United States Antimony Corporation
Q3 2018 Earnings Call Transcript

Published: 16 Nov 2018

[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 securities laws. Our presentation will include statements regarding our projections, estimates, expectations, beliefs, and assumptions. These forward-looking statements will relate to, among other things, our revenues and production. 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 2017 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 full forward-looking statements disclaimer is included in our press releases and this disclaimer is in effort 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 Lawrence:]

Welcome ladies and gentlemen. And this constitutes our Q3 filing of the 10-Q and unfortunately, Yahoo! and the other search engines did not pick up the 10-Q. However, it was published in our Web site this morning as usual. And with that, I’ll turn it over to Dan Parks, our CFO, who will go over the 10-Q with you. Dan?

[Dan Parks:]

Thanks, John. We had significant financial events during the third quarter. On August 31, 2018, we closed a member interest and capital share agreement with Great Lakes Chemical Corporation and Lanxess Holding Company U.S. Inc. who are the sellers. Under the agreement, we acquired a subsidiary of the sellers, which includes an antimony plant equipment and land located in Reynosa, Mexico. The Company plans to disassemble salvage and transport the antimony plant and equipment for use in our operations in both Mexico and the United States. We were paid $1,500,000 by the sellers to assist in the salvage and transportation costs of usable equipment. We also settled our tax assessment of $443,110 from 2013 in Mexico with a finding of no tax due. We paid our Mexican tax representatives $157,500 to resolve this for us. On November 7, 2018 as a subsequent event, the Company agreed to sell the property acquired in the Reynosa transaction for $700,000. The agreement calls for a down payment of $150,000, which we received on November 8th of 2018 and payment of $150,000 on December 8, 2018 and two more payments of $200,000 each on January 8th and February 8, 2019. This has not been reflected in our third quarter results, but will be included in the fourth quarter activity. For the third quarter of 2018, we recorded a net income of $1,267,447. The net income includes income of $443,110 associated with the settlement of our Mexican tax assessment and the receipt of $1,500,000 for the decommissioning of the antimony plant in Reynosa, Mexico. We recognized sales revenues of $2,091,725 for the third quarter of 2018. For the third quarter of 2017, we reported a net loss of $262,565 on sales of $2,369,714. For the three and nine months ended September 30, 2018, our companywide EBITDA was $1,492,798 and $1,348,232 respectively compared to a negative EBITDA of $55,390 and $33,598 for the same period since 2017. We had an operating income in the third quarter of 2018, which was primarily due to the $1,500,000 gain on the Reynosa plant acquisition, which was offset by a decrease in the raw materials received from our North American supplier. During the first nine months of 2018, we endured supply interruptions from our North American supplier. We anticipate that normal supply quantities from our North American supplier will resume for the remainder of 2018. We will be directing resources to completing the precious metals recovery plant and increase in our supply of raw material from Mexico. As regards to antimony for the three and nine months ended September 30, 2018, we sold 335,613 and 1,096,167 pounds respectively of antimony compared to 422,391 and $1,474,597 for the three and nine months ended September 30, 2017. Raw material from our North American supplier decreased by approximately 444,000 pounds for the nine months ended September 30, 2018. We had a decrease in raw material of approximately 18,000 pounds from Mexico for the third quarter of 2018 but we did see an increase of approximately 30,000 pounds for the nine months ended September 30, 2018. The average sales price of antimony during the three and nine months ended September 30, 2018 was $4.07 and $4.14 per pound compared to $4.25 and $3.97 during the same periods in 2017. Precious metals -- switching to precious metals, the caustic leech of flotation concentrates from Los Juarez was successful and the pilot production of Los Juarez gold, silver and antimony will commence with the completion of the cyanide leach plant at Puerto Blanco, which is on schedule to start testing at quarter four of 2018. Test will include three technical discoveries that we expect to increase recovery and expedite processing. For the three and nine months ended September 30, 2018, the EBITDA from precious metals was $71,820 and $213,523, respectively compared to $78,245 and $243,821 for the same period of 2017. For Bear River Zeolite, for the three and nine months ended September 30, 2018, BRZ sold 3,556 and 10,887 tons of zeolite compared to 2,671 and 9,446 tons in the same periods of 2017, up 885 tons or 33.2% for the three months and 1,441 tons or 15.3% for the nine months. BRZ realized a net income of $84,447 after depreciation of 46,807 in the third quarter of 2018 compared to net income of 132,859 after depreciation or $50,200 in the third quarter of 2017. For the nine months ended September 30, 2018, BRZ realized a net income of $373,167 after depreciation of $141,699 compared to a net income of $348,488 after depreciation of $150,000 for the same periods in 2017. BRZ realized an EBITDA for the three and nine months ended September 30, 2018 of $131,254 and $514,866 compared to $183,000 and $498,488 for the same periods of 2017. We are in the process of building a warehouse at our plant in Preston Idaho, which will enable us to do work over slower periods and store finished product so that we incur less overtime costs, which we believe will raise our net income. We expect growth in all areas of zeolite sales. Back to you, John.

