UNITED STATES ANTIMONY CORP, 10KSB, 1998-04-13

UNITED STATES ANTIMONY CORP
10KSB, 1998-04-13
PRIMARY SMELTING & REFINING OF NONFERROUS METALS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

(Mark One)

[X]ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the fiscal year ended December 31, 1997

[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period__ to__

Commission file number 33-00215
UNITED STATES ANTIMONY CORPORATION
(Name of small business issuer in its charter)

Montana 81-0305822

(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification No.)

P.O. Box 643, Thompson Falls, Montana 59873
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (406) 827-3523

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

Yes [X] No

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The registrant's revenues for its most recent fiscal year were $4,309,101

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the average bid price of such stock, was $2,056,142 as of
March 31, 1998.

At March 31, 1998, the registrant had outstanding 13,265,434 shares of par
value $.01 common stock.

<PAGE>

TABLE OF CONTENTS

PART I

ITEM 1. DESCRIPTION OF BUSINESS 1
General 1
Summary 1
Antimony Division 2
Gold Division 3
Environmental Matters 4
Marketing 5
Mining Industry and Metal Prices 5
Other 6

ITEM 2. DESCRIPTION OF PROPERTIES 7

Antimony Division 7
Gold Division 7

ITEM 3. LEGAL PROCEEDINGS 8

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 10

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS 10

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS 11

ITEM 7. FINANCIAL STATEMENTS F1-F29

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 14

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT 14

ITEM 10. EXECUTIVE COMPENSATION 15

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 16

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 16

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 17

SIGNATURES 18

<PAGE>

PART I

Item 1. Description of Business

General

Section 21E of the Securities Exchange Act of 1934 provides a "Safe Harbor"
for forward-looking statements. Certain information included herein contains
statements regarding management's expectations about future production and
development activities as well as other capital spending, financing sources
and effects of regulation. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made herein. These risks and
uncertainties include, but are not limited to, those relating to the market
price of metals, production rates, production costs, availability of continued
financing, and the Company's ability to remain a going concern. The Company
cautions readers not to place undue reliance on any forward-looking
statements, and such statements speak only as of the date made.

Summary

AGAU Mines, Inc., predecessor of United States Antimony Corporation, was
incorporated in June 1968 as a Delaware Corporation to explore, develop and
mine gold and silver properties. United States Antimony Corporation ("USAC,"
"the Company" or "the Registrant") was incorporated in Montana in January 1970
to mine and produce antimony products. In June 1973, AGAU Mines, Inc. was
merged with and into USAC, with USAC the surviving corporation in the merger.
In December 1983, the Company suspended its antimony mining operations when it
became possible to purchase antimony raw materials more economically from
foreign sources. The principal business of the Company has been the production
of antimony products and the mining and milling of gold.

In October 1989 and in April 1990, the Company had judicial financial
settlements against it totaling $1,243,316 plus interest and litigation costs.
The judgments consumed all available cash, shut down the Company's gold mining
operation and placed the Company in a near bankruptcy posture. In December
1990, a fire destroyed the Company's corporate headquarters and many of its
financial and administrative records.

In years prior to the fire, the Company had been a reporting entity subject to
the requirements of Section 13 of the Securities Exchange Act of 1934 (the
"Exchange Act"). The Company had timely filed all reports required by the
Exchange Act through September 30, 1990, when it filed its Form 10-Q for that
quarter. Subsequent to that time, due to the destruction of records in
December 1990 and the poor financial condition of the Company, no other
required filings were made until filing of the Company's Form 10-KSB for the
year ended December 31, 1995 and the subsequent Form 10-QSBs for each of the
quarters in the year ended December 31, 1996.

The Company has been able to avoid bankruptcy and a termination of operations
through borrowings from stockholders and directors, common stock sales, lack
of creditor action and net income produced from operations in 1994 and 1995.
There can be no assurance, however, that the Company will be able to continue
to meet its obligations and continue in existence as a going concern (see Note
1 to the consolidated financial statements).

<PAGE>

Antimony Division

The Company's antimony properties, mill and metallurgical plant are located in
the Burns Mining District of Sanders County, Montana, approximately 15 miles
west of Thompson Falls. The Company holds 12 patented lode claims, some of
which are contiguous and 2 patented mill sites.

Prior to 1984, the Company mined antimony ore underground by driving drifts
and using slushers in room and pillar type stopes. Mining was suspended in
December 1983, because antimony could be purchased more economically from
foreign sources. The Company's underground antimony operations may be reopened
in the future should raw material prices warrant so. The Company, through a
joint relationship, obtains the majority of its antimony from China and, to a
lesser degree, Canada.

The Company currently is pursuing the acquisition of a 50% interest in United
States Antimony, Mexico S.A. de C.V. ("USAMSA") to mine, mill and produce
antimony metal and other products from the Mexican states of Zacatecas,
Coahuila, Sonora, Queretaro and Oaxaca to be sent to Thompson Falls, Montana
for processing. From refined antimony metal, the Company produces four
antimony oxide products of different particle size using proprietary furnace
technology and several grades of sodium antimonate using hydrometallurgical
techniques. Antimony oxide is a fine, white powder that is used primarily in
conjunction with a halogen to form a synergistic flame retardant system for
plastics, rubber, fiberglass, textile goods, paints, coatings and paper.
Sodium antimonate is primarily used as a fining agent for glass in cathode ray
tubes used in computer monitors and television bulbs and as a flame retardant.
On September 1, 1991, the Company entered into an agreement with HoltraChem,
Inc. ("HoltraChem") whereby the Company processes raw material purchased by
HoltraChem into finished antimony products. The Company then delivers the
finished products to HoltraChem for sale, and share in the profits or losses
from sales with HoltraChem on a 50/50 basis.

