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UAMY > SEC Filings for UAMY > Form 10-K on 17-Mar-2014All Recent SEC Filings

Show all filings for UNITED STATES ANTIMONY CORP

Form 10-K for UNITED STATES ANTIMONY CORP


17-Mar-2014

Annual Report


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.

Results of Operations by Division
Antimony - Combined USA
  and Mexico                                     2013             2012             2011
Lbs of Antimony Metal USA                         931,789        1,031,164        1,179,973
Lbs of Antimony Metal Mexico:                     647,393          372,046          221,450
  Total Lbs of Antimony Metal Sold              1,579,182        1,403,210        1,401,423
Average Sales Price/Lb Metal                 $       5.30     $       6.24     $       7.43
Net income (loss)/Lb Metal                   $      (1.30 )   $      (0.62 )   $       0.37

Gross antimony revenue - net of discount     $  8,375,158     $  8,753,449     $ 10,406,636
Precious metals revenue                           369,706          647,554          667,813
Production costs - USA                         (4,592,019 )     (5,665,806 )     (7,294,421 )
Product cost - Mexico                          (2,614,860 )     (1,677,927 )     (1,031,957 )
Direct sales and freight                         (285,274 )       (279,694 )       (281,089 )
General and administrative - operating           (275,312 )       (353,656 )       (280,853 )
Mexico non-production costs                    (1,095,839 )       (678,053 )       (430,601 )
General and administrative - non-operating     (1,325,902 )     (1,193,583 )       (936,873 )
Non-operating gains                                73,551
 Net interest                                        (346 )          6,059            5,205
  EBITDA                                       (1,371,137 )       (441,657 )        823,860
Income taxes                                     (229,451 )       (167,107 )       (105,610 )
Depreciation,& amortization                      (448,036 )       (263,214 )       (199,515 )
Net income (Loss) - antimony                 $ (2,048,624 )   $   (871,978 )   $    518,735

Zeolite
Tons sold                                          11,182           12,189           12,105
Average Sales Price/Ton                      $     196.96     $     216.73     $     168.83
Net income (Loss)/Ton                        $      36.44     $      25.72     $       9.76

Gross zeolite revenue                        $  2,202,414     $  2,641,699     $  2,043,641
Production costs                               (1,096,731 )     (1,618,816 )     (1,221,101 )
Direct sales and freight                         (162,143 )       (169,346 )       (183,333 )
Royalties                                        (211,095 )       (234,343 )       (197,371 )
General and administrative - operating            (62,133 )        (47,456 )        (59,371 )
General and administrative - non-operating        (44,242 )        (47,819 )        (58,049 )
 Net interest                                        (260 )           (701 )
  EBITDA                                          625,810          523,218          324,416
Depreciation                                     (218,356 )       (209,776 )       (206,231 )
Net income - Zeolite                         $    407,454     $    313,442     $    118,185

Company-wide                                         2013             2012             2011
Gross revenue                                $ 10,947,278     $ 12,042,702     $ 13,118,090
Production costs                               (8,303,610 )     (8,962,549 )     (9,547,479 )
Other operating costs                          (2,091,796 )     (1,762,548 )     (1,432,618 )
General and administrative - non-operating     (1,370,144 )     (1,241,402 )       (994,922 )
Non-operating gains                                73,551
Net interest                                         (606 )          5,358            5,205
  EBITDA                                         (745,327 )         81,561        1,148,276
Income tax benefit (expense)                     (229,451 )       (167,107 )       (105,610 )
Depreciation & amortization                      (666,392 )       (472,990 )       (405,746 )
Net income (Loss)                            $ (1,641,170 )   $   (558,536 )   $    636,920


Overview

Our cost of production was elevated for the year ended December 31, 2013, because we were starting a major mining and production facility in Mexico. The same workers responsible for production were also a significant part of building and testing the manufacturing plants and equipment at Puerto Blanco and Madero, Mexico, which resulted in costs that won't be incurred when construction and testing is complete. To a lesser degree, we incurred similar costs at our plant in Thompson Falls, Montana. There will still be some overlapping costs in the first quarter of 2014 because the plants are still in a start-up mode, but the production from Mexico should be significantly greater for 2014 than 2013.