[John Lawrence:]

Okay, Leo Jackson and the John Gustavsen, are heading up the Reynosa dismantling of the plant, transportation and liquidation of the inventory. Leo is with us from Dallas right now. Leo, could you give us just a quick oversight of progress and expectations?

[Leo Jackson:]

Sure. We began dismantling of the plant. We contracted with a local company there in Reynosa to do the dismantling, and also furnished the freight for the equipment removing. We have actually -- I think we're ahead of schedule in the dismantling of the plant. And we should -- our target is to be finished with everything we have to do there by the end of January 2019.

[John Lawrence:]

Leo, can you just comment on where some of the equipment is going?

[Leo Jackson:]

Sure. So far we have sent equipment to the plant in Puerto Blanco in State of Guanajuato Mexico. And also to the furnace -- the furnaces are installed in the State of Coahuila between -- it’s called Madero, between the cities of Saltillo and Torreon, Coahuila. We also are going to send some equipment to your operation, John, in Thompson Falls.

[John Lawrence:]

Leo, we have also processed and we’re in the process of processing more of some of the inventory. And I’ll just ask you for a quick synopsis of what that consisted of? And then I’ll ask Russell to comment on what he expects at his smelter in Madero?

[Leo Jackson:]

Okay. We inherited inventories of -- actually oxide, fairly good great oxide. When I say oxide, I’m talking about antimony oxide. And some -- when I say some, at least two trailer loads of low -- this is called low grade slag material with some antimony content in it, but actually the values are fairly high some of it ran 40% to 50%. And a lot of this is going to go to Russell and some has gone to Russell in Madero where the furnaces are. Also we, there is a lesser amount but still at least a truckload of -- and when I say truckloads, I’m talking about 42,000 pound of sodium antimony that is useful to for us for converting it to antimony oxide. John, do you want me to be more specific or is that…

[John Lawrence:]

No, I think that covers it. And Russ, could you comment on your plans right now for installing two more all stainless steel LRFs and just comment on your plan?

[Russell Lawrence:]

Okay. We are pouring concrete for the floor, for the second LRF, we have one LRF that John designed and we installed and have been using. We’re continuing to pour and we need to about double what we have poured already and it shouldn’t take more than two weeks to have that work done. And then I understand there’s at least two, maybe five more LRFs coming from Leo and Gus at Reynosa. And I’ve already got the manifold for the natural gas ready, and we’re just waiting for that. However, Leo and Gus have already shipped quite a bit of clean outs and stainless steel ducting for using with two next LRFs and converting our existing mild iron cooling and possibly bag house, as well to stainless steel. Does that cover, John, or you want me to…

[John Lawrence:]