On July 1, 1995, the Company and HoltraChem terminated the 1991 agreement and
entered into an Inventory and Sales Agreement and a Processing Agreement.
These agreements gave rise to the creation of a wholly owned subsidiary,
United States Antimony Corporation-Montana ("USAM"), that participates with
HoltraChem and its subsidiary, HoltraChem-Montana, Inc. ("HCMI"), in the
processing and sale of antimony products. While the agreements still provide
for the sharing of profits or losses from sales, after deduction of certain
costs, on a 50/50 basis, they also require the Company to fund and own 50% of
the antimony inventory up to $750,000. The Company funds the acquisition of
50% of the antimony inventory through the contribution of 50% of the Company's
share of profits. USAM also receives a processing fee from HoltraChem for the
finished antimony inventory. In consideration of the Company's financial
participation in carrying raw material and antimony inventory, HoltraChem
agreed to provide additional marketing efforts in an attempt to increase
product sales to 10 million pounds of antimony products per year. The
agreements expire on December 31, 1999.

For the year ended December 31, 1997, the Company, through its relationship
with HCMI, sold 3,037,369 pounds of antimony products generating approximately
$4.3 million in revenues. During 1996, the Company, through its relationship
with HCMI, sold 2,333,321 pounds of antimony products, which generated
approximately $4.2 million in revenues. The Company reports 50% of total sales
made with HCMI. The Company's products are sold to various customers
throughout the United States. During 1997 and 1996, 14% and 22%, respectively,
of the Company's antimony sales were made to one customer.

<PAGE>

Gold Division

Yankee Fork Mining District

The Company owns two patented lode mining claims on Estes Mountain in the
Yankee Fork District, which are now idle.

Yellow Jacket Mining District

The Company holds a mining lease on the Yellow Jacket mine located in the
Yellow Jacket Mining District of Lemhi County, Idaho, approximately 70 miles
southwest of Salmon, Idaho. On July 8, 1987, the Company and Geosearch, Inc.
("Geosearch"), an Idaho corporation, entered into a mining lease agreement
with Yellow Jacket Mines, Inc. of Palo Alto, California for the lease of the
Yellow Jacket mine. Also on that date, the Company and Geosearch entered into
an operating agreement for the exploration, development and mining of the
Yellow Jacket property. Under the terms of the operating agreement, Geosearch
and the Company would divide equally the net operating proceeds realized from
the Yellow Jacket mine.

On February 19, 1988, the Company obtained an assignment from Geosearch of all
of its rights, title and interest in and to the lease agreement dated July 8,
1987 by and between Yellow Jacket Mines, Inc., the Company and Geosearch. In
consideration of the assignment of the lease, the Company agreed to conduct
certain exploration activities and to provide a preliminary mining plan which,
if justified, would result in applications for permitting and bonding for a
mine and mill with the state of Idaho, the U.S. Forest Service and other
agencies. The Company also agreed to pay Geosearch a 12.5% net operating
profits interest until the Company recovered its full investment in the
property, and thereafter, Geosearch would receive a 15% net operating profits
interest. USAC currently pays Geosearch a minimum monthly payment of $1,000
during the months of January through April of each year, if operations are
closed due to weather, and $2,000 per month for the months of May through
December of each year. After the mill was built at the Yellow Jacket mine in
1990, the Company paid Geosearch $25,000 per year in staggered installments,
with all payments accumulated and credited against the net operating profits
due Geosearch. Net operating profits and guaranteed minimum payments paid to
Geosearch apply to a $600,000 purchase price after which the Company will not
be obligated to make any further payments to Geosearch.

In March 1994, Geosearch filed an action in the Seventh Judicial District
Court, Custer County, Idaho, alleging breach of the 1988 assignment of lease.
The lawsuit requested recovery of $94,013 in past royalties and accrued
interest thereon. On September 9, 1994, the Company settled the litigation by
agreeing to an amendment to the assignment of lease. The amendment calls for
the payment of past royalties and accrued interest through the assignment of
5% of gross receipts from gold production at the Yellow Jacket mine. The
unpaid balance accrues interest at 10% per annum until paid in full. In
addition, in 1995 the Company issued 50,000 shares of its unregistered common
stock and 100,000 common stock purchase warrants exercisable at $.35 per share
to Geosearch. The Company also paid $4,000 in legal fees incurred by
Geosearch.

<PAGE>

The underlying lease with Yellow Jacket Mines, Inc. requires a minimum payment
of a net smelter royalty of 5% with a minimum annual royalty of $27,500.

On July 7, 1990, the Company entered into a mining venture agreement with
BumbleBee, Inc. ("BumbleBee"), a company controlled by Bobby C. Hamilton
("Hamilton"), a stockholder and creditor of the Company, to explore, develop
and operate the Yellow Jacket property. Pursuant to the agreement, the
Company became the venture manager and had a 60% net profits interest. The
Company contributed the lease on the mining property and the use of its mine
and mill equipment. BumbleBee made an initial contribution of $500,000 for its
40% net profits interest. The Company began the production of gold bullion by
trucking the concentrate to the Preachers Cove cyanide leach plant. Later in
1993, gold concentrates were shipped to a smelter in British Columbia, Canada,
operated by Cominco Metals, a division of Cominco, Ltd. ("Cominco"). The
operation never reached operating capacity due to the problems of storing
tailings and the lack of adequate operating capital. After several years of
continuing losses, the Yellow Jacket mine was put on a care-and-maintenance
status in 1996.