The non-cash loss items totaled $1,076,229 for 2013 and included $688,738 for depreciation, $8,040 for accretion, $150,000 for director compensation, and $229,451 for an increase in the valuation allowance for deferred income taxes.

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 a significant portion of our raw materials in 2013. We will still purchase raw materials from suppliers for our smelter in Montana.

                                               Lbs of Antimony
                   Mexico Production Activity: Metal Contained
                    Direct Shipping Ore (DSO)
                   Wadley property                     148,372

                   San Louis Potosi area               140,977

                   Guadalupana area                     68,098

                   Miscellaneous mines                  36,095
                      Concentrate from Mill
                   Guadalupe                           121,986

                   Soyatal district                     20,149

                   Inventory usage                     148,255

                   Total production at smelter         683,932

We have almost completed installation of a natural gas pipeline to replace propane as the fuel used in our Mexico smelter. We expect the pipeline to be finished by March of 2014. We expect the pipeline to cost approximately $1.7 million dollars when completed, and that it will reduce our smelter fuel cost by approximately 75%. Our smelter fuel costs (propane) in Mexico were approximately $700,000 in 2013. We have spent approximately $1,438,000 on construction as of December 31, 2013.

We have initiated the installation of a 400 - 500 ton per day flotation mill to be completed by the end of 2014 that we expect to cost between $400,000 and $500,000 to install. The concrete work for the mill has been completed, and work will be ongoing as we generate cash from operations. This mill will be dedicated to processing ore from the Los Juarez mining property. We have adequate crushing capacity in place to feed the 500 ton per day mill and the existing mill.

The restart of production from Los Juarez will create a significant increase in our precious metals revenue for 2014 and years forward.

Our principal smelter, precious metals recovery operation, and our Company headquarters remain in Montana. With increased production, we expect to widen our base of customers.


Results of Operations

Comparison of Years ended December 31, 2013, 2012, and 2011

                                                         2013             2012             2011
Antimony Division - United States:
Revenues - Antimony (net of discount)                $  8,375,158     $  8,745,321     $ 10,406,636
Revenues - Other                                           73,551     $      8,128
Revenues - Precious metals                                369,706          647,554          667,813
                                                        8,818,415        9,401,003       11,074,449
Domestic cost of sales:
Production costs                                        4,592,019        5,665,806        7,294,421
Depreciation                                               61,574           40,979           29,963
Freight and delivery                                      227,179          218,563          216,668
General and administrative                                275,313          370,838          280,853
Direct sales expense                                       58,095           61,131           64,421
    Total domestic antimony cost of sales               5,214,180        6,357,317        7,886,326

Cost of sales - Mexico
Production costs                                        2,614,860        1,677,927        1,031,957
Depreciation and amortization                             386,462          222,235          169,552
Freight and delivery                                       52,628          111,652          121,432
Reclamation accrual                                         8,040            8,040
Land lease expense                                        202,364           27,720
Other non-production costs                                644,993          174,852          150,773
General and administrative                                187,814          148,321          158,396
    Total Mexico antimony cost of sales                 4,097,161        2,370,747        1,632,110

   Total revenues - antimony                            8,818,415        9,401,003       11,074,449
   Total cost of sales - antimony                       9,311,341        8,728,064        9,518,436
   Total gross profit (loss) - antimony                  (492,926 )        672,939        1,556,013