Yes, that covers it Russ. And just as background, this plant we originally saw running at the Occidental Petroleum facility in La Porte, Texas quite a few years ago. And at that point, the LRF and other furnaces had output of about 30 million pounds per year of oxide. And of course, we don't have that feed at this point, but we are concentrating our efforts to increase Mexican production to offset the slowdown of our North American facility. And to that event or to that end, we are increasing production at Wadley. We've realized new equipment and we’re going to be installing one of the compressors from Reynosa there. Secondly, we have begun production at Guadalupe and we have high hopes on production there. The third mine that we’re bringing on is Soyatal in the state of Queretaro. And to do that we’re perfecting an explosives license, but that would be the immediate plan. Very briefly looking at the assets from Reynosa, the five LRFs that Russell has mentioned are invaluable as stainless steel. And I’d hazard and guess very, very high, there's other equipment. And the second big advantage of Reynosa is that it's providing equipment for our Los Juarez cyanide leach plant at Puerto Blanco. And to that end, we are moving about half of the equipment this Friday from Montana where it’s been built to that facility. There’ll be one or two more trucks thereafter. And the projects include completing the huge tailings pond, it's about 6 or 7 acres and it's about 33 feet deep. Secondly, we’re wiring in everything. At the present time, we’re bringing primary voltage in third would be the building itself, we’re providing a roof over and so forth. So we expect to be in a test phase by the end of this year, and that will include the installation of a total analytic fire assay lab, so that we can have assays within a matter of hours. The most day from the time we need them, as opposed to going to a third party lab, which takes time and money and it's very critical for operating. We feel that this is the biggest event that we've got going right now. And the plan would be to start commercial production during Q1 2019. And we expect the typical shakedown changes to be made during that period. And we would hope that we reached commercial production sometime by the end of Q1 2019. With that, we will go ahead and keep our profits to expand the mill capacity to 400 tons per day. Part of that instillation is already in place at Puerto Blanco. With that, I’m going to go ahead and turn it over to Matt Keane, who is going to report on antimony sales, as well as zeolite sales. Matt?

[Matt Keane:]

Thanks, John. Like John said sales is my area. And as far as antimony goes, we’ve got a very strong, very active customer base, real solid. And there seems, as far as new customers, there seems to be a real good demand for domestic source of antimony oxide and also metal. Normally, this time and the year we see a little slowdown because of the companies trying to keep their inventories down. But right now our production is for full, our production schedules fall through the end of the year. So we’re not seeing any problem there. However, we usually do get blindsided by quite a few orders of people trying to put in inventories right on the 1st of January. So haven’t seen that happen yet, but I what's going to. As far as the world’s area -- China’s inventory, actually China’s production was off by about 4% for the nine months of the year, but their inventories right now seem to be strong. So they're predicting the price to fall off a little bit between now and the end of the year. The current Rotterdam price for antimony metal is $8,175 per metric ton, which equals to £3.71. That’s all I have for antimony. As far as BRZ is concerned, Dan said at $0.01 at the very end of his talk was we are expecting antimony to grow in every sector, and that is one of my points. Our customer base is very strong and solid here. Also, most of our customers have increased their business with us this year. And in many cases, well in a few cases, they’ve actually double their take of antimony. We’ve not seen any slowdown and normally we do this time a year in that business, but it's looking still real strong. Our top markets are still the animal feed ag, water filtration, waste water purification, order control. And this time of the year, of course, we do a lot of attraction material, those markets seem real strong. And like Dan said, we expect them to grow next year, especially from the conversions that I've had with the customer base we have and potentially new customers. We think that’s all going to grow real well. So that’s it.

[John Lawrence:]

Matt, appreciate it. One remark before we go to questions is that, recently, we’ve seen a surge in interest in water filtration and from several different avenues, but the advantage of zeolite is a filter media is that it will actually remove filter out most bacteria. And we have one company that is coming out with the product with the Bear River Zeolite, in which they claim they will remove 99.9% of all the bacteria just by filtering. The market is absolutely huge in places like India, China, third world countries. And we’re seeing a rapid expansion, we think the last war on earth is going to be fought over water, and we’re a prime solution to that problem. Will, I’ll go ahead and turn it back to you for questions and answers.

[Operator:]

[Operator Instructions] And we’ll take our first question from Mark Menzel with Sunrise Wealth. Please go ahead.

[Mark Menzel:]

I had a couple of questions, you mentioned capacity of 400 tons a day. Were you talking about Los Juarez?

[John Lawrence:]

Correct, yes.

[Mark Menzel:]

And we're talking about what looks like $125 a ton pay dirt down there?

[John Lawrence:]

Gross value, yes, and it varies every day with the price of metals.

[Mark Menzel:]

So that area is successful, that’s 50,000 a day or 18 million a year, if things really start looking good down there. How quickly can you increase that capacity?