Due to disappointing operating results and low metal prices, the Company
determined that without sufficient operating capital, the Yellow Jacket
reserves were not economical to mine. Therefore, during the fourth quarter of
1996, the Company's remaining carrying value of the property of $463,057 was
written off. Also, property with a carrying value of $85,735 was also written
off. The Company is continuing an exploration program to identify additional
underground reserves. If ongoing exploration efforts are unsuccessful and a
decision is made to permanently close the property, an accrual for closure
costs will be necessary.

During the year ended December 31, 1996, the Company sold 2,190 ounces of gold
and 1,317 ounces of silver which generated $850,518 of revenues.

During 1997, the Company realized $15,692 from gold recovered in the leach
circuits of discontinued milling operations.

Subsequent to the curtailment of production at Yellow Jacket, the Company
began an underground exploration program and proceeded in reopening an
abandoned tunnel on the property (the No. 3 Tunnel). In 1953, the Idaho Bureau
of Mines reported gold values of 0.2 ounces per ton, 7% to 10% lead and 2% to
3% copper in the No. 3 tunnel located below the main Yellow Jacket pit. These
values are in a fault offset from the open pit mineralized zone and are
sulfides. The existence of this mineralized resource could increase the
average recovered value to the $100 to $140 per ton range as processed by the
existing mill and could increase mineable reserves. With these values,
production could resume immediately, at a reduced throughput initially.
However, there is no assurance that 1) the tunnel can be successfully
reopened, 2) that an economical ore reserve exists, and 3) that the sulfide
material can be profitably milled due to regulatory restrictions or economic
factors.

Environmental Matters

The exploration, development and production programs conducted in the United
States are subject to local, state and federal regulations regarding
environmental protection. Certain of the Company's mining and production
activities are conducted on public lands. The USDA Forest Service extensively
regulates mining operations conducted in National Forests. Department of
Interior regulations cover mining operations carried out on most other public
lands. All operations by the Company involving the exploration for or the
production of minerals are subject to existing laws and regulations relating
to exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials, odor, noise,
dust and other environmental protection requirements adopted by federal, state
and local governmental authorities. The Company may be required to prepare and
present to such authorities data pertaining to the effect or impact that any
proposed exploration for or production of minerals may have upon the
environment. Any changes to the Company's reclamation and remediation plans
which may be required due to changes in federal regulations could have an
adverse effect on the Company's operations.

<PAGE>

In 1994, the U.S. Forest Service, under the provisions of the Comprehensive
Environmental Response Liability Act of 1980 (CERCLA) designated the Company's
cyanide leach plant at the Preachers Cove mill, which is located six miles
north of Sunbeam, Idaho on the Yankee Fork of the Salmon River, as a
contaminated site requiring cleanup of the cyanide solution. The Company has
been reclaiming the property and, as of December 31, 1997 the cyanide solution
discharge was complete and the mill has been removed. The Company anticipates
having the cyanide leach residue containment completely finished by 1999. In
1996, the Idaho Department of Environmental Quality requested the Company sign
a consent decree related to completing the reclamation and remediation at the
Preachers Cove mill, which the Company signed in December 1996.

On November 15, 1996, the Bureau of Land Management (BLM) notified the Company
that it may be a responsible party as defined under CERCLA for hazardous
substances released from uncontained mining tailings at a mining site near the
Pine Creek Mining District in Idaho. The Company was one of 13 companies that
had received a similar notice.

In response to the notification, the Company informed the BLM that it is
neither a current or former owner of a site, has never been an operator, nor
has it shipped hazardous substances or arranged for the disposal or treatment
of hazardous substances in the Pine Creek area. Accordingly, the Company does
not consider itself a potentially responsible party under CERCLA for the Pine
Creek site. On August 21, 1997, the Company received correspondence from the
United States Environmental Protection Agency, Region 10, informing the
Company that it will not recommend that the Company be added to the litigation
involving contamination at the Pine Creek site.

Marketing

Gold and silver concentrates from the Yellow Jacket mine are marketed directly
to a smelter at Trail, British Columbia operated by Cominco. There are several
other smelters that could purchase and process the concentrates. If the
Company was unable to sell its concentrate to its present vendor, the Company
believes the loss of this vendor would not have a material adverse impact on
the Company's operations.

In 1995, the Company entered into two agreements with HoltraChem to market its
antimony products (see "Description of Business - Antimony Division"). The
Company receives a processing or toll fee for producing antimony products, and
HoltraChem and the Company sell the products to the customers. After
HoltraChem deducts sales costs, the cost of raw materials, freight,
warehousing and administrative costs, the remaining profit or loss is shared
on a 50/50 basis between the Company and HoltraChem. In addition, USAC also
receives 50% of any profits on HoltraChem's sale of foreign produced antimony
product.

Mining Industry and Metals Prices

The operating results of the Company have been and will continue to be
directly related to the market prices of antimony metal and gold, which have
fluctuated widely in recent years. The volatility of such prices is
illustrated by the following table which sets forth certain high, low and
average prices of antimony metal per pound and gold per troy ounce as reported
by sources deemed reliable by the Company.

<PAGE>

Antimony metal prices reflect New York dealer quotes, while gold prices are
Handy & Harmon quotes as reported in Metals Week for the periods indicated.

