# UNITED STATES ANTIMONY CORP (UAMY) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from UNITED STATES ANTIMONY CORP's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/101538/000165495422004348/uamy_10k.htm
Accession: 0001654954-22-004348
Filing date: 2022-03-31
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/UAMY/
All MD&A years: /company/UAMY/mda/
Next year: /company/UAMY/mda/fy2022/ (FY 2022)

Item 7 Management’s Discussion and Analysis or Plan of Operations

Certain matters discussed are forward-looking statements that involve risks and uncertainties, including the impact of antimony prices and production volatility, changing market conditions and the regulatory environment and other risks. Actual results may differ materially from those projected. These forward-looking statements represent our judgment as of the date of this filing. We disclaim, however, any intent or obligation to update these forward-looking statements.

[[GREPCENT_TABLE]]
[["15"],["Table of Contents"]]
[[/GREPCENT_TABLE]]

Overview

Company-wide

For the year ended December 31, 2021, we reported net loss of $60,469 after depreciation and amortization of $880,880, compared to a net loss of $3,286,804 for 2020 after depreciation and amortization of $885,843.

During the year ending December 31, 2021, the most significant factors affecting our financial performance were as follows:

[[GREPCENT_TABLE]]
[["","\u00b7","Two private placements of stock during the first quarter of 2021."],["","\u00b7","A significant, steady, and pronounced increase of the London Metals Bulletin price of antimony."],["","\u00b7","The efforts in sales of zeolite of our zeolite sales director, Gretchen Lawrence."],["","\u00b7","The addition of an antimony sales director, Mitzi Hart."],["","\u00b7","The complete restructuring of office and plant personnel and procedures at the Montana and BRZ facilities."],["","\u00b7","Increased trucking prices and decreasing trucking availability"],["","\u00b7","Difficulties in sourcing labor due to the Covid pandemic and the relief funding to curtail the incentive to work."],["","\u00b7","The renegotiation of various supply, treatment, royalty, and tolling agreements."],["","\u00b7","The retirement of several outstanding, old, and significant debts."]]
[[/GREPCENT_TABLE]]

During the year ended December 31, 2021, the most significant event affecting our financial performance was the addition of over $23 million to our working capital via two capital raises of common stock. These funds allowed the Company to retire much of its outstanding debt. It also allowed the Company leverage to re-negotiate existing contracts and pursue previously prohibitive ventures. The fact that the Company could pay its bills on time resulted in a serious amount of restructuring and the ability to offer more to attract and retain labor.

Our plan for 2022 is as follows:

[[GREPCENT_TABLE]]
[["","\u00b7","Continue processing tons of mined rock from the Los Juarez property at our Puerto Blanco facility."],["","\u00b7","Continue to process ores and concentrates at our Madero facility."],["","\u00b7","Finish the removal of all the legacy slag at Madero (should be completed early Q2 of 2022)."],["","\u00b7","Begin substantial improvements at the Madero facility including the initiation of the construction of a large set of buildings to house the furnaces, filter bags, and cooling towers in order for ability to produce finished antimony oxide."],["","\u00b7","The purchase of new forklifts and scales at Madero facility."],["","\u00b7","The relining of many of the small rotary furnaces at Madero facility."],["","\u00b7","The installation of two new electric furnaces at the Montana facility for increase production of antimony trisulfide."],["","\u00b7","The completion of the geological, geochemical, and geophysical study at the Los Juarez property (currently underway) in order to ascertain more information about the mineralization. This study is being done on an area approximately 3km in length by about 0.8 km in width to cover the entire region extending from the western limits of our mining concessions all the way to the ejido of Los Juarez."],["","\u00b7","The continued effort to source antimony from Honduras and Nicaragua and other sources in Mexico and the United States."],["","\u00b7","Continued talks with Perpetua Resources detailing a tolling or treatment charge agreement in keeping with our existing collaboration agreement."],["","\u00b7","Finalization of several negotiations with land and concession owners in Mexico regarding additional sources of antimony."],["","\u00b7","Continuation of the mining of the Soyatal claims with a particular experiment of the processing of 40 tons of hand-sorted sulfide rock for flotation in the hopes of an auxiliary source of concentrates for the production of antimony trisulfide."],["","\u00b7","Continuation of the supply of sized antimony metal to Ambri in accordance with our letter of intent of 2020. The Company also intends to formalize its collaboration agreement with Perpetua Resources in the event that the demand of antimony from Ambri follows predicted trajectory."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["16"],["Table of Contents"]]
[[/GREPCENT_TABLE]]

