United States Antimony Corporation
Q3 2015 Earnings Call Transcript

Published: 12 Nov 2015

Operator:

Good day everyone and welcome to the United States Antimony Corporation Conference Call. Before we begin our presentation, I would like to advise you that today’s call will include forward looking statements within the meaning of the federal security laws. Our presentation will include statements regarding our projections, estimates, expectations, beliefs and assumptions. These forward looking statements will relate to among other things 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 2014 10-K form and our current 10-Q. These reports also include glossaries of certain industry terms that may be used in today’s conference call. The forward looking statements disclaimer is included in our press releases and this disclaimer is in effect for the duration of the call. Please note today’s call is being recorded and at this time I would like to turn the conference over to Mr. John Lawrence. Please go ahead, sir.
John Lawrence:

Welcome everyone to our Q3 investor report and we’re going to try to cover a vast group of subjects here. I want to make one thing clear to begin with. In the proxy statement we are not moving to remove cumulative voting. Cumulative voting will remain in effect and we investigated it. To change that would be a long lengthy process with the SEC. Going back with this company, we started with basically one product and that was antimony. We had one raw material supply and that was the mine here in Montana. The only product we produced was antimony trisulfide. We had one production facility where I sit right now and one customer. At this point we have three major products antimony silver, gold and zeolite. We have six raw material supplies, five production facilities, hundreds of customers and we’ve become a totally integrated international producer of more than 50 products. We are to a degree not dependent on one commodity anymore. I’d like to bring Dan Parks in now for the financial highlights of the third quarter. Dan?
Daniel Parks:

A thumbnail sketch of us and our company wide financial results. For the first nine months of 2015 we realized a net income of $106,376 on sales of $9,853,127 compared to a loss of $1,341,771 in the first nine months of 2014 on sales of $8,173,914. The profit was primarily due to a negotiated adjustment of $914,967 to the company’s cost of raw materials in the first quarter of 2015. The gain from the price adjustment has been reported as other operating income. For the third quarter of 2015 we incurred a net loss of $135,890 on sales of $3,505,452 compared to a net loss of $559,329 in the third quarter of 2014 on sales of $2,951,457. The loss was primarily due to a decrease in the sales price of antimony from $4.72 per pound in quarter three of 2014 to $4.06 per pound in quarter three of 2015, a decrease of $0.66 per pound. The loss for third quarter of 2015 was after depreciation, and amortization of $222,375. For the first nine months of 2015 the earnings before income taxes, depreciation and amortization was $771,151 compared to a negative EBITDA of $779,641 for the same period of 2014. Gross antimony revenue net of discount was $2,741,846 for the Q3 of 2015, up $246,508, 10% from quarter three of 2014 despite the price decrease. Gross antimony revenues for the first nine months of 2015 were $7,707,620, up $1,432,514, 23% from the same period of 2014 despite the price decrease. Our gross profit was positive for the quarter and for the first nine months of 2015 primarily due to a decrease in the per pound production cost for antimony. This was despite the decrease in the price of antimony metal from 4.82 during the first nine months of 2014 to $4.12 since in the first nine months of 2015, a decrease of $0.70 per pound which was 14.5%. For the first nine months of 2015 the non-operating general and administrative expenses were $1,142,684 compared to 890,280 for the same period of 2014, an increase of 28%. Management is continuing to work on decreasing the G&A cost. Back to you, John.
John Lawrence:

That covers the broad brush financials and I am just going to touch on the actual production of antimony which basically was 675,000 pounds during Q3 of 2015 compared to 529,000 pounds during the same quarter in 2014, an increase of 27%. During the first nine months of 2015 we produced 1,869,000 pounds compared to 1.3 million during 2014, an increase of 43%. The important thing is that the first nine months of this year we did not enjoy the LRF and this we think will make a tremendous impact. It has been in operation during this quarter and is being commissioned. The initial production was really spectacular and I am going to turn it over at this point to Matt Keane who does our marketing of basically all of our antimony and the bulk of our zeolite. Matt, do you want to cover the antimony market for us?
Matt Keane:

Our sales for this year are very strong. We never have any problem, I never have any problem selling all we can produce and that seems to be the general trend. However Decembers are usually a little weak because of customers wanting to keep their inventories down going into the end of the year. So I think we might see a little fall off in oxide sales in December, but I think metal sales will be as strong as ever there. And with that fall off in December that usually leads to a much bigger January where somebody will buy three loads instead of two loads in January. The current prices for metal right now are $2.70-ish in the 2.70s. However, the sales we have booked to the end of the year are greater than that. They top off at 3.25 per pound. Oxide sales range from -- our oxide sales range from $2.65 to $5.40 per pound currently with the difference being a one ton sale at $5.40 versus truck load sale at $2.65. Like John said earlier, we originally had one customer. Now in the oxide and metal division we have 60 customers, approximately 60 customers and probably about half a dozen right now that are testing and qualifying our product for use in next year all looking for domestic supply. That’s about all on metals. The other -- the one thing that we are looking forward to is the sale of trisulfide and [Gus] would you help me on that and just touch on the trisulfide for a brief minute?
Unidentified Company Representative:

The antimony trisulfide is used in primers for ordinance and small arms ammunition and it’s in virtually every small arms bullet and most small caliber military weapons
Matt Keane:

Good and our future looks strong there also. We do get calls from the Department of the Defense probably -- twice a year, three times a year -- once a quarter maybe even.
Unidentified Company Representative:

No, I think it’s probably three or four times a year, yes.
Matt Keane:

Yes, I think so - wanting to know what their options are for domestic supply of antimony and the trisulfide - antimony metal and trisulfide.
Unidentified Company Representative:

You might point out, Matt, that virtually all of the antimony trisulfide primers for the world come from China right now - not the primers themselves but the antimony trisulfide.
Matt Keane:

But the trisulfide, yes. That's a good point. So that makes them - the Department of Defense - really eager to talk to us and they get the new people together. Every quarter we get one or two of the same people and then another group involved that are trying to be educated into their options for antimony metal and trisulfide. So back to you, John. Thanks.
John Lawrence:

Okay. I might add Matt has been with the company for many years and is intimately familiar I’d say with almost every user in the United States of antimony products as well as --
Matt Keane:

I didn't go into our list - I didn't go into our list of users but it's hundreds.
John Lawrence:

Okay. One passing comment - and in addition [John Gustafson] was president and CEO of AmSpec which had produced close to 30 million pounds of trioxide a year for many years. Intimately familiar with the metallurgy -- the pyrometallurgy of antimony as well as the markets, the uses, the chemistry and sales of that product. And he's been with us now two years,
Unidentified Company Representative:

John, I think it’s almost four years.
John Lawrence:

Time flies. So Russ did you make it? Did [Russell Craig] make it - Lawrence?
Operator:

Not at this time, sir.
John Lawrence:

Okay, I’m going to forego that right now and we're going to - one last comment on the trisulfide. The company as we mentioned has picked up a mine called Sierra de Guadalupe in Mexico and they -- we are capable right now of making an antimony trisulfide concentrate that runs close to at or slightly more than 70% trisulfide which makes that property very unique in our portfolio because the mil spec -- the military spec -- on trisulfide is I believe -- what 70.5 now
Unidentified Company Representative:

That's correct, yes.
John Lawrence:

So we darn near make it just by milling at Puerto Blanco and it's a very exciting market because it's a very elevated price for the product with a nominal amount of processing. [Indiscernible] I'm going to turn it over to you with regards to our silver, gold or better yet gold, silver production and report for the first nine months of this year. We sold $365,000 worth of gold and silver compared to 288,000 for 2014 -- a 26% increase. The big production will come from Los Suarez and we're getting well along with the two changes or additions better of the gold and silver circuit at Madero, a number one and at Puerto Blanco and [indiscernible] I'll let you discuss those items.
Unidentified Company Representative:

Okay. We've been working on this gold and silver metallurgy for a number of years now and we tried pyrometallurgical methods first and we didn’t recover as much as we thought we should and anyway we have worked out a chemical technique for leaching the gold and silver out of the Los Suarez concentrates before they get roasted and we generate a residue that contains virtually all of the gold and silver that's contained in the concentrate. One other circuit that we will be installing is a cyanide leach circuit at the flotation mill at Puerto Blanco. When we do the flotation, we lose some gold and silver to the tailings. This cyanide leach circuit will allow us to recover all of that gold and silver. We've done experiments on both procedures and they both work very well.
John Lawrence:

Great. I might add that the concentrate leach at Madero will be basically 100% recovery and we will extract the gold and silver as a doorway bullion. The circuit at Puerto Blanco we will make a high grade gold it’ll actually be a silver gold bullion that we can market directly. Before we leave these two subjects, I want to just Russell was going to report in.
Russell Lawrence:

I’m in.
John Lawrence:

Okay, great. Russ, could you go ahead and bring the group up to speed on your LRF and other improvements there at Madero?
Russell Lawrence:

Yes. So I guess it’s two weeks ago now we started the LRF. All the systems were a go and we’ve been experimenting with different recipes in it and I bit off a little more than I can chew lately. We got choked up overnight that we’re back on. We basically safely are replacing about 15 small furnaces but just because we’re having a little bit of growing pains with the system, I’m going to say its equivalent to 12 small furnaces that we have and that represents an incredible savings for four reasons. One is manpower. To operate 12 small furnaces it takes 18 men. To operate the equivalent production or a little better production we’ve got only six guys. So that represents a third of the manpower costs. In terms of natural gas my estimate is that we're six times less on the consumption of natural gas owing to the fact that the sulfides burn so well that I often have to turn the gas off. We’ve got a huge advantage of scale there in terms of natural gas and because we’re only filled with feeding sulfites to that furnace. In terms of the electrical savings, I figure just roughly to run 12 SRF’s small rotary furnaces we got 484 horse power for 12 of those. For one for the one LRF it’s 102 so it’s over four times better on saving for that. And the final thing is the overall greater the crude oxide produced is better with the LRF. The initial essays were 79% for ducting oxide and they’re all on the order of about anywhere from 65 to 75 for the SRF’s. So those are the four reasons that the LRF is doing real well and but, we’re still learning in terms of recipes and throughput and we ran into a condensation problem that I think we got licked. So I’m just happy that we’ve got it up and running and it’s being demonstrated. Also I guess John wanted me to report on we’re making finished antimony here in the form of ingots and we just started doing that about two weeks ago as well and our first truck will leave here Wednesday. That has proceeded very smoothly frankly. We’re getting great results on that. So with the LRF we freed up a bunch of SRF’s to put either sulfide or oxide icons or from Puerto Blanco or from just regular feed from Wadley or Zacatecas or a variety of other places vendors and that’s about all I got.
John Lawrence:

Okay. Russ, thanks a lot and this I think marks a tremendous turn around in the production of antimony our capacity. And finally we’re going to be able to bring our production back to where it should be on the Mexican facilities. And I’ve got to point out that when Dan discussed the cost per pound of production, that included all of our holding costs for Los Suarez, 90% of the holding cost for the Puerto Blanco mill and the maintenance costs for Wadley, Soyatol and Guadalupe. Although we’ve been producing from all three of those facilities, it’s been a very reduced amount and we’re sitting on a large inventory of product. At this point we’ve covered the antimony business, the gold and silver and we turn to zeolite and zeolite has been insulated from the commodity downswing. The price has been relatively steady and we have had what appears to be a breakout with zeolite. The third quarter of 2015, we shipped and sold 3,528 tons compared to 2,251 tons for the same quarter of 2014, an increase of more than 56%. For the first nine months of 2015 we shipped 10,491 tons compared to 8,016 tons for 2014, an increase of 30%. And as we already mentioned in our monthly report, the month of October alone we’ve shipped more than 2,330 tons in one month. So we’re looking for a breakout in terms of production and profitability in zeolite. The net income for zeolite in the third quarter of 2015 was 132,000 compared to 619 -- $6,191 same period of 2014, an increase of over 2000%. Net income for the first nine months of 2015 was 267,000 compared to 178,000 for 2014, an increase of 50%. I’m going to turn the zeolite market back to Matt Keane for pricing and indicated orders. Matt, go ahead.
Matt Keane:

Well as you can see from those numbers, it’s been real, real active and all I was going to say about that was that I have a gut feeling being on the phone every day that the last four or five months have just been extremely positive with records that 2,338 tons last month was actually a monthly record for the company. That was a real high point and part of -- also part of being on the phone, I get the feeling that customers are coming from -- coming to us from the competition. It seems like -- it seems like they’re coming our way because of our quality. They like that nice color. They like the way we put it in bags, the way we bag it up, it’s not dirty, it’s not dusty, its clean. They’re just starting to like our product. They’re seeing it out there a lot. It’s in distribution a little bit with a couple of distributors and it’s been really good. It’s just felt really good that 2,338 tons most of that product was sold into the wastewater filtration market. It seems like natural zeolites are starting to catch on in that market and well we’ve got -- we’ve got two or three fairly big projects in that wastewater filtration market. Other markets that we feel are just this strong and have the potential for growth are the drinking water market. Right now our zeolite is being shipped all over the world for drinking water filtration. Another area is the animal feeds and agriculture. Another big one with huge potential is the oil fields which we are making in rows there already and have sold into that market. And another new one that is growing pretty fast is landscaping and hard scaping. Landscaping being with the earth as a soil amendment; hard scaping being with the concrete patio block whatnot as infill along with synthetic turf which is -- which is huge now in this drought. We’ve made big end roads there. We right now on the schedule, we have 1,100 tons to ship as soon as we possibly can and if we can ship that, we’ll certainly get more. They’re waiting. Our current customer base is now about 140 repeat buyers, repeat users and like I said on the phone every day, it seems like I make a couple of good contacts every day. I just know, I just know it’s growing. It’s got great potential. Pricing on zeolite is anywhere from $135 a ton to $250 a ton. All of that will be the mine. And that's about it. We just feel, as a company we feel really strong and we feel really good about what we've seen in the last four months and excited to get into it.
John Lawrence:

Thank you, Matt. Can you touch base on the blended products?
Matt Keane:

Oh, I sure can. Yes, thats another new good market. We blend products with the zeolite for customers. It's a high end market because the blending is fairly labor intensive and pretty expensive because of what we blend, what we have to buy to blend ad the fuel costs. But John and I were talking the other day and we just feel that, that market is probably one of the best we have for growth potential and right now you take a $230 or $185 ton of zeolite and by the time we're done blending it and ship it, it's a $1,200 product to $1200 a ton product. We've got a lot of good things in the works that connect to a lot of big companies out there. Is that, what we were talking about, John?
John Lawrence:

Yes, sure is.
Matt Keane:

Okay, great.
John Lawrence:

As Matt mentioned this -- but the reason our zeolite is so well received is not only due to quality control but we think we’ve got a much better zeolite than any other zeolite in the world. Number one, it has a very high exchange ratio, a [cadine] exchange ratio. Secondly it contains very little soluble sodium and sodium is a bad [actor] in terms of agriculture many things. Basically turning briefly here before we finish to what have the accomplishments been so far this year. We've ended up with a net income of 106,000 compared to a loss of 1,341,000 same period in 2014. The EBITDA for 2015 as Dan mentioned, 771,000 compared to a loss of 779,000 same period of 2014. And I’ve got to point out that much of this EBITDA is being used to fund the progress on the gold and silver plant as well as the expansion of zeolite. Last but not least on that we ended the quarter with $450,000 of cash. We've increased production of zeolite with additional equipment. The capital is coming primarily from EBITDA but also the zeolite production and we plan to expand zeolite as rapidly as we can. The one month that jumped to 2,300 tons was a challenge and we're looking forward to a continued challenge. The gold silver is the next big step for us that we've been planning for years and we're doing it very carefully to prove the feasibility of the property first before we do a drilling program. We can drill it out now but without proven metallurgical feasibility it's of no value. The third thing we're doing as a result of Russ's efforts on the LRF and the expansion of the Madero smelter is to liquidate inventories that we've got and increase the production to bring all the Mexican operations on stream. This has been one of the biggest cost factors in our production of antimony. With that off our back we think we may come into a very potentially prosperous market at low costs. At this point I'll go ahead and turn it open to questions from everyone or anyone.
Operator:

Ladies and gentlemen, the question and answer session will be conducted electronically. [Operator Instructions] And first we’ll hear from John Griswold.
Unidentified Analyst:

Hi guys. [Indiscernible] I was wondering [Indiscernible] Was there an opportunity and I can’t remember this bill [Indiscernible] I think in Colorado. Was there an opportunity that’s relevant to your product?
John Lawrence:

Hi John, I’m having a little trouble hearing but every one of these bills is an opportunity and the major factor with these bills is EPA approval and the EPA has recognized zeolite as an absorbent for petroleum spills and every one of them is a potential market. There is one glitch on zeolite that we got involved in on the Gulf spill and that is although the zeolite will clump the oil on the surface of the water and sink, the EPA will not allow us to sink petroleum at this point but it’s under consideration and we we’re getting in on, various markets. One would be truck and railroad spills. It’s a terrific application. We had gotten in on a anhydrous ammonia spill at Minot, North Dakota years ago. I think we sold 450 tons. We were recently invited on a blowout in the Bodkin and that is potentially a great market.
Unidentified Analyst:

Thank you. What I was trying to refer to is that toxic waste spill in the Colorado River that has been [Indiscernible] I didn’t know if that was an applicable application.
John Lawrence:

That would be and the that was a actually and I believe it was a EPA cleanup of a old mine in Colorado that ended up in the river. And here again the zeolite would absorb the toxic heavy metals the bulk of them. The question is it happened very quickly and how do you place the zeolite? We’ve looked at various spills and if it’s not a, if it’s not flowing in the Colorado River, we would erect probably a carrier of zeolite so that the water passed through it down slope and we’re selling it actually for wastewater and storm water waste in that application. We didn’t get in on that spill.
Operator:

And next we’ll hear from Demetrios Manthous.
John Lawrence:

Hi Demetrios.
Unidentified Analyst:

How are you John and the rest of you guys? Just a few questions. I got on a tad late. So since we’re already on zeolite, let’s stick with that I guess. And Matt had talked about new or customers liking the product for its color, it’s not dirty. It’s bagged a little bit better than some of the competition. You mentioned about, some of this is coming this growth is coming from competition. And I guess the first question would be why now. We’ve been selling bare river zeolite for many years.
John Lawrence:

15. Why now, Demetrios?
Unidentified Analyst:

Yes.
John Lawrence:

Okay. To start when we began in zeolite and even to this day many people have never even heard of the term. Secondly those that have heard of it don’t really understand it chemically that it’s a cadine exchange agent. So the history of a lot of our customers, Demetrios is they’ll order maybe one bag or one truck the first year. They’ll experiment and then amazingly sometimes 2, 3 or 4 years ago afterwards they realize just what it does and that’s in other words it’s a slower sale and a lot of the customers when you go out think that you’re selling snake oil. And in fact until they try it, they don’t realize the real benefits of it. So it’s a it’s basically a chemical sale. The customer has to understand, what how water filtration for instance involves competing elements and it’s a difficult sale but once they’re on the hook, they’re there and it’s seemingly growing. Matt mentioned that we’re getting our competition some of our competition’s customers and we think it’s a quality issue. It’s a better zeolite to begin with. We take real pains in quality control.
Unidentified Analyst:

Okay but…
John Lawrence:

Demetrios, also one of the customers mentioned that in the landscaping and hardscaping and synthetic turf business that it was actually being legislated in drought stricken areas California those places that synthetic turf is being legislated in and they’re using the zeolite because of our nice green color. They like to -- it’s called infill in the zeolite or in the synthetic turf and they like to use it to weight that synthetic turf down because its color is nice. So we’re being legislated in that regard. And John mentioned also that we were, the first 10 years we were in business it seemed like we were just trying to make zeolite a household word and I think now we’re succeeding.
Unidentified Analyst:

I guess just going back to California. I mean, we know it could be long lasting. It could be temporary I guess in terms of the drought conditions so I am just wondering what the sustainability of this increase production, I mean I know you seem to think that there is a lot of growth potential and with all these new applications, so that -- I’d add on what percentage of this past quarter’s revenue in tons sold and October’s tons sold, what percentage of that is new applications versus the older ones?
John Lawrence:

Matt, you want to take that one?
Matt Keane:

Boy, that’s a good question. Percentage -- do you consider what -- John do you consider what we sent them to Canada as a new application?
John Lawrence:

Not really.
Matt Keane:

I didn’t either, yes.
John Lawrence:

It’s a remediation of water.
Matt Keane:

The new customer.
John Lawrence:

Yes. In other words I think the apps are still the same, Demetrios. It’s that there are many more customers for that app. And I’ve got to add that in the case of water, I’ve heard it said and I think it’s true that the last war fought on earth is going to be over water and that market is potentially incredible. The entire Mississippi River basin is marginal in terms of nitrates for drinking water. That’s the sort of thing continued drought in the turf application, synthetic turf, I think that’s just going to grow with the drought and the increased population. It’s also used as a deodorant for pets.
Matt Keane:

John the same customer who talked about the synthetic turf business being legislated in, he also said he’d like our product for his northern customers all the way to Canada where one of his biggest markets is dog runs right now in the non-drought areas. Oregon all the way to Canada is dog runs.
Unidentified Analyst:

What do you mean dog runs? I’m not familiar with that term.
Matt Keane:

Well you see them in backyards all the way to in malls, a cement slab with a fenced in cement slab where they’ll put synthetic turf on it for the dog and I’ve got one in back east New Jersey, New York that’s in a mall actually and he is a repeat customer who buys half a dozen tons at a time and they’ll just vacuum up all the zeolite that’s in that synthetic turf as the dogs urinate on it or whatnot and then put a new layer down. So that’s what I’m referring to as a dog run.
Unidentified Analyst:

And when you mentioned the Canadian customer, is that in the gold mines that we talked about in previous conference calls?
John Lawrence:

It is, Demetrios. There are many customers in Canada but we actually service two mines in Canada and that was one of the big applications and it deals with ammonia in underground blasting and ammonium in waste water.
Unidentified Analyst:

And then last question on zeolite would be the production cost seemed flat even though the tonnage was up. Is that something we expect to continue?
John Lawrence:

Yes, I think...
Unidentified Analyst:

And why was that up?
John Lawrence:

Yes, I think -- in other words production costs were flat and tonnage is going up. We’re improving our throughput and it appears that basically what we want to do -- what we want to strive is number one tonnage and we get that by throughput through our [Raymond] Mill where we ship in one ton bags and we get it from big tonnage in the granule lines. Where we get bogged down and we’re working on this is where we have to go and fill for instance five town bottles for the retail market. So we’re increasing the manpower in the small packaging area but I look for the big potential in basically the markets that we’ve discussed. Animal feed, Matt has customers that regularly take one, two or more loads per week and that’s our low cost production where we’re not handling even 25 KT or 50 pound bags and I look for that as a huge potential. In other words in the oil patch we were able to make a 22 ton load in three hours and, that’s terrific production. And similarly in some of the granule markets we can do almost the same production rate.
Unidentified Analyst:

Okay so what you're telling me is as new applications come on, you’d like to sort of get away from some of these smaller volume orders.
John Lawrence:

The ones and twos are intriguing because they're higher price but basically we're better to pay attention to the big markets where potentially -- and not for sure but potentially we could be talking several thousand tons a month into one application in namely oil and gas or actually it could be much greater than that. It's unfortunate the price of oil and gas is so far down but never the less the oil companies have a huge contingent liability for what they've been doing and I think they're starting to recognize that.
Unidentified Analyst:

Okay. And now changing over to antimony, I mean I was a little bit late on the call. I didn't hear Hills Grove or Australian, our partner over there -- mentioned once. Is there any changes in that relationship?
John Lawrence:

We've been concerned about that [Demetrios] in that the price is so bad compared to the last five or six years. And I was on with Hong Kong in the last three days and they assured us that they are in it for the long run. They're going to wait the market and we will be also starting to recover the gold from those concentrates. So that was a fear we had and I don't see that as a problem.
Unidentified Analyst:

Okay. If I remember that deal correctly, they had the opportunity after one year to expand. So they haven't expanded but will they keep to that commitment of whatever -- how many tons they said, a year ago?
John Lawrence:

Yes. I think that we're onboard especially now that Russ has the LRF started and the precious metal recovery -- they’ve indicated that they want to expand the business. That's no proof or guarantee but that's what I'm told.
Unidentified Analyst:

Is that a nice way of telling me they were as frustrated with the LRF as I've been?
John Lawrence:

I think, you know, doing something in Mexico besides withstanding a 100 foot smoke stack permitting electricity, natural gas, [blah, blah, blah] things just don't happen overnight and I'm tickled that it's up and running right now.
Unidentified Analyst:

Okay. And then I guess - I know Russell did mention, we’re doing different recipes and stuff like that and, I know the 10-Q is something that started up in November. I guess how long until this LRF is really, do we even have an inkling on how long until we really know, one week I think you said it was up to 12 small furnaces and we've talked in the past about 20 to 25. When does the efficiency get to those levels? I mean how long do we think it's going to take?
John Lawrence:

Russ, do you want to go ahead and address that?
Russell Lawrence:

Yes. Frankly I mean I'm being conservative because I am sensitive to investors being frustrated. I can just tell you [Demetrios] no one could be more frustrated than I with the LRF. With that said, I'm very tickled with the fact that it is producing and I have to say when I said 12, that's conservative. It's actually more like 15 and that's just a recipe shooting from the hill. We had a couple snags but I can't believe any system that complex is going to be without incident. I can tell you that when we packed it, I was very doubtful that it would work so well. It's already exceeded my expectations but to answer your question whether it could get to 20, I'd say you can expect over the next couple weeks of getting beyond 15 rather immediately. I mean we're running into things like I have some condensate overnight appearing in some of the clean out tubes. You’re probably not interested in the technical details. The quick answer to your question is it shouldn’t be more than the month before if that maybe a week or two before it’s at its efficiency and, John mentioned 20. I don’t know for sure, he knows better than I do about what its actual potential is. All I can tell you is what I’m able to make it do and my guess is it’s going to get better and better from here on out. I can tell you that we ran two and three quarter lots through it before it got I ran into this problem and the things I mentioned before that are tickling it’s making a better recovery on the first fuming cycle than any of the SRF’s. We were getting 73, 74 sometimes as low as 60 on the first throughput on the SRF’s and I got 85.9 on the first lot and that includes fugitive oxide in the ducting system and bag house and everywhere else. So I’m tickled with what it’s doing. I understand the investor frustration with the delay but we had a lot of corporate problems, not to mention permitting and everything else. So not to make excuses Demetrios but that’s the short answer is I wouldn’t expect going backwards anyway and I expect that it would get and lot better very soon. Like I say, it should get better every week.
Unidentified Analyst:

Okay. No, you gave me exactly, I was just trying to if the context is it weeks? Is it months? Is it quarters? So thank you, Russ.
Russell Lawrence:

You bet. I hope I wanted to mention I neglected to tell everybody that today I started furnace 13 for the precious metal recovery. It takes a day for those SRF’s to get up to temperature at least. It’s more like three days but I can start charging it tomorrow and also furnace 14 I ought to have that fired in by Wednesday, John so you know.
John Lawrence:

Great, great.
Russell Lawrence:

And both of those furnaces are earmarked for the processing so the reduction of the hill growth slag and a collection of the precious metals by reduction of the antimony for a collector in there.
John Lawrence:

In other words Demetrios, he’s had three breakthroughs. One is the start of the LRF which has an engineer designed output of up to the equivalent of 20 SRF’s, possibly even more. Number two, the recasting of metal in Mexico which lowers our cost on the order of 20 something odd cents for trucking. And number three, the recovery of precious metals and we incidentally shopped this slag all over the world. And we think that without a doubt we’ve got the cheapest and best recovery the best pay for Hill Groves precious metals than any other smelter in the world none of which seem to be particularly interested. And number four is the availability now with the LRF running to go ahead and get all of our operations on stream in Mexico and to get rid of that cost item. That’s where we break out more pounds produced and no more holding costs and we’re off to the races.
Russell Lawrence:

I don’t want to John step on anybody’s toes but I wanted to mention one more thing that became obvious to me and my men with the LRF and that is, we’re putting exclusively sulfite cons in there that are very exothermic and I’m having to turn the actual burner off and roast it just from the exothermic reaction so that the cost of savings in terms of natural gas are even more than what I gave you the 1/6 was based on leaving the max on at a minimum setting which I calculate to be about [Indiscernible] we look two SRF’s. But when I turn it off and we get our recipe dialed in perfectly, it will actually have almost no I know it sounds crazy but no comparable natural gas consumption during that time. For cleaning out in that, yes but during production. The other thing is I wanted to mention I talked to John a little bit about this. It’s the opinion of everyone here that we may be able to process our oxide cons in there in the LRF to which to me means in the future a second SRF or LRF, John but that’s just I’m not making a prediction. It’s just something that seems important for this conversation.
John Lawrence:

That would be a real breakout, Demetrios.
Unidentified Analyst:

Yes. Well I guess putting oxides in the LRF is a little bit above my pay grade and I’m not going to get into it.
John Lawrence:

The issue there Demetrios is the slag. In other words the beauty of a high grade concentrate generates very little slag and the handling of the LRF the oxide or in the LRF if we can handle the slag, Russell can do it.
Unidentified Analyst:

And just lastly on, we’ve talked about trisulfides for quite a couple of years at least and I know the government gives you guys phone calls and stuff. When do you think we’ll have trisulfides to to tell the government well you don’t have to order it from China anymore?
John Lawrence:

Demetrios, we have already made trisulfide and we...
Unidentified Analyst:

In volume I mean.
John Lawrence:

Right now we’re prioritizing the -- of course the antimony production of Madero. Russell’s heading that up and the zeolite and we already have a furnace capable of making it. And [Gus] I’ll ask you to come in on that. What are your thoughts?
Unidentified Company Representative:

Remember that we recently about four weeks ago sent a sample of that antimony sulfide concentrate to the Department of Defense and they’re going to be testing it they said commencing in October. Knowing the government that may or may not happen, but at any rate they want to test our concentrate as it is without any more upgrading to see if it can be used in at least some ammunition.
Unidentified Analyst:

Okay. Is this the first time we sent them anything?
Unidentified Company Representative:

Yes, that is. And previously we were -- we were cleaning up, I’m going to say recycling antimony trisulfide for a current supplier to the government. This material that we make from antimony ore would be our production.
Unidentified Analyst:

Okay and is it going to that same subcontractor or that contractor?
Unidentified Company Representative:

No, it’s going directly to the Department of Defense.
Unidentified Analyst:

No, well that’s good progress. Thank you.
Unidentified Company Representative:

Yes, previously the Department of Defense was talking theoretics. This time they actually wanted something. This is the first time they actually wanted something.
Unidentified Analyst:

Well I -- for all my frustrations progress is being made albeit [indiscernible].
John Lawrence:

Very rapidly, Demetrios. It’s amazing all of the sudden things are coming to fruition.
Unidentified Analyst:

Well I’m going to let someone else ask you some questions. Thank you, guys.
Operator:

And next we’ll hear from Marshall Berol.
Unidentified Analyst:

Hi. I’m good. Thanks, John. I am wondering, my recollection was in some prior announcement you mentioned or it was mentioned that there was some drilling going on for the gold and silver and if I understood you correctly today, you’re still figuring out the metallurgical process and there is no drilling. Can you clarify that for me, please?
John Lawrence:

What happened, Marshall, the initial thought was there are hotspots in the jasperoid zones. So, we started a shallow drilling program actually typically only two meters and we went around, basically we did a global look at about half of the zone and we came up with some incredible numbers. So at that point we realized that you could have one hole that went over an ounce of gold and that is as close as four or five meters away. It was not an ounce but maybe 2/10. So we have target areas that we have continued to mine on a very reduced scale but according to the Canadian National Institute 43101, the protocol for drilling is quite strict and anyway you come up with a -- hopefully with a resource. But the second part of a 43101 is you have a pre-feasibility and you also have a feasibility study. And if you can’t make, if it is not for instance recoverable, your entire drilling, you can only say we have so many tons of this grade but we can’t make an economic recovery. So our thinking is we know where to start mining. We know where to start drilling but it’s absolutely paramount that we prove the feasibility of making a recovery and that’s precisely what the company is doing. We’re going to be able to say we’re feasible. We’re already mining this. And then we’ll proceed with a deeper drilling program. I’ve got to point out another company and this was a Canadian company and they went in and they did a 43-101. They did a PEA - preliminary economic assessment. They figured it was very feasible. They had a drilled reserve of nine grams, eight to nine grams of gold per ton. And they went ahead on their preliminary based on their PEA and they started mining and I forget where their stock was. It was I believe around a dollar. I'm not sure of that. They went ahead and they mined a block of their “drilled reserve” and it turned out only five grams at beast with three to four grams. They've shut the mine down. They'd made a $400 million investment in that mine. Their stock has plummeted to something like $0.13 cents right now. They do have some $22 million or $23 million in the bank. It's Canadian. They estimate that that will last them in a shutdown mode for six months and at the end of six months they will have to refinance the restart of the mine if they can demonstrate eight or nine grams. Frankly it looks like a tough, tough road but there again is a 43-101. Another a second issue you get into and a lot of the major companies have 43-101 reserves that were fully proven. In other words they got through the feasibility as well as the drilling. Every time the price of gold goes down, they end up writing off in some cases billions of dollars. It comes off the balance sheet and it cannot be reestablished as a reserve in the future even if the price comes up. So it has advantages I guess for funding but in looking at the appetite for commodity investments, it looks very challenged to me.
Unidentified Analyst:

I understand that and I'm all too aware, painfully aware of the real world and investment perception but I was trying to get a better handle on what you’re doing there and so I take it you're doing only some minimal extraction of tonnage to do the metallurgical testing but are you also - you're getting some the gold and silver that you sold this past quarter, did that come from Los Suarez or is that from the Australian material?
John Lawrence:

[Marshall] that was Canadian production and we are sitting on an inventory somewhat small right now of Los Suarez concentrates where we can only inventory the antimony. We can't inventory the gold and silver in those concentrates but this will be for better lack of a better term this will be our PEA. It will be our proving of the feasibility of extraction of this material and if we had the money and I'm not sure who would step up but it's a meaningless deal without what we're doing right now. So our approach has been to develop this thing and we have a shot at some pretty big tonnage after we prove up on the 100 to 150 ton mill to go to 500 and it should generate a bunch of money. So rather than dilute the current shareholder or get in debt which seems to be the kiss of death right now in the mining industry as well as the oil and gas, we're moving I think quite rapidly with what has to happen.
Unidentified Analyst:

Okay, my background is in the oil and gas business and very similar to some of the things you pointed out and I would just come back to you and say, in a situation where you're worried about an excess cash call, you can negotiate a carried interest meaning that you have a major interest in this gold prospect that you're carried by the controlling party, so just a suggestion. The second point is that control is a lot different than shareholder value in terms of the owners of the company so that any realistic major company entrance into this project would cause UAMY share price to skyrocket just by their participation so I wanted to leave that with you as well. I’m coming at it from a perspective as an owner and I think this company has huge potential and I’d like to see it -- I’d like to see it unlocked a little bit more.
John Lawrence:

I’ve got to agree with you, Bill, very frustrating right now.
Unidentified Analyst:

The second question I had goes with your opening of the cumulative voting [Call Ended Abruptly]

United States Antimony Corporation Q3 2015 Earnings Call Transcript

Other United States Antimony Corporation earnings call transcripts:

United States Antimony Corporation
Q3 2015 Earnings Call Transcript