Year Average
1997 $ 0.93
Antimony 1996 1.60
Metal 1995 2.28
1994 1.78
1993 0.77
1992 0.79
1991 0.83

Year High Low Average
1997 $370.00 $282.50 $331.10
Gold 1996 415.00 367.00 387.70
1995 395.40 371.20 384.00
1994 396.25 369.65 382.95
1993 405.60 326.10 365.85
1992 359.60 330.35 344.98
1991 403.00 344.25 373.63

The range of sales prices by HCMI for antimony oxide (per pound) was as
follows for the periods indicated:

Year High Low Average
1997 $5.75 $0.98 $1.41
Antimony 1996 4.50 1.53 1.86
Oxide 1995 3.12 0.89 2.56
1994 2.75 0.98 1.83
1993 1.11 1.02 1.04
1992 1.20 2.09 1.09
1991 1.05 1.19 1.13

Metals prices are determined by a number of variables over which the Company
has no control. These include the availability and price of imported metals;
the quantity of new metal supply; industrial, commercial and investor demand;
the level of, and expectations regarding, interest rates and the rate of
inflation; political considerations; prices of other commodities; and
speculation. If metal prices decline and continue to remain depressed, the
Company's operations may be adversely affected.

Other

The Company holds no material patents, licenses, franchises or concessions,
but it considers its antimony processing plant as proprietary in nature. The
Company uses the tradename "Montana Brand Antimony Oxide" for the marketing of
its antimony products.
The Company is subject to the requirements of the Federal Mining Safety and
Health Act of 1977, requirements of the state of Montana and the state of
Idaho mining inspection, Health and Safety statutes and Sanders County, Lemhi
County and Custer County health ordinances.

<PAGE>

Management of the Company believes that its current discharge of waste
materials from its milling, mining and processing facilities is in material
compliance with environmental regulations and health and safety standards. See
"Environmental Matters."

Employees

As of March 31, 1998, the Company and its wholly-owned subsidiary employed 30
people, which number may adjust seasonally. None of the Company's employees
are covered by collective bargaining agreements.

Item 2. Description of Properties

Antimony Division

The Registrant's principal plant and mine are located in the Burns Mining
District, Sanders County, Montana, approximately 15 miles west of Thompson
Falls, Montana. The Registrant holds 2 patented mill sites and 12 patented
lode mining claims. The lode claims are contiguous within two groups.

Antimony mining and milling operations were curtailed during 1983 due to
continued declines in the price of antimony. Through its arrangement with
HoltraChem, the Company is currently purchasing foreign raw antimony materials
and continues to produce antimony metal, oxide and sodium antimonate from its
antimony processing facility near Thompson Falls, Montana.

Gold Division

Yankee Fork Mining District

Estes Mountain

The Estes Mountain properties consist of 2 patented lode mining claims in the
Yankee Fork Mining District of Custer County, Idaho. These claims are located
approximately 12 miles from the Company's former Preachers Cove Mill.

Preachers Cove Millsite

The Company had a 150-ton per day gravity and flotation mill located
approximately 50 miles west of Challis, Idaho and 19 miles northeast of
Stanley, Idaho on the Yankee Fork of the Salmon River at Preachers Cove. The
mill also had a cyanide leach plant for the processing of concentrates into
doré bullion. The plant has been dismantled and the property is being
reclaimed.

Yellow Jacket Mining District

The Yellow Jacket properties consist of 12 patented and 60 unpatented lode
mining claims located in the Yellow Jacket Mining District of Lemhi County,
Idaho, approximately 70 miles southwest of Salmon, Idaho. The gold
mineralization is in quartz breccia zones that extend for more than 10,000
feet. The Company has produced 13,420 ounces of gold through December 31, 1997
from the property and is currently exploring underground for additional
reserves.

<PAGE>

The Company's mineral resource at the Yellow Jacket mine, as determined by
Western Gold Exploration and Mining Company in July 1989, was as follows:

Contained
Diluted Tonnage Diluted Grade Gold Ounces
--------------- ------------- -----------
Drill indicated 238,898 0.1406 33,589
Geologically probable 73,379 0.1048 7,690
--------------- ------------- -----------
312,277 41,279
=============== ===========

In 1996, Company personnel determined that the existing mineral resource was
not economical to mine without additional operating capital and at current
metals prices. Accordingly, production operations at the Yellow Jacket mine
were suspended and the mine placed on a care-and-maintenance status. In
connection with the suspension of operations, the Company wrote off $463,057
of the unamortized net profits interest purchased in 1995. Additionally,
property with a carrying value of $85,735 was written off.

The Company is currently reopening a tunnel to establish a continuation of the
mineralization below the main Yellow Jacket pit ("Fault Offset"). The Company
renewed its lease on the Continental-Columbia property in October of 1996 and
subsequently canceled the lease in 1997.

Item 3. Legal Proceedings

Excel-Minerals Co., Inc.

In June 1987, Lucky Custer Gold, Inc. ("Lucky Custer") filed an action in the
United States District Court for the District of Idaho against Excel-Minerals
Co., Inc. ("Excel") and the Company, in a case entitled Lucky Custer Gold,
Inc. vs. Excel-Minerals Co., Inc. and United States Antimony Corporation,
Civil No. C87-1129.

In August, 1988, Excel filed an action in the Seventh Judicial District Court
of the State of Idaho entitled Excel-Minerals Co., Inc. vs. United States
Antimony Corporation, Case No. 3081. The action claimed, among other things,
that the Company breached a certain sublease contract between the Company and
Excel due to the Company's nonpayment of royalties due Excel and that the
Company did not return all of the metal recovered from ore being processed for
Excel.