[John Lawrence:]

Well, I think the 400,000 or 400 ton per day mill is going to be the second step after the 100 tons. But at that point, it would behoove us to have a mill closer to the ore body. And we've looked at that from an engineering environmental standpoint and it would save us approximately $15 to $20 per ton in transportation. So a big issue there will be permitting. And I think that the operation we looked at is very good for the area. And I would assume that we could permit within a year or two, and then we would go and add it in stages. In other words, we put in a crushing facility for perhaps a couple 1,000 tons a day. And then we go incremental steps on ball mills, perhaps 500 tons per day, and that would be a result of profitability with the 400 ton mill and the 100 ton.

[Mark Menzel:]

Okay, it’s your business. But I smell at 400 tons a day, 15 million to 20 million in revenues. Like I said, it’s your business. It would seem to me whatever you can do to expedite capacity would make financial sense.

[John Lawrence:]

That’s absolutely correct. The one thing that we’ve done over the years is we try to go on a very cautious basis. In other words, we want the 100 ton mill to be reeling in cash to step to the 400 ton and so forth and so on. We want no fatal on this thing as similar that’s been made by other companies.

[Mark Menzel:]

Stepping back to Reynosa, I didn’t quite get it. Are you saying that they left behind various amounts of oxides that are valuable to us?

[John Lawrence:]

Yes, that’s correct.

[Mark Menzel:]

Can you give us the number? Does this mean $10,000 to the company or $10 million?

[John Lawrence:]

I think conservatively, Mark, we’re talking about a gross value before processing perhaps $1.2 million, it was a net perhaps half of that.

[Mark Menzel:]

So you received $1.5 million for cleanup, $700,000 for sale of the property. Maybe $0.5 million to you in cash after it’s all said and done on the residue left behind and the use of all the equipment?

[John Lawrence:]

That is correct in terms of funds. The biggest asset is actually the equipment, Mark. For us to build a, for instance, all stainless steel LRF, we can be talking very easily a couple of million dollars per furnace.

[Mark Menzel:]

It’s an amazing transaction. Please sir, may I have another. Okay, all right. In your monthly Monday updates, you always had that sense in there that the Company was looking at potential financial transactions that would not involve dilution. And, okay, I see this. And it looks truly wonderful and quite honestly transformational for the Company. So in the last Monday update that sentence was missing. So are we done and finished on potential company benefiting transactions, or are there still some things out there that you’re looking at?

[John Lawrence:]

There’s still at least one other major transaction that was not mentioned at the meeting here. And I’m under wraps to disclose what we expect. But the subject involves the production of antimony trisulfide and we have successfully -- Gus and rest of us have come up with a method of making antimony trisulfide using concentrates. The background is that it's almost exclusively provided by the Chinese. And they have to hand sort to get the grade up. And it’s sold at a real premium -- and anyway, we’re currently selling at about $4 per pound, a little bit more, per pound of contained antimony. The trisulfide is selling in the neighborhood of $13 per pound. It's $13 per pound of antimony plus the sulfur. So the contained antimony is worth close to $18 a pound, and it's one of those little products that could be a real company builder.

[Mark Menzel:]

This is what’s used in primers for armaments…

[John Lawrence:]

Yes, it's used as igniter in all center-fire cartridges in the primer, as well as rockets.

[Mark Menzel:]

So this is the area that potentially you may have some business transaction that you’re under wraps on?

[John Lawrence:]

Correct. I can't disclose it, other than we have made what is called as mill spec 159 A, which is the U.S. military specification for that product.

[Operator:]

[Operator Instructions] And we’ll take our next question from [Demetrius Mathis] with [indiscernible]. Please go ahead.

[Unidentified Analyst:]

John, I would reiterate what Mark said that you guys have had a lot of good news in the last few months, and the transactions was just too good to be true, I think. So going -- just looking at the total -- the profit margin in the zeolite, even though we had a very good quarter production wise, was it due to over time or what in -- and this a one-time event where profit margin came down substantially on the zeolite business?

