Mexico Operations And Montana Expansion Will Advance Antimony Processing

Key Takeaways

• Reopening and enhancing operations in Mexico and Montana will boost earnings through increased sales volumes and margins.
  
• Alaska initiatives and zeolite business improvements aim to improve profitability and grow net earnings robustly.
  
• Reliance on international suppliers, regulatory compliance challenges, and operational issues in Mexico and Alaska could destabilize revenue and hamper financial growth.

Catalysts

Produces and sells antimony, zeolite, and precious metals in the United States and Canada.

• Reopening of Mexico operations and increased market price/demand for antimony will enhance earnings due to higher sales volumes and prices.
  
• Improved antimony processing capacity in Mexico, including sourcing new suppliers and enhancing machinery, is expected to boost revenue and gross profit margins.
  
• Expansion of antimony processing facility in Montana and acquisition of mining claims that offer potential supply ownership could lead to higher volume output, potentially improving revenue and net margins.
  
• Zeolite business improvements and the addition of sales personnel aim to grow sales profitably, which should increase net earnings as production reliability and safety are enhanced.
  
• Alaska mining initiatives, expected high-grade antimony supply, and low transportation costs could significantly enhance profit margins and revenue in the second half of the year.

United States Antimony Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming United States Antimony's revenue will grow by 118.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -11.6% today to 34.9% in 3 years time.
• Analysts expect earnings to reach $54.3 million (and earnings per share of $0.46) by about April 2028, up from $-1.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $91.9 million in earnings, and the most bearish expecting $16.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.8x on those 2028 earnings, up from -224.3x today. This future PE is lower than the current PE for the US Metals and Mining industry at 20.9x.
• Analysts expect the number of shares outstanding to grow by 5.71% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.24%, as per the Simply Wall St company report.

United States Antimony Future Earnings Per Share Growth

Risks

• The closure of operations in Mexico during the first quarter of 2024 due to years of losses presents a risk, as the company still relies on international suppliers for antimony ore, potentially impacting revenue stability and supply chain certainty.
  
• The zeolite business experienced a gross loss in 2024 due to high maintenance and repair costs, suggesting ongoing challenges with operational efficiency could negatively affect net margins.
  
• The company’s historical lack of exposure to Wall Street and limited institutional awareness could challenge efforts to secure capital, impacting future financial growth and investment.
  
• Regulatory compliance issues, such as potential non-compliance with SEC S-K 1300 regulations due to incomplete mineral reserve calculations, may pose financial and operational risks.
  
• Expansion and mining activities in Alaska face logistical and environmental challenges, including harsh winters that could delay operations and increase costs, impacting projected earnings and meeting production timelines.

Valuation

• The analysts have a consensus price target of $3.838 for United States Antimony based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $5.0, and the most bearish reporting a price target of just $2.6.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $155.4 million, earnings will come to $54.3 million, and it would be trading on a PE ratio of 11.8x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of $3.4, the analyst price target of $3.84 is 11.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.