On April 24, 1989, the cases described above went to trial. In October 1989, a
judgment was rendered against Lucky Custer for any claims against the Company
and Excel; against the Company for any counterclaims against Lucky Custer and
Excel; and in favor of Excel against the Company. The judgment against the
Company ordered that Excel recover $1,128,461 in damages and interest accrued
thereon, including litigation costs of $80,695. In April 1990, an additional
judgment was declared against the Company for nonpayment of royalties due
Excel. The judgment against the Company ordered that Excel recover $114,855 in
unpaid royalties plus litigation costs to be determined by the court.

On June 26, 1990, the Company and Excel entered into a Covenant not to Execute
("Covenant") the above-described judgments. Pursuant to the Covenant, the
$1,128,461 judgment and related attorneys fees' were payable in entirety in
quarterly installments of $63,850 including interest at 10.5% through December
15, 1994, at which time the entire unpaid judgment amount was payable. In
addition, an additional $51,188 was payable on March 15, 1991, representing
interest for the period from April 1, 1990 to December 31, 1990.

<PAGE>

Royalty payments equal to 10% of net smelter returns, subject to certain net
profit limitations, for all ore mined from the Estes Mountain property were to
be applied monthly to the judgments payable, including accrued interest above
and beyond the terms described previously, until paid in full. The Company
subsequently defaulted on the payment terms of the Covenant, and Excel
terminated the agreement.

On August 29, 1991, the Company transferred its rights and interests in
certain Estes Mountain patented and unpatented mining claims to Lucky Custer
in exchange for Lucky Custer's 55% interest in the Excel judgment, which had
previously been assigned to Lucky Custer in settlement of litigation between
Excel and Lucky Custer. Concurrently, the Company entered into an agreement
with Bobby C. Hamilton ("Hamilton"), a stockholder, whereby Hamilton would
acquire a security interest in the 55% judgment claim in return for the
release of Hamilton's security interest in the Estes Mountain claims which
were transferred to Lucky Custer. In July 1993, the Company, Excel, Hamilton
and BumbleBee entered into an agreement to settle the Excel judgment.

The settlement agreement provided for the issuance of 1,666,667 shares of
Series B preferred stock to Excel and Hamilton in amounts proportionate to
their respective interests in the judgment. Accordingly, Excel received
750,000 shares of Series B preferred stock and Hamilton received 916,667
shares to be held as collateral for indebtedness due him. The preferred stock
was convertible into common stock at 1:1 on or before December 31, 1995 and
earned an annual dividend of $.01 per share. None of the preferred stock was
converted prior to December 31, 1995.

In addition, the settlement agreement provided for the transfer of two
patented mining claims, the Gold Star and First Southwest Extension, to Excel
and Hamilton in accordance to their respective interests in the judgment
claims and 100% of the Charles Dickens patented claim to Excel. During 1995,
Excel quit-claimed any interest in the Gold Star, First Southwest Extension
and Charles Dickens mining claims back to the Company.

On August 1, 1995, the Company filed a complaint in the United States District
Court of Idaho against Hamilton and BumbleBee. The complaint sought
declaratory and injunctive relief from a judicial determination by the court
of the amounts due and owing Hamilton and BumbleBee and of the effect of
various debt and repayment agreements between the Company and Hamilton.

On November 15, 1995, the action was settled, and the obligation to Hamilton
was determined to be $1,800,000, which included $500,000 for the purchase of
Hamilton's 40% net profits interest in the Yellow Jacket mine. The unsecured
debt accrues interest at 7.5%, is payable from 10% of the Company's gross
sales from all operations and requires a minimum payment of $150,000 annually,
including interest. The settlement agreement released all security interests
Hamilton had in the Company's real and personal properties, recovered 916,667
shares of Series B preferred stock and two patented mining claims held by him
as security and terminated the Yellow Jacket venture agreement with BumbleBee.
The settlement agreement also extinguished all previous stock price guarantees
to Hamilton and caused his surrender of 150,000 shares of the Company's common
stock back to the Company. In connection with the settlement, the Company
canceled warrants granted to Hamilton to purchase 500,000 shares of common
stock at $.25 per share and issued Hamilton 500,000 shares of the Company's
unregistered common stock in connection with the purchase of his 40% net
profits interest in the Yellow Jacket property.

<PAGE>

Geosearch, Inc.

In March 1994, Geosearch filed an action in the Seventh Judicial District
Court, Custer County, Idaho, alleging breach of the 1988 assignment of lease.
The lawsuit requested recovery of $94,013 in past royalties and accrued
interest thereon. On September 9, 1994, the Company settled the litigation by
agreeing to an amendment to the assignment of lease. The amendment calls for
the payment of past royalties and accrued interest through the assignment of
5% of gross receipts from gold production at the Yellow Jacket mine. The
unpaid balance accrues interest at 10% per annum until paid in full. In
addition, in 1995 the Company issued 50,000 shares of its unregistered common
stock and 100,000 common stock purchase warrants exercisable at $.35 to
Geosearch. The Company also agreed to pay $4,000 in legal fees incurred by
Geosearch.