In addition to the processing goals stated above, the Company intends to continue to improve its production capacity and sales of zeolite at its subsidiary Bear River Zeolite. These goals will be aided by the additional 100’ by 50’ warehouse for the storage and stockpile of product and also its 60’ x 40’ shop building, both of which should be completed in the first half of 2022. Also, the purchase of a Caterpillar 740 haul truck is underway to replace the defunct haul truck we had. The Company plans to purchase a replacement front-end loader for the mine to replace its 988-B Caterpillar that is on its last legs. The Company plans to then update the rippers on both Cat D-8 and D-9 supplement mining. A secondary, winter-storage platform located between the mine and the mill 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 following are highlights of the significant changes during 2021:     

Antimony:

[[GREPCENT_TABLE]]
[["","\u00b7","The sale of antimony during 2021 was 911,079 lbs. compared to 815,310 pounds in 2020, an increase of 11.7%."],["","\u00b7","The average sales price of antimony during 2021 was $5.29/lb. compared with $3.61/lb. in 2020, an increase of $1.68/lb. (a 46.5% increase). During the beginning of 2022, the Rotterdam price of antimony is approximately $6.06/lb. per pound."],["","\u00b7","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 producing primarily ores from the Wadley mines in 2021. Our smelter in Montana was producing material from both Mexico and our North American sources in 2021. Raw materials from our North American supplier was reduced in 2021 due to the effects of Covid and shipping difficulties."],["","\u00b7","We produced ingots of antimony metal in 2021 to be shipped directly to customers from our Madero smelter starting in 2022. We intend to increase this for 2022 and beyond. This will significantly reduce our production and shipping costs."],["","\u00b7","We are proceeding with the processing of Los Juarez ore in the 100 ton per day mill at Puerto Blanco. Due to the hardness of the jasperoid rock at Los Juarez, it has been determined that the actual through-put is more like 80 tons per day."]]
[[/GREPCENT_TABLE]]

Zeolite:

During 2021, the Company sold 11,747 tons compared to 10,661 tons in 2020, an increase of 1,086 tons (10.1%). Bear River Zeolite (“BRZ”) realized a gross profit of $340,806 (13.1% of sales) in 2021 compared to a gross profit of $323,780 (15.3% of sales) in 2020. Net income for the BRZ segment was $193,675 for the year ended December 31, 2021 compared to $262,861 for the year ended December 31, 2020.

Corporate-wide:

During the year ending December 31, 2021, the following transactions had a material impact on the Company’s net loss:

[[GREPCENT_TABLE]]
[["","\u00b7","On April 20, 2020, the Company received a loan of $443,400 pursuant to the Paycheck Protection Program (the \u201cPPP\u201d) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. During the year ended December 31, 2021, the Company received notification that the loan had been forgiven. The amount of the loan, $443,400, was recognized as gain on forgiveness of the CARES Act loan."],["","\u00b7","On November 7, 2014, the Company entered into an advance and concentrate processing agreement with Hillgrove Mines Pty Ltd of Australia (Hillgrove) in which the Company was advanced funds from Hillgrove to build facilities to process Hillgrove antimony concentrate. The Company has not processed Hillgrove concentrate for more than two years. The balance of the advance liability due was $1,134,221 at December 31, 2020. In April 2021, the Company successfully negotiated a settlement with Red River for an agreed upon amount of $1,020,799 which was paid on paid on April 8, 2021. The Company recognized a gain on settlement of the advance in the amount of $113,422 during the year ended December 31, 2021 (Note 8)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["17"],["Table of Contents"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u00b7","Starting in August of 2021, US Antimony negotiated with our Canadian feed source for a more favorable treatment charge contract to replace the previous one. This contract became effective in December of 2021 and represents an improvement from the previous treatment charge contract."],["","\u00b7","Throughout 2021, the price of antimony increased steadily."],["","\u00b7","Throughout 2021, the price of trucking, lumber (for pallets), fuel, and labor increased. The Company raised its starting wages twice at the facility in Montana and once at Bear River Zeolite."]]
[[/GREPCENT_TABLE]]

Operational and financial performance

Antimony Sales

Our sales volume of antimony for the year ended December 31, 2021 was as follows:

[[GREPCENT_TABLE]]
[["Antimony - Combined USA and Mexico","","2021","","","2020"],["Total Revenue - Antimony","","$","4,815,524","","","$","2,942,628"],["Total Lbs of Antimony Metal Sold","","","911,079","","","","815,310"],["Average Sales Price/Lb Metal","","$","5.29","","","$","3.61"],["Average cost per Lb Metal","","","4.99","","","","3.86"],["Average gross profit per Lb Metal","","$","0.30","","","$","(0.25",")"]]
[[/GREPCENT_TABLE]]

During 2021, we saw our average sale price for antimony increase by $1.68/lb from an average of $3.61/lb in 2020 to $5.29/lb in 2021.

