with less sourcing in Mexico during the negotiation phase regarding our purchase option agreement for the Wadley property. The delay between the reception of ore at the Mexican Smelter combined with the aforementioned delay carried over into fourth quarter of the year.
The Company processed and sold 37,485 lbs. of antimony trisulfide as part of a tolling agreement. During this period, the Company worked on and solved several problems that it was having with its processing of antimony concentrate from Mexico into antimony trisulfide crystal for sale to the munitions market and the Defense Logistics Agency (“DLA”). In addition, two more furnaces were purchased to give the Company back-up in anticipation of planned maintenance.
Mitzi Hart, who assumed the role of Plant Manager and also assistant Sales Director for antimony, has extensive previous experience in sourcing trucking. This resulted in decreasing our trucking costs considerably. Also, the Company was able to offer a discount for clients willing to source their own trucking which resulted in several clients who now provide their own freight.
Zeolite
Financial and operational performance of zeolite for the year ended December 31, 2022 and 2021 was as follows:
| Year ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zeolite | 2022 | 2021 | $ Change | % Change | ||||||||||||
| Total revenue - zeolite | $ | 3,151,330 | $ | 2,593,641 | 557,689 | 21.5 | % | |||||||||
| Gross profit - zeolite | 339,907 | 340,806 | (899 | ) | (0.3 | %) | ||||||||||
| Tons of zeolite sold | 13,047 | 11,747 | 1,300 | 11.1 | % | |||||||||||
| Average sales price/ton | $ | 241.55 | $ | 220.78 | $ | 20.77 | 9.4 | % | ||||||||
| Average cost/ton | $ | 216.27 | $ | 191.77 | $ | 24.50 | 12.8 | % | ||||||||
| Average gross profit/ton | $ | 25.28 | $ | 29.01 | $ | (3.73 | ) | (12.9 | %) |
Sales volume of zeolite for the year ended December 31, 2022 increased 1,300 tons over the year ended December 31, 2021. Average sales price per ton increased $20.77 for the year ended December 31, 2022 over the comparable period ending December 31, 2021.
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At Bear River Zeolite, between 2021 and 2022, despite an increase in sold tons, gross profit decreased slightly. This was due to the increase in costs combined with a delay in raising our prices in order to retain particular clients that had pre-existing price agreements. The strategy going forward will be to increase our sales price while significantly increasing production and sales. The overall strategy for increasing production started with the mine and mining techniques and utilizing the newly purchased rolling stock (mining and trucking equipment). The Company experimented with ripping versus blasting and concluded at first that ripping was superior. However, due to the distribution of rock size from ripping, it was concluded by the end of 2022 that ripping caused more delay in processing owing to the necessity to drill and break or blast oversized rock that would not fit in the jaw crusher. Consequently, the primary technique that yields the fastest production from the mine through the mill is blasting. Improvements to the blasting technique are scheduled for 2023. The second phase of production improvements relate to the selection of the discharge size from the new cone crusher purchased in December. Once the optimal size has been determined that corresponds to the most efficient rate of production and efficiency in product size, the plan is to work our way downstream through the secondary crushing circuit and then the screening. Finally, the efficiency and production capacity of our packaging plant vs. available labor for this plant will be addressed to match the increased zeolite production.
Precious Metals
Financial and operational performance of precious metals for the three months ended December 31, 2022 and 2021 was as follows:
| Year ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Precious metals | 2022 | 2021 | $ Change | % Change | ||||||||||||
| Total revenue - precious metals | $ | 261,707 | $ | 338,341 | (76,634 | ) | (22.6 | %) | ||||||||
| Gross profit precious metals | 151,167 | 231,077 | (79,910 | ) | (34.6 | %) | ||||||||||
| Ounces sold - gold | 43.77 | 70 | (26.23 | ) | (37.5 | %) | ||||||||||
| Ounces sold - silver | 25,122 | 27,342 | (2,220 | ) | (8.1 | %) |
EARNINGS BEFORE INTEREST TAX DEPRECIATION AND AMORTIZATION
The Company utilizes Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”), a non-GAAP financial measurement which approximates free cash flow.