Item 4. Submission of Matters to a Vote of Security Holders

On October 3, 1997, the registrant held its annual meeting of stockholders.
At the meeting, directors were elected to hold office until the 1998 annual
meeting of stockholders as follows:

Directors: For Against Abstained

John C. Lawrence 9,955,724 13,250 25,921
Walter L. Maguire, Sr. 6,927,634 18,100 28,441
Robert A. Rice 6,933,779 13,150 28,421

The second matter voted on at the annual meeting held October 3, 1997, was the
approval of a proposal made to the holders of subordinated convertible and
convertible debentures and other debt holders to convert the unpaid principal
balance and accrued interest due on their debts into Series C convertible
preferred stock. The proposal was approved with 6,309,466 votes cast for,
25,251 vote cast against and 64,637 votes abstaining.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

The following table sets forth the range of high and low bid prices as
reported by NASD trading and market securities for the periods indicated. The
quotations reflect inter-dealer prices without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions. Currently,
the stock is traded on the NASD electronic bulletin board under the symbol
"UAMY." Prior to 1997, the Company's stock was traded over-the-counter on the
pink sheets and has had minimal trading activity since 1990. Therefore, the
following prices do not reflect an active market.

<PAGE>

High Low
1997
First Quarter $0.875 $0.25
Second Quarter 0.56 0.28
Third Quarter 0.50 0.18
Fourth Quarter 0.25 0.15

1996
First Quarter $0.625 $0.25
Second Quarter 0.50 0.125
Third Quarter 0.25 0.0625
Fourth Quarter 0.50 0.25

The approximate number of record holders of the Registrant's common stock at
December 31, 1997 is 2,766.

No dividends have been paid or declared by the Registrant during the last five
years.

Item 6. Management's Discussion and Analysis or Plan of Operations

Certain matters discussed are forward-looking statements that involve risks
and uncertainties, including the impact of gold and antimony prices and
production volatility, changing market conditions and the regulatory
environment and other risks. Actual results may differ materially from those
projected. These forward-looking statements represent the Company's judgment
as of the date of this filing. The Company disclaims, however, any intent or
obligation to update these forward-looking statements.

Results of Operations

The Company's operations resulted in net income of $662,774 in 1997 or $.05
per share compared to a net loss of $1,014,995 or $0.08 per share in 1996.
The net income in 1997 was primarily due to a gain recognized on the
conversion of certain debts to Series C preferred stock. The net loss in 1996
was primarily due to lower gross profits from the antimony division,
write-down of the Yellow Jacket property and equipment and accrual of related
reclamation costs.

Total revenues during 1997 were $4,309,101 compared to $5,010,913 in 1996. The
decrease of $701,812 is primarily attributable to decreased sales of gold and
lower antimony prices during 1997. Sales of antimony products in 1997 were
$4,293,409 consisting of 3,037,369 pounds at an average sales price of $1.41
per pound. Sales of antimony products in 1996 were $4,160,395, consisting of
2,333,321 pounds at an average sales price of $1.78 per pound. Gross profit
from antimony product sales was $792,999 in 1997, or 18% of sales, compared to
$503,903 in 1996, or 12% of sales. The increase in gross profit is primarily
due to increased sales of antimony products with higher gross profit margins.
The Company reports 50% of total antimony sales made by HoltraChem and the
Company. Accordingly, total sales of antimony products by both companies was
$8,586,817 or 6,074,737 pounds in 1997 and $8,320,790 or 4,666,642 pounds in
1996. In both years, almost all of the antimony products sold were produced at
the Company's plant near Thompson Falls, Montana.

Currently, the price of antimony metal has been relatively stable at
approximately $1,550-$1,650 per metric ton. The Company believes that the
gross profit from anticipated sales of antimony products at current antimony
metal prices will enable the Company to operate its antimony division
profitably in 1998.

<PAGE>

Sales of gold and silver were $15,692 in 1997, and resulted from processing
gold bearing concentrates recovered from the Company's discontinued milling
operation.

Sales of gold and silver totaled $850,518 in 1996 and consisted of 2,190
ounces of gold and 1,317 ounces of silver. During 1997 the Yellow Jacket mine
was closed and underground exploration and care-and-maintenance costs of
$188,361 and $232,428, respectively, were incurred during the year. Yellow
Jacket's operating loss, excluding the allocation of any general and
administrative expenses, was $325,190 during 1996.

In 1997, the Company accrued additional estimated costs of $202,234 to its
reclamation liabilities as a result of management's updated analysis of costs
required to fully reclaim the Company's antimony processing site and
Preacher's Cove millsite.

During 1996, the Company wrote down $548,792 of property and equipment due to
the uncertainty of recovering the unamortized balance of the mineral property
and certain equipment at the Yellow Jacket mine. In connection therewith, the
Company also accrued estimated costs of $82,326 for reclamation at the site.
The Company's exploration efforts are continuing at the site. If these efforts
are unsuccessful and the Company determines that a permanent shutdown of the
property is appropriate, an additional accrual for closure costs will be
necessary.

General and administrative expenses decreased from $333,303 in 1996 to
$244,553 in 1997, a decrease of $88,750 or approximately 27%. The decrease in
1997 compared to 1996 was principally due to decreased professional fees that
were incurred during 1996 related to the Company's efforts to regain
compliance with Securities and Exchange Commission ("SEC") reporting
regulations.

In 1996, the Company recognized a gain on the disposal of fully depreciated
assets of $45,000. No such gain was recognized during 1997, as no assets were
disposed of. Interest expense decreased from $284,927 in 1996 to $203,635 in
1997. The decrease in interest expense directly related to the conversion of
certain debenture and director debts to Series C preferred stock during
1997. Interest and other income was $14,427 in 1997 and $10,680 in 1996. The
increase in interest income during 1997 was primarily due to increases in the
Company's restricted cash balances.