[John Lawrence:]

It's actually a fairly complicated explanation. But the number one factor what is the -- one of our customers had switched their production to not just bags of zeolite but two bags in a paper -- in a cardboard box. And we had been led to believe that they were going to do away with that. But in fact, during the year it doubled. And it’s actually good news, because they’re taking over the pool and spa business. So that required a lot of overtime during a period -- a seasonal period and it increased our cost. Number two, we lost our miners in our cone crusher and it kept us down basically for about four weeks with no production and in that time our manpower was focused at repairing the cone crusher. And we took advantage of footing in some other capital expenditure, conveyers and so forth. And third, we had a failure in our electronics on our automatic bagging line and un renown to us we could not get a IT short of the factory, which was unable to provide one in the U. S. And it kept us down from bagging for a period of, I think over two months. And we manually had to fill the bags, weigh them and seal them as opposed to automatic installation. So, we’re doing a whole bunch of preventive things now. First, we’re building a warehouse that Dan mentioned to produce the bag in the box, so to speak, during off season and having an inventory that will go out immediately. Secondly, we’re providing a stockpile of primary crushed rock on the order of 10,000 tons. And third, we’re making provisions to provide a parallel bagging line, so that if one is down we can use the other or as we expand use both of them at the time.

[Unidentified Analyst:]

And just since I am on zeolite, you added an access inventory of [Technical Difficulty] last year to two. Have we gotten new customers? I know Matt was talking about how zeolite is expected to be continued growth business going forward? Do we have any new applications or new customers using of those that extra inventory defined?

[John Lawrence:]

Actually, Demetrius, we have both. We have some new customers for the product and we have some new applications. But the paradox here is the biggest selling product is what we call 14x40, and it’s a granule. And for every 100 tons of rock coming in, about 55% report to the granules and the balance goes to what we call a minus 40 product. And yes, we’re out diligently trying to increase sales there. And Matt’s been able to move quite a bit here recently. We also have a growing Canadian market.

[Unidentified Analyst:]

Can you move more if you lower the price on the -- on the 40 mesh or?

[John Lawrence:]

We trying, Demetrius, and it doesn’t seem to be of any great advantage to us. Just to get rid of it, we have discounted some of it but basically it’s going to be continuing issue and there are several ways to remedy it. One would be to go back to the concrete business where they could take all of it. We have another person working on more animal feed, primarily poultry. So we’re trying -- and we have discounted it locally, but it doesn’t really impact our sales that much.

[Unidentified Analyst:]

And then working over to the antimony side. Wadley, it doesn’t look like year-over-year production was up or and was that sales number that was in the queue. But you're finally getting to the point -- I know you’re going to put an compressor in. And you're finally getting to the point where you’re -- I know you -- and you've told us that you’ve been sending more trucks from Wadley to Madero in the past. When are we going to start seeing the numbers really amp up?

[John Lawrence:]

Well, first of all, the beginning of the year was fairly slow. And right now, we’re getting a truck 20 metric ton truck every Monday. But as of this morning, it looks like we’re going to be accelerating that slightly. The compressor will be out of Reynosa and we’re ready to put that in we just bought a newer truck for transporting the ore from the mountain down to the mill where it's crushed before it goes to Russell. And with the compressor -- with [indiscernible], we expect that to increase production pretty rapidly. Secondly, we’re reworking one of our underground load hole dump units to open up the tunnel and access a bunch of lower grade that will go to the mill. So that’s on stream. We are doing basically the same thing over at Guadalupe right now.

[Unidentified Analyst:]

So we should start seeing some of the numbers increasing from Mexico production then. And on the Reynosa, I know Leo said that he’s going to be done by the end of January. How much more expense is it going to -- I know that you had obviously takes money to move all this stuff around. How much more expense is it going to take?

[John Lawrence:]

We’re spending about 100,000 a month -- a little bit more, Leo, is at -- that doesn’t include some of the transportation, no. So I would estimate -- Leo, help me here, a couple of hundred, 250,000.

[Leo Jackson:]

Yes, at most…

[Unidentified Analyst:]

And if you -- I know next year some of your -- you get some debt payments that need to be made. Could you ever -- all that equipment that you got us, you mentioned to Mark that the equipment is really of launch dollar of value. Could you do some [Technical Difficulty] get asset back round on that equipment?

[John Lawrence:]

Very hard for a U.S. company to borrow money for Mexican equipment…

[Unidentified Analyst:]

Even though it’s stainless steel or LRFs?

[John Lawrence:]

Yes. There are a whole bunch of laws, Demetrius, through customs and so forth. But frankly with what we have going, we don't need a loan, at least at this point.