Our company-wide Earnings Before Interest Taxes Depreciation Amortization (“EBITDA”) was $1,369,095 for the year ended December 31, 2022, compared to EBITDA of $825,950 for the year ended December 31, 2021, a 65.8% increase. Increase in gross revenue of $3,297,201 and increased gross profit of $1,157,585 were the primary drivers behind the EBITDA results in 2022.
Income from operations improved from a company-wide loss of $660,257 for the year ended December 31, 2021 to income from operations of $348,205 for the year ended December 31, 2022. Primary drivers were increased antimony sales and, to a lesser extent, continued strong market prices for antimony and zeolite.
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EBIDTA schedules by business segment for the year ended December 31, 2022 and December 31, 2021 is presented as follows.
| Antimony – Combined USA and Mexico | Year endedDecember 31, 2022 | Year endedDecember 31, 2021 | $ Change | % Change | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross antimony revenue | $ | 7,631,670 | $ | 4,815,524 | $ | 2,816,146 | 58.5 | % | ||||||||
| Cost of sales | 6,126,554 | 4,548,802 | 1,577,752 | 34.7 | % | |||||||||||
| Gross profit – antimony | 1,505,116 | 266,722 | 1,238,394 | 464.3 | % | |||||||||||
| Operating expenses | 1,482,526 | 1,355,121 | 127,405 | 9.4 | % | |||||||||||
| Income (loss) from operations | 22,590 | (1,088,399 | ) | 1,110,989 | 102.1 | % | ||||||||||
| Non-operating income | 129,481 | 603,179 | (473,698 | ) | 78.5 | % | ||||||||||
| Provision for income tax | (16,073 | ) | - | (16,073 | ) | N/A | ||||||||||
| Net income (loss) – antimony | 135,998 | (485,220 | ) | 621,218 | 128.0 | % | ||||||||||
| Interest expense | 6,884 | 1,700 | 5,184 | 304.9 | % | |||||||||||
| Provision for income tax | 16,073 | - | 16,073 | N/A | ||||||||||||
| Depreciation and amortization | 630,855 | 613,202 | 17,653 | 2.9 | % | |||||||||||
| EBITDA – antimony | $ | 789,810 | $ | 129,682 | $ | 660,128 | 509.0 | % |
| Zeolite | Year endedDecember 31, 2022 | Year endedDecember 31, 2021 | $ Change | % Change | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross zeolite revenue | $ | 3,151,330 | $ | 2,593,641 | $ | 557,689 | 21.5 | % | ||||||||
| Cost of sales | 2,811,423 | 2,252,835 | 558,588 | 24.8 | % | |||||||||||
| Gross profit – zeolite | 339,907 | 340,806 | (899 | ) | (0.3%) | |||||||||||
| Operating expenses | 165,459 | 143,741 | 21,718 | 15.1 | % | |||||||||||
| Income from operations | 174,448 | 197,065 | (22,617 | ) | (11.5%) | |||||||||||
| Non-operating income (expense) | (32,952 | ) | (3,391 | ) | (29,561 | ) | 871.7 | % | ||||||||
| Net income – zeolite | 141,496 | 193,674 | (52,178 | ) | (26.9%) | |||||||||||
| Interest expense | 8,257 | 3,839 | 4,418 | 115.1 | % | |||||||||||
| Depreciation and amortization | 167,825 | 160,414 | 7,411 | 4.6 | % | |||||||||||
| EBITDA – zeolite | $ | 317,578 | $ | 357,927 | $ | (40,349 | ) | (11.3%) |
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| Year ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Precious Metals | 2022 | 2021 | $ Change | % Change | ||||||||||||
| Gross revenue precious metals | $ | 261,707 | $ | 338,341 | $ | (76,634 | ) | (22.6 | %) | |||||||
| Cost of sales | 110,540 | 107,264 | 3,276 | 3.1 | % | |||||||||||
| Gross profit – precious metals | 151,167 | 231,077 | (79,910 | ) | (34.6 | %) | ||||||||||
| Operating expenses | - | - | - | N/A | ||||||||||||
| Income from operations | 151,167 | 231,077 | (79,910 | ) | (34.6 | %) | ||||||||||