Zeolite Division:
Revenues                                                2,202,414        2,641,699        2,043,641
Cost of sales:
Production costs                                        1,096,731        1,618,816        1,221,101
Depreciation                                              218,356          209,776          206,231
Freight and delivery                                       83,618           93,260          103,630
General and administrative                                 62,133           47,457          117,420
Royalties                                                 211,095          234,343          197,371
Direct sales expense                                       78,525           76,086           79,703
    Total cost of sales                                 1,750,458        2,279,738        1,925,456
      Gross profit - zeolite                              451,956          361,961          118,185

Total revenues - combined                              11,020,829       12,042,702       13,118,090
Total cost of sales - combined                         11,061,799       11,007,802       11,443,892
Total gross profit (loss) - combined                 $    (40,970 )   $  1,034,900     $  1,674,198


? During the three year period ended December 31, 2013, the most significant event affecting our financial performance was the decrease in the price of antimony (see table page 6). During the year ended December 31, 2013, the most significant event was the commencement of production at our Mexico operations which caused our reported operating costs to be elevated when compared to years when we were not initiating the start-up of a new production facility. Mexican production of antimony as metal contained was 683,932 pounds during 2013 compared to 372,047 pounds for 2012, up 83.8%. 2013 is regarded as a "start- up year" during which the holding costs, permitting, and metallurgical research was categorized as a "non-production" operating expense. Specifically Los Juarez was not produced, Soyatal oxide ore was in a research phase at the Puerto Blanco oxide circuit, Guadalupe had shipped dump material while they obtained an explosives license and prepared the underground for mining higher grade rock, and the Puerto Blanco mill circuits were utilized less than 10% of their capacity. Going forward, the increased supply of raw material from Mexico and the metal prices for both antimony and precious metals will be the most significant factors influencing our operations. The following are highlights of the significant changes during 2013 and the three year period then ended:

? Revenues from antimony sales in 2013 were approximately $378,000 (4.3%) smaller than 2012 due to a decrease in the price of antimony. The average sale price for antimony contained in all products declined from $6.24 in 2012 to $5.30 in 2013, a decrease of $0.94 (17.7%). Our sales of antimony for 2013 increased by approximately 175,000 lbs from 2012. Our revenues from antimony decreased in 2012 by approximately $1,653,000 (16%) from 2011 primarily due to a decrease in the price of antimony metal.

? The metallurgical problem with the Los Juarez feed has been solved, and mining, milling, and smelting will resume by the beginning of the 2nd quarter 0f 2014. This will also put the Puerto Blanco mill back in operation. During 2013, the Puerto Blanco mill was operating at less than 10% of capacity.

? The Soyatal oxide ore recovery problem has been solved, and oxide concentrates are being produced. Oxide mineralized rock will be mined and underground development will be started.

? Explosives have been permitted at Guadalupe, and underground development has started Q1 2014 that should provide a much higher feed for the Puerto Blanco mill.

? Assuming that Guadalupe and Los Juarez feed are going to the Puerto Blanco mill, the 500 ton per day mill that is estimated at 40% of completion will need to be completed.

? If the Mexican "non-production" holding expenses for properties that are being developed are excluded, the cost of production of 1,780,134 pounds of contained meal was $4.10 per pound for 2013. The average sale price during 2013 was $5.30 a pound

? Our cost of goods sold for antimony for 2013 increased by approximately $583,000 from 2012 due to an increase in our raw materials cost, but was a greater percent of sales than in prior years primarily due to start-up costs in Mexico. During 2013, the average cost of production in Mexico per pound of metal contained was $3.50 per pound compared to $4.47 per pound for Montana. The combined cost for 2013 was $4.10 per pound. Our cost of goods sold for antimony for 2012 decreased by approximately $790,000 from 2011 due to a decrease in our raw materials cost, but was a greater per cent of sales than in prior years primarily due to costs associated with starting a major production facility in Mexico. For all three years, costs of goods sold include operating and non-operating production costs from Mexico operations. As production has increased in Mexico, we have seen an inordinate increase in our smelter costs due to the high cost of propane in Mexico. After we switch to natural gas as a fuel for our smelter at Madero in 2014, we will see a significant improvement in our operating costs. The cost of goods sold during all years has been impacted by an increase in the cost of operating supplies, such as fuel, trucking, insurance, refractory costs, steel, and propane.