[Unidentified Analyst:]

And then did you just feel confident that as Los Juarez pilot plant ramps up, that’s going to provide enough cash flow to make sure that we’re -- we don't need a loan or any dilutive offering?

[John Lawrence:]

I look at it very simply. And the reason our antimony profitably was down is we lost 44% roughly of our Canadian supply of raw materials and that was the major problem. We’re replacing that and increasing it more and we expect them to come back on stream by next month. So that's going to be returning profit margin to us. And the additional Mexican production from Wadley, Guadalupe and Soyatal will be on top of the Canadian. So we look at that as a major standard profit center. Secondly, we look at Bear River to continue to spin off a profit plus depreciation to assist us in the neighborhood of say $600,000 to $800,000 cash per year. And thirdly, we expect to be producing antimony trisulfide, which could be a very, very profitable production number to go from $4 a pound to possibly as high as $17, $18 a pound of contained antimony is incredible. And fourth of course will be the advent of silver, gold antimony production from Los Juarez. And I might say that some of that profit will be diverted into a drilling program. So that we can get a better picture of just how big this deposit is. No, I don't see any reason for a loan at this point.

[Unidentified Analyst:]

No, I am glad you clarified exactly why you don’t need a loan. And then lastly, I would just ask on the tech. I remember hearing back at the beginning of the year when they first weren’t sending any product down to you guys that I think it was supposed to -- it was only supposed to be for a few months. And by May it was supposed to start up, and it really never did. How do you feel confident that they’re really going to start sending the product again in a month or so?

[John Lawrence:]

We’ve done business with them for more or less 20 years, and we've had production delays in the past and they've always come through 100%.

[Leo Jackson:]

Demetrius, actually send us a production schedule and you can see May had only 35 tons and October had no tons in it, zero. And you can see where they tend to ramp up. Now that’s a projection of course. But like John said, they’ve always come through in the past.

[Unidentified Analyst:]

I am just trying to make sure that -- trying to hear from you guys if this relationship with them hasn’t changed in any way and this is just a -- they’ve got some hiccups and they have worked their way through?

[John Lawrence:]

Basically, Demetrius, they have one furnace called the [Kitsap] [indiscernible] and it went down for rewinding at a cost of $55 million.

[Unidentified Analyst:]

I remember you mentioned that in the previous conference call. Well, I will…

[Leo Jackson:]

The number really don't show but it's just incredibly evident to me trying to keep customer base satisfied is that I've watched the Canadian supply go down, John said that we've got 44% of what we normally get and I've try to maintain a customer base. And we had to do that through Mexico. And John and Russell just hit it hard and did it. So the numbers, even if they're equal to last year, it's absolutely huge success for what we've done like that, I feel.

[Unidentified Analyst:]

Yes, but I thought the numbers from Mexico were equal also, that's where…

[Leo Jackson:]

One thing that this was evident right now, it wasn't last quarter is it we're sitting on a substantial inventory of Mexican production that we hope to liquidate this quarter. We may not get it all done but that's the objective.

[John Lawrence:]

John, you said this but I'm not sure it was plain. Already, we're seeing a truck containing roughly 14,000 tons of contained antimony every Monday from Wadley. And two months ago, we were only seeing a truck every couple of weeks or even a month. So that production is already not equal has gone up and by at least double or more than double.

[Unidentified Analyst:]

And it's going to be weekly and is that going to fall back to where it was prior? I'm just trying to make sure that going forward we see the same consistency?

[John Lawrence:]

Actually, Demetrius, as of this morning, we may have a truck in four days this week, four to five days.

[Unidentified Analyst:]

Well, I am excited that things are -- this story and this thesis is stronger now than ever. And John you've done very good stewardship in terms of protecting shareholders and dilution, I know sometimes I've deferred in terms of trying to see the story come together a little quicker with more funds, but you have been a very good steward to the shareholders by not diluting them.

[John Lawrence:]

Appreciate it, Demetrius, and I think that's what everyone thinks onboard.

[Operator:]

[Operator Instructions] And we'll take our next question from [David Rosenfield], who's a private investor. Please go ahead.

[Unidentified Analyst:]

I'm always the advocate of silver and gold production, and I just wanted you to touch on that just a little bit about what you can foresee in the future. I know you can't -- I'd say the raw material till you get it out. But you have some idea about how that's going to help the bottom line and the company.