| Non-operating expenses | - | - | - | N/A | ||||||||||||
| Net income – precious metals | 151,167 | 231,077 | (79,910 | ) | (34.6 | %) | ||||||||||
| Interest expense | - | - | - | N/A | ||||||||||||
| Depreciation and amortization | 110,540 | 107,264 | 3,276 | 3.1 | % | |||||||||||
| EBITDA – precious metals | $ | 261,707 | $ | 338,341 | $ | (76,634 | ) | (22.6 | %) |
| Company-wide | Year endedDecember 31,2022 | Year endedDecember 31,2021 | $ Change | % Change | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross revenue | $ | 11,044,707 | $ | 7,747,506 | $ | 3,297,201 | 42.6 | % | ||||||||
| Cost of sales | 9,048,517 | 6,908,901 | 2,139,616 | 31.0 | % | |||||||||||
| Gross profit | 1,996,190 | 838,605 | 1,157,585 | 138.0 | % | |||||||||||
| Operating expenses | 1,647,985 | 1,498,862 | 149,123 | 9.9 | % | |||||||||||
| Income (loss) from operations | 348,205 | (660,257 | ) | 1,008,462 | 152.7 | % | ||||||||||
| Non-operating income | 96,529 | 599,788 | (503,259 | ) | (83.9 | %) | ||||||||||
| Provision for income tax | (16,073 | ) | - | (16,073 | ) | N/A | ||||||||||
| Net income (loss) | 428,661 | (60,469 | ) | 489,130 | 808.9 | % | ||||||||||
| Interest expense | 15,141 | 5,539 | 9,602 | 173.4 | % | |||||||||||
| Provision for income tax | 16,073 | - | 16,073 | N/A | ||||||||||||
| Depreciation and amortization | 909,220 | 880,880 | 28,340 | 3.2 | % | |||||||||||
| EBITDA – Company-wide | $ | 1,369,095 | $ | 825,950 | $ | 543,145 | 65.8 | % |
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LIQUIDITY AND FINANCIAL CONDITION
| WORKING CAPITAL | December 31,2022 | December 31,2021 | ||||||
|---|---|---|---|---|---|---|---|---|
| Current assets | $ | 21,617,359 | $ | 23,568,992 | ||||
| Current liabilities | (2,219,870 | ) | (2,070,854 | ) | ||||
| Working capital | $ | 19,397,489 | $ | 21,498,138 |
| For the year ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| CASH FLOWS | December 31,2022 | December 31,2021 | ||||||
| Cash flow used by operating activities | $ | (249,277 | ) | $ | (2,431,477 | ) | ||
| Cash flow used by investing activities | (1,785,661 | ) | (653,126 | ) | ||||
| Cash flow provided (used) by financing activities | (267,725 | ) | 23,782,555 | |||||
| Net change in cash during period | $ | (2,302,663 | ) | $ | 20,697,952 |
As of December 31, 2022, the Company had cash and cash equivalents of hand of $19,117,666 which consisted of $19,060,378 in money market funds and deposit accounts along with $57,288 of restricted cash.
Net cash used by operating activities was $249,277 for the year ending December 31, 2022, compared with cash used by operating activities of $2,431,477 during the year ended December 31, 2021. The $2,182,200 change in cash from operating activities is attributable to ongoing strong gross profit from antinomy sales.
Net cash used by investing activities of $1,785,661 included the purchase of a caterpillar for the Bear River Zeolite operation and ongoing construction of a new warehouse in Preston, ID.
Cash flow used by financing activities for the year ended December 31, 2022 was $267,725 compared to a cash flow provided by financing activities of $23,782,555 for the year ended December 31, 2021. In 2021, the Company raised $23,342,178 from the issuance of common stock and warrants and $1,790,705 from the exercise of warrants by existing shareholders. This capital raise and warrant exercise was not recurring during the year ended December 31, 2022.