Financial Condition and Liquidity

At December 31, 1997, Company assets totaled $1,302,297, and there was a
stockholders' deficit of $2,325,642. The stockholders' deficit decreased
$1,364,187 from the prior year, primarily due to the conversion of certain
debts of the Company into Series C preferred stock. In order to continue as a
going concern, the Company is dependent upon (1) profitable operations from
the antimony division, (2) additional equity financing, and (3) continued
availability of bank financing. Without such debt conversions and additional
financing, the Company may not be able to meet its obligations, fund
operations and continue in existence. There can be no assurance that
management will be successful in its plans to improve the financial condition
of the Company.

Cash used in operations during 1996 was $211,487 compared to cash provided by
operations of $40,409 in 1997. The change in cash used in operations in 1996
to cash provided by operations in 1997 was primarily due to an increase in
gross profit from sales of antimony products during 1997 as compared to 1996.

<PAGE>

Investing activities used $137,036 of cash in 1997 compared with $84,576 in
1996. Cash used in investing activities related exclusively to purchases of
property, plant and equipment, primarily for the antimony division. Financing
activities provided $290,263 in 1996 and $96,627 in 1997.

Cash from financing activities relates principally to cash received from
common stock sales and bank financing. During 1997, the Company borrowed
$30,437 pursuant to a one-year note payable and renewed two line-of-credit
agreements totaling $125,000, with a bank. The borrowings paid certain current
obligations of the Company and funded operating activities.

Significant financial commitments for future periods will include:

. Providing $5,000 per month for a "sinking fund" to pay converted
debentures, related accrued interest.

. Servicing borrowings from the bank.

. Servicing the Hamilton note payable at a minimum of $150,000 annually
(see Note 10 to the consolidated financial statements).

. Keeping current on property, payroll, and income tax liabilities and
accounts payable.

. Fulfilling responsibilities with environmental, labor safety and
securities regulatory agencies.

. Paying annual care-and-maintenance costs at the Yellow Jacket mine.

. Funding minimum annual royalty payments to Geosearch and Yellow Jacket,
Inc.

. Providing funding of the Company's antimony inventory from antimony
profits when the Company's share of antimony inventory amounts to $750,000
or more or when its share of inventory is less than 50% of total inventory.

In 1996 the Yellow Jacket operation was put on a care-and-maintenance basis
after a long history of operating losses. During 1996 the Yellow Jacket lost
$325,190 from its partial year of operation. In 1997 Yellow Jacket consumed a
total of $420,789 in care-and-maintenance and exploration costs. It is
expected that the final results of exploration will be known during 1998, at
which time the Company will either resume operations at the facility or
proceed with its closure. If the Yellow Jacket is closed, exploration costs
will cease and economic resources may be generated from the disposal of
equipment.

In 1997, $210,000 was generated through sales of 420,000 shares of
unregistered common stock and common stock purchase warrants to a director and
others to help finance and fund operations. In 1998, 160,000 additional
unregistered common stock shares and common stock purchase warrants were sold
to a director for $40,000.

On February 21, 1996, a proposal was submitted to the holders of defaulted
convertible and subordinated convertible debentures and holders of
related-party debt offering an opportunity to convert their debenture
principal and accrued interest into common stock of the Company. On August 8,
1996, the proposal was revised to offer debenture and other debt holders
conversion rights into a Series C preferred stock that would be convertible
into common stock of the Company. The proposal, which was subject to
shareholder ratification, offered to issue one share of convertible Series C
preferred stock for each $.55 of defaulted principal and accrued interest to
December 31, 1996 associated with both classes of debentures. On October 3,
1997, at the Company's annual meeting of shareholders, the August 8, 1996
proposal to debt holders was ratified.

<PAGE>

On November 21, 1997, the Company submitted the final Offer to Purchase All of
the Issued and Outstanding Ten Percent (10%) Subordinated Convertible
Debentures and Ten Percent (10%) Convertible Debentures of United States
Antimony Corporation (the "Offer") to debenture holders.

Acceptance of the Offer required conversion of 100% of the defaulted principal
and at least 70% of the accrued interest on the debentures as of December 31,
1996.

Tendering debenture holders had the option of:

(i) receiving a pro rata portion of quarterly cash payments for up to 30%
of accrued interest on tendered debentures from a $5,000 monthly "sinking
fund" to be established by the Company, or

(ii) converting all or a portion of such accrued interest into Series C
shares and receiving warrants to purchase common stock of the Company for
each $0.55 of accrued interest which was converted to Series C shares in
excess of the 70% threshold.

Pursuant to the Offer, tenders of debentures could be withdrawn at any time
prior to the December 31, 1997 expiration date.

The terms of the Offer included that the Company would purchase, convert and
pay for (by issuance of Series C shares and warrants, as applicable) all
debentures and debts validly tendered. Unless the Company failed to issue the
Series C shares and/or warrants upon surrender of debentures, any debentures
properly tendered pursuant to the Offer and accepted for conversion would
cease to accrue interest after December 31, 1996. Any debentures not
surrendered in the Offer (or surrendered or withdrawn prior to the expiration
date) would remain defaulted obligations of the Company.

As a result of the Offer, debentures, director debts, accounts payable and
accrued interest thereon, totaling $1,408,419 were converted into 2,560,762
Series C preferred shares and 249,356 commons stock purchase warrants of the
Company as of December 31, 1997.

Item 7. Financial Statements

The consolidated financial statements of the registrant are included herein on
pages F-1 to F-29.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

<PAGE>

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with
Section 16(a) of the Exchange Act

Identification of Directors and Executive Officers are as follows:

Affiliation
Name Age with Registrant Expiration of Term

John C. Lawrence 59 President, Director Annual meeting
Robert A. Rice 73 Director Annual meeting
Walter L. Maguire, Sr. 76 Director Annual meeting

The Company is not aware of involvement in any legal proceedings by its
directors or executive officers during the past five years that are material
to an evaluation of the ability or integrity of such director or executive
officer.

