stellalevi/E+ via Getty Images United States Antimony Corporation (NYSE:UAMY) is the single manufacturer of refined antimony in the US and Mexico. The company also produces zeolite and has gold and silver properties in exploratory phase in Mexico. Because of Chinese competition and depressed commodity prices, UAMY has been unable to generate profits for much of its history, severely diluting its shareholders for the past two decades in order to survive. Several opportunities have opened for the company: the trade war with China has revived US interest in local production of antimony, the gold and silver properties in Mexico show promising exploration results, and a group of activists is pushing for more professional management. However, given its terrible historical performance, problems with its financial reporting, and the volatility embedded in future developments, I consider UAMY a no-go at current prices, unless solely for speculative purposes. Note: Unless otherwise indicated, all information has been obtained from UAMY’s filings with the SEC. Antimony Historicals A commoditized, chronically unprofitable market: Antimony is a metal used as an alloy and as a component of flame-retardants, lead-acid batteries and a plethora of other uses. The largest world producer is China, with 92% of world output. After mining, antimony has to be refined, and sometimes transformed into oxides before its usage. Antimony is a commodity, and one with China playing a major role. Therefore, the antimony market is commoditized and suffers from chronic under profitability. The last antimony mine in the US closed in 2001, given its lack of profitability, and environmental concerns around the mining process. Currently, the US has no production of antimony’s raw mineral, stibnite. Single antimony assets in North America, largest mine in Mexico: UAMY has the only treating facility in the country, located in Montana. It also has the only smelter facility in Mexico, located in Coahuila, and has recently agreed on an eight-month purchase option for the largest mine in Mexico, located in San Luis Potosi (Wadley mine). The company is also exploring a property in Soyatal, Queretaro, and has a flotation mill in Guanajuato. Stagnant or decreasing production: UAMY has not been able to increase its production of antimony for the past two decades, with yearly output averaging 1.5 million pounds of refined product between 2004 and 2019. These numbers fell below 1 million pounds for 2020 and 2021 and are only slightly up for the 9M22 period. Consistent under profitability: The antimony division has generated losses since separated segment reporting started in 2011 (with the exception of 2017). These losses have ranged from $1 million to $4 million per year. Future opportunities Consolidation in Mexico operations: With the acquisition of the Wadley mine in 2022, and the scaling of the Coahuila operation. UAMY could improve its terrible cost profile for antimony. This makes sense given that moving raw material into the Montana facility from Mexico and product from Montana to its end markets is extremely costly. Trade tensions with China: If the conflict between the US and China continues to escalate, UAMY might become a preferred provider, with semi-monopolistic characteristics, given that it controls the only two smelters in North and Central America. Perpetua Resources is a company pushing for the reopening of US antimony mining in Idaho based on geopolitical and supply chain security grounds. The DoD has very recently provided $25 million to Perpetua to finish the environmental studies necessary to eventually start producing stibnite (the raw mineral from which antimony is extracted). Perpetua has already started conversations for an agreement with UAMY to process the material. Liquid-metal batteries: Calcium-antimony batteries are being developed by Ambri, a startup based in Massachusetts. These could become a potential contestant in the world’s search for a grid-scale battery system. The system is still on its infancy and has not been commercially tested. It could eventually drive demand for antimony. Bigger groups can enter the market: On the negative, if the market for antimony suddenly became desirable, many mining and chemical groups with much higher capital resources could probably also open new, much more efficient facilities in a relatively short time. Zeolites Commoditized but stable market: Zeolites are a variety of minerals used for animal feed, water and sewage treatment, fertilization, and as catalysts in the oil and gas industries. Zeolites are mostly mined although they can be produced synthetically. The market is not dominated by China, with a 30% share, against a 10% share from the US. The top three producers generated 85% of US zeolites, with UAMY accounting for about 10%. According to the USGS, zeolites have a relatively more stable price than antimony, around $125 per ton. There are many types though, and prices depend on it. A profitable albeit small segment: The zeolite segment has been profitable for the past 12 years, averaging $300 thousand in yearly net income for the period. Production has averaged about 13 thousand tons per year. Sales prices have been relatively stable between $180 and $220 per ton for UAMY for that period. Mature market: There is no particular opportunity in this market, given that it is already mature and there are no specific new uses for the minerals. Gold and silver The Juarez properties: UAMY has owned 720 hectares of mining properties in Queretaro since at least 2011. In that year’s 10-K report the company already mentioned the possibility of the properties containing gold, silver and antimony, based on a study started in the 1970s. Exploratory works continue in these properties, with 2 thousand tons being processed in the Guanajuato floating mill. If mineral deposits were confirmed, significant capital (that UAMY does not have) would be needed to extract them. However, confirmed deposits would probably revalue the properties and the company’s stock with them. Profitable treatment in the Montana mill: The company has treated gold and silver in the Montana mill, generating consistent revenues averaging $600 thousand per year. The company separated the reporting for this segment in 2017, with net income ranging from $80 thousand to $400 thousand, averaging some $200 thousand. Managerial challenges A small managerial team: UAMY is run by Mr. Gustavsen, who has been President of the company since 1983 and CEO since 1990. Total compensation for the CEO and President (Mr. Lawrence) roles was $235 thousand in 2021, the lowest I have seen in a public company. The activist fund Pro Cap NYC has recommended the company to renew its managerial team, increasing compensation and moving its headquarters from the small city of Thomson Falls in Montana. According to the fund, the small managerial team is not able to manage UAMY’s different operations (mining in Idaho and three sites in Mexico, treatment in Montana and two sites in Mexico). Bad financial reporting: UAMY has several reporting errors on its financial statements. Examples abound: several ‘insert table here’ can be found on its 10-K reports, or the company publishing an amendment to its 3Q22 report correcting the price of antimony from $9/lb to $6/lb. UAMY also reports material deficiencies on its control over financial reporting for FY21 on its 10-K (under the heading ‘Internal control over financial reporting’). With three divisions and shared assets between two of them (antimony and precious metals), good financial reporting is difficult. An INSERT NEW TABLE placeholder left in the company’s 10-K for FY21 (UAMY’s 10-K for FY21) Conclusions A consistent history of dilution: Given the gigantic losses generated by the antimony segment, UAMY has consistently required cash, which has been financed by share issuance. UAMY had 43 million shares outstanding in 2008, and now has more than 100 million. In 2021 alone, the company issued 30 million shares. The company has issued warrants for another 12.5 million shares. Unprofitable based on historical operations: If one had to value UAMY based on its historical profile, then the company should close its antimony operations and carve-out its zeolite operations. It is impossible to value a business that consistently generates between $1 and $4 million in losses based on historical operations. Speculative future developments: With the company trading at a market cap of $50 million, it seems that the market is concentrating on future opportunities. I have named a few: concentration in Mexico for enhanced profitability in the antimony segment, expansion of the US antimony market (through mining and batteries), exploration of gold and silver in the Juarez properties, and a change in managerial team. The problem is that some of these developments will take years to materialize (US antimony mining and antimony batteries) while others are extremely speculative (managerial change or exploratory success in the Juarez properties). In my opinion, UAMY is an unprofitable, cash eating business with very few opportunities that are years ahead or are incredibly speculative. It is not worth consideration from a long-term conservative investor. This does not mean that the stock price could not jump after an extraordinary announcement is made, for example of a managerial change or positive developments in the Juarez mines. But those developments are difficult if not impossible to predict. Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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