In the 4th quarter 2021, the Company renegotiated a treatment-charge contract with its North American supplier of sodium antimonate. This contract renegotiation became effective in December 2021 and will result in a more favorable price of purchased antimony contained that had previously existed.

During 2020, we saw our average sale price increase by $0.13 per pound from an average of $3.48 per pound for 2019 to an average of $3.61 per pound for 2020. Following the change in management in June and the suppressed price of antimony, the Company temporarily suspended sale of antimony oxide. This decision was made principally in order to minimize the loss per pound in sales at a time for which our production acquisition contracts were being renegotiated. As consequence of these decisions, the Company was, as of the first quarter of 2021, obtaining its raw materials from its Mexican sources at a substantial savings as compared to the previous year. These savings were due to the withdrawal of overhead from the staff it had at the Wadley mine.

Additionally, the Company is now processing antimony products at its Madero facility at a substantial savings compared with all previous years. These savings were due to the renegotiating of its natural gas contract for the Madero smelter which was completed in early 2021. Furthermore, the Company has been able to produce finished antimony ingots and will sell them directly from its Madero facility starting in 2022. This saves at least $0.29/lb in shipping to and the finishing costs at Montana.

[[GREPCENT_TABLE]]
[["18"],["Table of Contents"]]
[[/GREPCENT_TABLE]]

Zeolite Sales

Our sales volume of zeolite for the year ended December 31, 2021 was as follows:

[[GREPCENT_TABLE]]
[["Zeolite","","2021","","","2020"],["Total Revenue - Zeolite","","$","2,593,641","","","$","2,118,823"],["Tons of zeolite sold","","","11,747","","","","10,661"],["Average Sales Price/Ton","","$","220.78","","","$","198.75"],["Average cost per ton","","","191.77","","","","168.37"],["Average gross profit per ton","","$","29.01","","","$","30.37"]]
[[/GREPCENT_TABLE]]

Our sales volume of zeolite in 2021 was 1,086 tons more than we sold in 2020, an increase of 10%. Our average sales price for the year ended December 31, 2021 increased by $22.03 per ton (11.1%) from $198.75 per ton in 2020. For the year ended December 31, 2021, total sales of zeolite increased by $474,818. The zeolite division had an EBITDA of $357,927 for the year ended December 31, 2021.

Our sales volume of zeolite in 2020 was 3,019 tons less than we sold in 2019, a decrease of 22%. Our average sales price increased by approximately $6 per ton, from $192 per ton in 2019 to $199 per ton in 2020 (3.6%). During 2020, total sales of zeolite decreased by $504,294 from 2019. The zeolite division had an EBIDTA of $445,481 for 2020, compared to an EBITDA of $683,936 for 2019. Net income decreased from $497,470 in 2019 to $262,861 in 2020 ($234,609).

Precious Metals Sales

[[GREPCENT_TABLE]]
[["Precious Metals","","2021","","","2020"],["Total Revenue - Precious Metals","","$","338,341","","","$","174,079"],["Ounces sold - Gold","","","70","","","","31"],["Ounces sold - Silver","","","27,342","","","","11,434"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["19"],["Table of Contents"]]
[[/GREPCENT_TABLE]]

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 a $825,950 for 2021, compared to a negative EBITDA of $2,382,970 for 2020.

EBIDTA schedules by business segment is presented as follows.