[John Lawrence:]

Well, to start with, we've been pouring over the metallurgy on a trial basis at Madero. And then we call up the caustic leach, and Russell has come up with a very high recovery on that. But the number one factor is that the rock, depending on the current price of silver, gold and antimony, is in the $125, $150 range. Secondly, it’s open pit and mining costs are very low. Third is that milling is straightforward and we’re getting most of the antimony, most of the silver. But the next item is the cost or the cyanide leach of the tailings. And this has been something that we haven’t really disclosed, because it’s been somewhat of an enigma. And here’s the enigma. We were getting only about a 30% to 50% recovery of the gold at the mill. And more often than not, it was only 30%. So we had it figured that for every in a ton of concentrates for every 400 to 500 ounces of silver. We would have about half the three quarters ounce of gold. But in several instances, instead of a half to three quarter of an ounce, one instance we had 6.1 ounces, another one we had 8 point some odd ounces of gold. And we’ve going back, we've re-assayed it, it was there. Why? And the current theory and this is just a theory is that the gold is, like the Nevada Carlin trend, it’s a no-see-um microscopic gold and very well disseminated. But there could be another fraction, and that would be a closer amount of gold. In other words, instead of sub-micron size, we did identify one grain that was 10 microns in size. And we’re thinking that we may have a rogue gold assay, and it could be much better than what we were predicating at 0.04, 0.043 ounces per ton. And to further fortify that idea, in our shallow drilling program, we had many, many holes at 1 ounce per ton or three quarters of ounce. So although, the ore body, the host is homogenous to some degree, we may have a second mineralization sequence where we had a closer amount of gold and it could be a real surprise as to the gold value. We’re looking at it from a conservative standpoint when we say 125 bucks plus.

[Unidentified Analyst:]

Would you mind just going over how this leach process -- I know it’s using cyanide. Correct?

[John Lawrence:]

Correct.

[Unidentified Analyst:]

And so it will get a much higher return that any other process that we could use. Correct?

[John Lawrence:]

Well, the thing here David is it’s catching the gold that we were not catching in flotation. And we’re figuring that's at least 50% of the gold. But of that if we’re looking at real gold values, it may be a real bonanza, not counting on it. But, nevertheless, we can explain why it's happened.

[Unidentified Analyst:]

Correct me if I am wrong. I thought your plan was to go back through the tailing ponds with the leach process. Is that correct or no?

[John Lawrence:]

No, we’re just going to take incoming rock and we’ve already mined about 30,000 tons enough for one year with 100 ton mill and we will be milling it as usual, taking the flotation concentrate to Russell to remove that. But then the tailings will be mixed with about a quarter of a percent of sodium cyanide, and the recovery of the gold is very high. And we have test after tests where we’re seeing over -- and it is impossible but it's a sampling issue, recoveries of well over 100% and that’s what has evaded us to-date. And in fact gold will be the major product of the deposit. So that’ll be collected, David, in the carbon and then we will de-source the carbon and ship the residue almost as 100%.

[Unidentified Analyst:]

So you feel like the return is going to be astronomical possibly of it?

[John Lawrence:]

Not counting on it but nevertheless we don't -- can’t explain the issue.

[Unidentified Analyst:]

And so all of the tailings that to reprocess from the previous mining there, I guess at whereas you’re just going to let that go, because it’s over with, right?

[John Lawrence:]

Yes, it’s a small fraction of what we’re looking at, David, and it’s near surface where our antimony recovery was not terrific either. As we get a little bit lower, we expect higher recovery of antimony and probably the silver.

[Unidentified Analyst:]

So will that leach actually -- it won’t involve the silver reclamation at all?

[John Lawrence:]

Yes, it will. And we typically are getting 65% to 80% of the silver, and it is going to grab another part of the silver also that we’re losing in the tailings. Not as good as the gold, the gold recovery is very fast and very complete. The silver is little slower and a little bit lower recovery.

[Unidentified Analyst:]

So the product that’s going to come out is cyanide processed. Will that go [indiscernible] for further refining or will you take that straight up to the main plant in the United States?

[John Lawrence:]

Correct the latter. It will go from Puerto Blanco directly to Thomson Falls, and it’s going to be a very fast return, because it’s going to be a very pure product.

