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1. Basis of Presentation
9 Months Ended
Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

The unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019.

 

For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

Going Concern Consideration

 

At September 30, 2019, the Company’s consolidated financial statements show negative working capital of approximately $2.8 million and accumulated deficit of approximately $27.5 million.  In addition, the Company has a net loss of $1,762,091 and cash used in operations of $283,542 for the nine-month period ended September 30, 2019. The Company has had recurring operating losses for most of the prior periods.  These factors indicate that there is substantial doubt regarding the ability to continue as a going concern for the next twelve months. 

 

The continuing losses are principally a result of the falling prices of antimony and production costs incurred in Mexico.

 

Antimony prices decreased approximately 14% in the first nine months of 2019 compared to the same period in the prior year.  For the nine months ended September 30, 2019, the average sale price for antimony was approximately $3.56 per pound compared to a price of $4.14 per pound for the nine months ended September 30, 2018. In addition, during 2019, we have endured supply interruptions from our North American supplier and shipments have resumed although at a lower level than years prior to 2018. A new supply agreement negotiated with our North American supplier in 2017 helped us with cash flow from our antimony division in 2018, but the continued decrease in prices for antimony have caused us to negotiate a better supply agreement in 2019 which will help us with our cash flow situation. We negotiated a $73,469 decrease in our raw material cost with the supplier for the third quarter.

 

Since 2017, we have continually reduced labor and other operating costs at our Mexico locations which have resulted in a lower overall production cost in Mexico. In June 2019, we reached agreement with our miners in Mexico to further reduce labor costs. In 2019, we completed installation of three of the large rotating furnaces (LRFs) we obtained from the Lanxess transaction. The Company’s 2019-2020 plan involves ramping up production at our antimony properties in Mexico utilizing the additional LRFs obtained from Lanxess. As a result, we expect to increase the antimony output from our Mexican properties in 2020. In 2019, we began selling antimony metal directly from Mexico to customers which saves us approximately $0.38 per pound in processing costs and freight.

 

On September 16, 2019, we were awarded a grant for $510,528 to provide the Defense Logistics Agency of the Department of Defense with six samples of antimony tri-sulfide for testing to determine the consistency for making primers for ordnance per military specification MIL-A-159D. We will be paid $85,088 per sample over the next twelve months.

 

The portion of the precious metals recovery system at the Madero smelter is complete and the cyanide leach circuit being built at the Puerto Blanco plant is complete except for the assaying and lab equipment which will be tested in the fourth quarter of 2019. We expect to be receiving income from the production of precious metals some time during the first half of 2020.

 

Over the past several years, the Company has made principal payments on most of its debt from cash generated from operations without the need for additional borrowings or selling shares of its common stock. However, we are delinquent on some debt payments (see Note 9).

 

On November 14, 2019, we completed a common stock private placement for $431,322 to complete the precious metals circuit at our Puerto Blanco milling facility and to make cost saving repairs at our Montana smelter.

 

Management believes that the actions taken to increase production from both antimony and precious metals coupled with a reduction in production costs will enable the Company to meet most of its obligations for the next twelve months. However, due to the uncertainty of the price of antimony and other operating factors, there is the likelihood that some obligations will not be met.