For the year ending December 31, 2023, we are planning to use funds for
| · | Continue with substantial upgrades to the Bear River Zeolite plant, including modernizing equipment in our crushing plant to include new screens, sorting, conveying, dust-control, and crushing equipment with increased number of safety mechanisms to avoid shut-downs and insure uninterrupted production. Additionally, we plan to use funds to expand and update our packaging capacity both on-site and possibly the creation of an off-site packaging plant where we can source more labor. All use of funds for Bear River Zeolite are for the express purpose of substantially increasing production and sales of zeolite. Some of the use of funds at Bear River Zeolite will doubtlessly be applied to increasing labor costs and an increase in the number of workers. | |
|---|---|---|
| · | The continuation of payment towards the completion of the purchase of the Sierra Guadalupe mining claims and surface rights. Also, the payment towards the purchase of ore and assistance for establishing the extraction of mineral at this property for the purpose of both the synthesis of antimony trisulfide, antimony metal, and antimony trioxide. | |
| · | The payment of the remainder of the amount due for the purchase of the Soyatal mining claims and purchase of ores from those claims for the synthesis of antimony trisulfide and antimony metal. | |
| · | For the addition of a gravity separation circuit at the Madero Smelter for the upgrading of low-grade oxide ores. The updating of equipment that has either rusted, or otherwise failed due to normal wear and tear including, but not limited to, the regular re-lining of furnaces. At some point in the future, we intend to use funds to update the facility in such a way that it will be able to produce finished antimony oxide for sale directly to customers. This will require a very large building to enclose our furnaces to shield them from rain, wind, and the weather. Also, we will need to purchase some quality-control equipment for this purpose. | |
| · | In Montana, to install two more electric furnaces; to reline two more smelting furnaces, and to continue to source and pay for labor at a competitive rate and pay our limited crew what they are worth. | |
| · | At Puerto Blanco, to continue to process ore into concentrate for synthesis into antimony trisulfide product. For the regular purchase of consumables and reagents necessary to operate the flotation facility and lab. | |
| · | To hire a certified geologist to do additional mapping and geologic work at the Los Juarez property to complete the geophysical, geochemical, and previous geological work that was done in order to help ascertain the value of the property. | |
| · | To pay for taxes on all mining concessions. | |
| · | To pay for all regular permitting fees associated with our holdings in Mexico and the United States. | |
| · | To pay for new sources of potential antimony ore and continue to investigate new or alternative sources of antimony ore. |
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Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.
Critical Accounting Estimates
We have, besides our estimates of the amount of depreciation on our assets, two critical accounting estimates. The percentage of antimony contained in our unprocessed ore in inventory is based on assays taken at the time the ore is delivered, and may vary when the ore is processed. Also, the asset recovery obligation on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations, and may differ when we cease operations.
| · | The value of unprocessed ore is based on assays taken at the time the ore is delivered, and may vary when the ore is processed. We assay the ore to estimate the amount of antimony contained per metric ton, and then make a payment based on the Rotterdam price of antimony and the % of antimony contained. Our payment scale incorporates a penalty for ore with a low percentage of antimony. It is reasonably likely that the initial assay will differ from the amount of metal recovered from a given lot. If the initial assay of a lot of ore on hand at the end of a reporting period were different, it would cause a change in our reported inventory, but would not change our accounts payable, reported cost of goods sold or net income amounts. Our net income would not be affected. Direct shipping ore (DSO) purchased at our Madero smelter is paid for at a fixed amount at the time of delivery and assaying, and is not subject to accounting estimates. The amount of the accounting estimate for purchased ore at our Puerto Blanco mill is in a constant state of change because the amount of purchased ore and the percent of metal contained are constantly changing. Due to the amount of ore on hand at the end of a reporting period, as compared to the amount of total assets, liabilities, equity, and the ore processed during a reporting period, any change in the amount of estimated metal contained would likely not result in a material change to our financial condition. | |
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| · | The asset retirement obligation and asset on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations, and may differ when we cease operations. We make periodic reviews of the remaining life of the mine and other operations, and the estimated remediation costs upon closure, and adjust our account balances accordingly. At this time, we think that an adjustment in our asset recovery obligation is not required, and an adjustment in future periods would not have a material impact in the year of adjustment, but would change the amount of the annual accretion and amortization costs charged to our expenses by an undetermined amount. |