[Unidentified Analyst:]

Well, that sounds really good. So we’re looking for a really good 2019 for everybody, I hope.

[John Lawrence:]

Yes.

[Unidentified Analyst:]

Well, thank you so much. And enjoy this big year with you. We look forward to higher stock price and everything to work out right. Thank you.

[John Lawrence:]

Thanks, David.

[Operator:]

And we’ll take our next question from Tim Hasara with Kennedy Capital. Please go ahead.

[Tim Hasara:]

So just curious on the equipment that you received in this transaction with Great Lakes to Reynosa. Will that go into balance sheet in some shape or form in the future, the value of that?

[John Lawrence:]

Actually -- Dan, I‘ll let you handle that one.

[Dan Parks:]

It’s going to be a little tricky on how we capitalize it, because first we have to determine some basis on which to capitalize it and GAAP, generally accepted accounted principals frowns on the use of fair market value except to limit how much you value something at. So we probably will try to come up with some evaluation based on wage and transpiration cost and then we’ll come up with -- they don’t have to compare that to some fair market value. But our discussion with the auditors has been that they think that would be an acceptable method. And so we will capitalize quite a bit of that like the things that aren’t installed right away, the stainless steel furnaces, so on and so forth. And so we’ll see a lot of that will show up on the balance sheet and not be expensed.

[Tim Hasara:]

Any tax implication to that?

[Dan Parks:]

We haven’t just thought sure what 2019 is going to look like -- 2000, we’re probably going to use up most of our net operating losses that got carried forward this year, probably going to use most of that. And then in 2019, if we capitalize, well, of course -- I guess I skip through over something. A lot of these costs that were capitalized are going to be in Mexico. And we can’t -- that doesn’t affect our U.S. tax return. So a lot of those costs are going to be capitalized so they won’t affect our U.S. tax return.

[Tim Hasara:]

And then just a clarification, on the trisulfide I think John you mentioned -- you made the comments exclusively provided by China. Just curious can you clarify that. Was that product bought from someone else from -- they were just the primary world supplier of that. Is that correct?

[John Lawrence:]

Historically, China. When we started the antimony business, the biggest supplier of antimony was Bolivia. And that was back in the late 60s. Secondly, Mexico the very various mines we're operating right now is a significant producer. And at one point, they considered Wadley as the largest antimony mine in the world. But drilling at that time, the Chinese have developed basically, it’s called the Xikuangshan mine in Hunan Province. And for years that was their sole supply of antimony. And they currently supply about 92% of the world antimony. But what’s happened now is Hunan is changing, the grade has gone down, the mine is getting deeper. And they’re importing about 40% of their raw material from countries such as Russia, Australia and some of the other Russian countries, so they’re getting depleted. The demand I think worldwide is going up on a steady basis. And it looks like a very tight situation in the future.

[Tim Hasara:]

Does the U.S. government still buy from China the trisulfide?

[John Lawrence:]

No, and not at the -- the trisulfide?

[Tim Hasara:]

Yes.

[John Lawrence:]

Yes, they do. And strangely enough, the Chinese have not offered trisulfide for three months.

[Tim Hasara:]

And that leads me on the next. Just an update on the -- any tariff situation that would benefit you potentially or not?

[John Lawrence:]

We thought it would. But I think -- and correct me if I’m wrong here. I think that what happened on the first 10% alleged tariff, they devalued the Yuan.

[Tim Hasara:]

So you really haven’t seen any necessarily any benefit yet, except for the fact that if China is not supplying the trisulfide to U.S. or just the fact that they did in the past, I think that would be a benefit I would presume?

[John Lawrence:]

Yes. It’s strange, because we’re seeing a lot of -- price is basically static right now. But we’re seeing a lot of consumers inquiring with Matt for production.

[Tim Hasara:]

What do you mean consumers?

[Matt Keane:]

Special consumers that users and purchasers of antimony tri-oxide and especially the small -- and they're truckload or fire return.

[Tim Hasara:]

For what purpose…

[Matt Keane:]

For fire return…

[Operator:]

[Operator Instructions].

[John Lawrence:]

Gentlemen, thanks a lot. Appreciate your interest.

[Operator:]

This does conclude today’s program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.