[[GREPCENT_TABLE]]
[["Antimony - Combined USA and Mexico","","2021","","","2020"],["Gross antimony revenue","","$","4,815,524","","","","100.0","%","","$","2,942,628","","","","100.0","%"],["Cost of sales","","","(4,548,802",")","","","(94.5","%)","","","(3,147,954",")","","","(107.0","%)"],["Gross profit","","","266,722","","","","5.5","%","","","(205,326",")","","","(7.0","%)"],["Operating expenses","","","(1,355,121",")","","","(28.1","%)","","","(3,134,889",")","","","(106.5","%)"],["Non-operating income","","","603,179","","","","12.5","%","","","21,808","","","","0.7","%"],["Loss on mineral properties","","","-","","","","0.0","%","","","(318,502",")","","","(10.8","%)"],["Net loss - antimony","","","(485,220",")","","","(10.1","%)","","","(3,842,235",")","","","(130.6","%)"],["Interest expense","","","1,700","","","","0.0","%","","","14,121","","","","0.5","%"],["Depreciation,& amortization","","","613,202","","","","12.7","%","","","616,388","","","","20.9","%"],["EBITDA - antimony","","$","129,682","","","","2.7","%","","$","(3,211,726",")","","","(109.1","%)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Zeolite","","2021","","","2020"],["Gross zeolite revenue","","$","2,593,641","","","","100.0","%","","$","2,118,823","","","","100.0","%"],["Cost of sales","","","(2,252,835",")","","","(86.9","%)","","","(1,795,043",")","","","(84.7","%)"],["Gross profit - zeolite","","","340,806","","","","13.1","%","","","323,780","","","","15.3","%"],["Operating expenses","","","(143,741",")","","","(5.5","%)","","","(57,049",")","","","(2.7","%)"],["Non-operating expenses","","","(3,391",")","","","(0.1","%)","","","(3,870",")","","","(0.2","%)"],["Net income - zeolite","","","193,675","","","","7.5","%","","","262,861","","","","12.4","%"],["Interest expense","","","3,839","","","","0.1","%","","","3,870","","","","0.2","%"],["Depreciation and amortization","","","160,414","","","","6.2","%","","","182,620","","","","8.6","%"],["EBITDA - zeolite","","$","357,927","","","","13.8","%","","$","449,351","","","","21.2","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Precious Metals","","2021","","","2020"],["Gross precious metals revenue","","$","338,341","","","","100.0","%","","$","174,079","","","","100.0","%"],["Production costs","","","(107,264",")","","","(31.7","%)","","","(86,835",")","","","(49.9","%)"],["Net income - precious metals","","","231,077","","","","68.3","%","","","87,244","","","","50.1","%"],["Interest expense","","","-","","","","0.0","%","","","-","","","","0.0","%"],["Depreciation and amortization","","","107,264","","","","31.7","%","","","86,835","","","","49.9","%"],["EBITDA - precious metals","","$","338,341","","","","100.0","%","","$","174,079","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Company-wide","","2021","","","2020"],["Gross revenue","","$","7,747,506","","","","100.0","%","","$","5,235,530","","","","100.0","%"],["Production costs","","","(6,908,901",")","","","(89.2","%)","","","(5,029,832",")","","","(96.1","%)"],["Operating expenses","","","(1,498,862",")","","","(19.3","%)","","","(3,191,938",")","","","(61.0","%)"],["Non-operating expenses","","","599,788","","","","7.7","%","","","17,938","","","","0.3","%"],["Loss on mineral properties","","","-","","","","0.0","%","","","(318,502",")","","","(6.1","%)"],["Net income (loss)","","","(60,469",")","","","(0.8","%)","","","(3,286,804",")","","","(62.8","%)"],["Interest expense","","","5,539","","","","0.1","%","","","17,991","","","","0.3","%"],["Depreciation and amortization","","","880,880","","","","11.4","%","","","885,843","","","","16.9","%"],["EBITDA","","$","825,950","","","","10.7","%","","$","(2,382,970",")","","","(45.5","%)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["20"],["Table of Contents"]]
[[/GREPCENT_TABLE]]

Financial Condition and Liquidity

[[GREPCENT_TABLE]]
[["","","2021","","","2020"],["Current assets","","$","23,568,992","","","$","1,808,161"],["Current liabilities","","","(2,020,855",")","","","(4,477,543",")"],["Net Working Capital","","$","21,548,138","","","$","(2,669,382",")"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","2021","","","2020"],["Cash provided (used) by operations","","$","(2,431,477",")","","$","(1,305,664",")"],["Cash used by investing:","","","(653,126",")","","","(243,091",")"],["Cash provided by financing:","","","23,782,555","","","","2,098,365"],["Net change in cash and restricted cash","","$","20,697,952","","","$","549,610"]]
[[/GREPCENT_TABLE]]

Our net working capital increased $24,217,520 for the year ended December 31, 2021 from a negative amount of $2,669,382 at the beginning of the year to $21,548,138 at the end of the year. Current assets increased due to an increase in cash and cash equivalents. Our current liabilities decreased by $2,456,690 which included a decrease of approximately $662,140 in accounts payables and payables to related parties, a decrease of $1,120,730 due to Mexican export tax liability. Capital improvements were paid for with cash.

For the year ending December 31, 2022, we are planning to use funds acquired from the two stock offerings raised in 2021 to make significant improvements to our operations at Madero, Puerto Blanco, Bear River Zeolite, and Thompson Falls facilities with the goal of increasing production and decreasing costs.

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.

[[GREPCENT_TABLE]]
[["","\u00b7","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 per cent 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."],["","\u00b7","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["21"],["Table of Contents"]]
[[/GREPCENT_TABLE]]