? Our volume of zeolite sold was down by approximately 8% in 2013, from 12,189 tons in 2012 to 11,182 tons in 2013, and total revenue decreased by approximately $439,000. In 2012, we sold more products with additives, which are higher priced, than we did in 2013. Our cost of goods sold for 2013 decreased by approximately $522,000 from 2012, primarily because we had a decrease in the volume of product sold, and because we did not pre-purchase as many supplies. We inventoried the cost of additives, drying, blending, and overall operating costs for a special product mix prepared in advance for winter sales in 2013 and 2014. Our volume of zeolite sold was nearly the same in 2012 as 2011, but total revenue increased by approximately $598,000. In 2012, we sold more products with additives, which are higher priced, than we did in 2011, and we raised prices for most products due to our increased operating costs. Our cost of goods sold for 2012 increased by approximately $354,000 from 2011, primarily due to the cost of additives, drying, blending, and overall operating cost increases. Although tons sold for 2011 was less than 2010, there was an increase in the sales price per ton which accounted for an increase in revenue of approximately $130,000. The increase in the price for 2011 was mainly due to an additive, drying, and blending for a customer, which also caused a similar increase in our cost of production for 2011.


Zeolite                                                  2013             2012             2011
Tons sold                                                  11,182           12,189           12,105
Average Sales Price/Ton                              $     196.96     $     216.73     $     168.83
Net income (Loss)/Ton                                $      36.44     $      25.72     $       9.76

Gross zeolite revenue                                $  2,202,414     $  2,641,699     $  2,043,641
Production costs                                       (1,096,731 )     (1,618,816 )     (1,221,101 )
Direct sales and freight                                 (162,143 )       (169,346 )       (183,333 )
Royalties                                                (211,095 )       (234,343 )       (197,371 )
General and administrative - operating                    (62,133 )        (47,456 )        (59,371 )
General and administrative - non-operating                (44,242 )        (47,819 )        (58,049 )
 Net interest                                                (260 )           (701 )
  EBITDA                                                  625,810          523,218          324,416
Depreciation                                             (218,356 )       (209,776 )       (206,231 )
Net income - Zeolite                                 $    407,454     $    313,442     $    118,185

? General and administrative costs, as reported in our statement of operations, include fees paid to directors through stock based compensation. In 2013 and 2012, we incurred $40,000 and $88,000, respectively, in fees to the NYSE MKT that were included in general and administrative expenses. General and administrative costs for 2013, 2012 and 2011 include general and administrative costs related to commencement of production at our facilities in Mexico. The combined general and administrative costs were 6.7%, 6.7% and 3.3% of sales for 2013, 2012 and 2011, respectively.

? The decrease in professional fees for 2013 from 2012 (approximately $33,846) was primarily due to decreased costs related to our audits and financial statement preparation. The increase in professional fees for 2012 from 2011, (approximately $52,500) was primarily due to increased costs related to our audits and financial statement preparation during the year we became listed on the NYSE MKT.

? Factoring costs were similar in 2013 to 2012. Factoring costs decreased in 2012 by approximately $76,100 as we were able to reduce our collection time for accounts receivable in that year. Our discount to customers for early payment increased by approximately $42,100 in 2012 from 2011. Factoring expense increased in 2011from 2010 by approximately $35,100 because of increased revenue and greater amounts of accounts receivable available for factoring.

? For the year ended December 31, 2010, we determined that it was likely that we would be profitable in the future, and that it was appropriate to record a tax benefit of $493,000 for the value of tax losses from prior years that could be used to reduce income tax in future periods. For the years ended December 31, 2013, 2012, and 2011, this benefit was reduced by $229,451, $167,107, and $96,442, respectively, for increases in the valuation allowance due to changed expectations about when we would have taxable income, and changes in the components that made up the base for calculating the future tax benefit.


Subsidiaries

The Company has a 100% investment in two subsidiaries in Mexico, USAMSA and AM,
whose carrying value was assessed at December 31, 2013, 2012, and 2011, for
impairment. Management's assessment of the subsidiaries' fair value was based on
their future benefit to us.

Financial Condition and Liquidity
                                            2013             2012             2011
Current Assets                          $  1,910,564     $  3,103,128     $  2,963,570
Current liabilities                       (2,479,341 )     (1,622,641 )     (1,742,022 )
  Net Working Capital                   $   (568,777 )   $  1,480,487     $  1,221,548

Cash provided (used) by operations      $    234,820     $    526,419     $    417,452
Cash used for capital outlay              (2,733,762 )     (3,513,901 )     (2,239,441 )
Cash provided (used) by financing:
  Proceeds from notes payable to bank        138,520                -                -
  Principal paid on long-term debt          (273,405 )       (464,936 )       (124,722 )
  Proceeds from long-term debt               352,000                -                -
  Sale of Stock                            1,147,194        4,624,763        1,242,780
  Other                                      154,165         (176,961 )        260,497
   Net change in cash                   $   (980,468 )   $    995,384     $   (443,434 )

Our net working capital, decreased for the year ended December 31, 2013, from a positive amount of $1,480,487 at the beginning of the year to a negative amount of $568,777 at the end of 2013. Our current assets decreased and our current liabilities increased primarily due to expenditures for capital improvements in Mexico. The capital improvements were mainly financed by the sale of stock and an increase in current liabilities. Our financial condition and liquidity improved for the two years ended December 31, 2012. This was due to an increase in our cash provided by operations and the sale of stock each year. We used most of our resources from operating cash flows and the sale of stock to complete our mine, mill, and smelter production facility in Mexico. Over the three year period, we raised approximately $6,932,000 from issuing restricted stock, and we used approximately $9,995,000, including $1,742,000 of assets purchased with debt, for capital improvements in Mexico ($8,617,000), Montana ($558,000), and at the Bear River Zeolite plant ($820,000). In Mexico, we completed the final installation of the crusher, ball mill and flotation circuit, four additional furnaces at Madero, started the installation of a 500 ton per day ball mill, and paid for partial construction of a natural gas pipeline that is nearly complete.

During the year ending December 31, 2014, we are planning to finance our improvements with operating cash flow. Our 2014 improvements are expected to include final installation of a natural gas pipeline to the Madero smelter and completing the installation of a 400 - 500 ton per day flotation mill that will increase our production from the Los Juarez mine.

In 2012, cash provided by operations was primarily due to the collection of approximately $978,000 of accounts receivable, which were approximately $1,438,000 at the beginning of the year, and approximately $460,000 as of December 31, 2012. In 2011, an increase in inventories due to raw materials purchased per supply agreements reduced cash flows from operations by approximately $923,000, and in 2011 and 2010, increases in accounts receivable due to December sales reduced cash flows from operations by approximately $693,000 and $583,000, respectively. An increase in accounts payable, not paid because of the increase in the amount of accounts receivable due at year end, increased our cash flow from operations by approximately $585,000 for 2011.

The current portion of our long term debt is serviceable from the cash generated by operations.


In 2013, cash provided by operations was primarily due to an increase in accounts payable and other accrued liabilities.

Our stockholders' equity section makes note that we have a liquidation preference of $5,760,078 for our preferred stock. This consists of a liquidation payment of $5,247,009 due if we liquidate our company or sell substantially all our assets, and $513,069 of undeclared dividends. The Board of Directors' does not intend to declare dividends on preferred stock as due and payable at any time in the near future. We do not feel that the liquidation preference and undeclared dividends related to our preferred stock will be an impediment to raising capital in the future by issuing additional shares of common stock, and are not going to affect our liquidity.

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