Business Experience of Directors and Executive Officers:

John C. Lawrence. Mr. Lawrence has been the President and a Director of the
Company since its inception. Mr. Lawrence was the President and a Director of
AGAU Mines, Inc., the predecessor of the Company, since the inception of AGAU
Mines, Inc., in 1968.

Robert A. Rice. Mr. Rice is a metallurgist, having been employed by the
Bunker Hill Company, a wholly owned subsidiary of Gulf Resources and Chemical
Corporation at Kellogg, Idaho, as Senior Metallurgist and Mill Superintendent
until his retirement in 1965. Mr. Rice has been affiliated as a Director of
the Registrant since 1975.

Walter L. Maguire, Sr. Mr. Maguire is a resident of Keller, Virginia. He is a
1943 graduate of Yale University and a 1948 graduate of Columbia School of
Business with an MBA degree. His past business experience includes natural
resource exploration and development, securities and underwriting, real estate
development and plastics research. He is the president of The Maguire
Foundation, a private passive foundation and has been a Director of the
Company since February 1989.

The Registrant does not have standing audit, nominating or compensation
committees of the Board of Directors or committees performing similar
functions, but does, however, have a financial committee to monitor the
Company's financial activities.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities, file reports of ownership
and changes in ownership with the Securities and Exchange Commission.
Officers, directors and stockholders holding more than 10% of the Company's
common stock are required by the regulation to furnish the Company with copies
of all Section 16(a) forms they have filed.

Based on information received by the Company, Messrs. Lawrence, Rice, Maguire,
Sr., and Maguire, Jr., did not timely file a Form 4 upon receipt of annual
stock compensation as directors of the Company.

<PAGE>

Item 10. Executive Compensation

Summary compensation for the Company's principal executive officer is as
follows:

Annual Compensation Long-Term Compensation
--------------------------------- ------------------------------------------------
Awards Payouts
---------- -----------------------------------
Securities
Other Restricted Underlying
Name and Annual Stock Options/ LTIP All Other
Principal Position Year Salary Bonus Compensation(1) Awards SARs Payouts Compensation
------------------- ---- ------- ----- --------------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Lawrence, 1997 $72,000 $ 4,154 None None None None
President 1996 72,000 4,154
1995 53,402 3,080
</TABLE>

(1) Represents earned but unused vacation.

Item 11. Security Ownership of Certain Beneficial Owners and Management

(a) Security Ownership of Certain Beneficial Owners:

As of the close of business on March 31, 1998, the following persons
own beneficially more than 5% of the outstanding voting securities of the
Company:

Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class(1)
- -------------- ------------------- -------------------- ----------
Common stock The Maguire Family and
related entities as a group 2,167,917(2) 15
c/o Walter L. Maguire, Sr.
P.O. Box 129
Keller, VA 23401

Common stock John C. Lawrence and related 1,220,271(3) 9
family members
P.O. Box 643
Thompson Falls, MT 59873

Common stock The Dugan Family 1,735,942(4) 12
c/o A. W. Dugan
1415 Louisiana Street, Suite 3100
Houston, TX 77002

Preferred
Series A A. Gordon Clark, Jr. 4,500(5) 100
stock 2 Musket Trait
Simsbury, CT 06070

Preferred
Series C John C. Lawrence 1,448,567(5) 57
stock P.O. Box 643
Thompson Falls, MT 59873

<PAGE>

(1) Percent of ownership is based upon 14,284,790 shares of
common stock and exercisable warrants, 4,500 shares of Series A preferred
stock, and 2,560,762 shares of Series C preferred stock outstanding at March
31, 1998.

(2) Includes 310,000 warrants to purchase common stock.

(3) Includes 155,810 warrants to purchase common stock.

(4) Includes 200,000 warrants to purchase common stock.

(5) The outstanding Series A and C preferred shares carry voting
rights for the election of directors.

(b) Security Ownership of Management:

Amount of Percent of
Title of Class Name of Beneficial Owner Beneficial Ownership Class (1)
- --------------- ------------------------ -------------------- -----------
Common stock Walter L. Maguire, Sr. 1,940,362(6) 14
Common stock John C. Lawrence 1,145,271(7) 8
Common stock Robert A. Rice 113,351(8) 1

Series C preferred Walter L. Maguire, Sr. 49,091(9) 2
Series C preferred John C. Lawrence 1,448,567(9) 57
Series C preferred Robert A. Rice 62,643(9) 3

(6) Does not include 219,555 shares owned by Walter L. Maguire, Jr., son
of Walter L. Maguire, Sr. or 8,000 shares and warrants owned by the Helen A.
Maguire - Mueller Trust.

(7) Does not include 75,000 shares owned by family members of John C.
Lawrence.

(8) Includes 3,101 warrants to purchase common stock

(9) Series C preferred shares are convertible into common shares on a
one-for-one basis.

Item 12. Certain Relationships and Related Transactions

See Notes 7, 9, 10, 11, 12 and 15 to the consolidated financial statements
included herein.

<PAGE>

Item 13. Exhibits and Reports on Form 8-K

Documents filed with this report:

Exhibit No. Item Dated
- -------------- ------------- -----
10.28 Warrant Agreements Various

21 List of subsidiaries N/A

27 Financial Data Schedule N/A

Documents filed with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995:

Exhibit No. Item Dated
- --------------- --------------- -----
3.1 Articles of Incorporation -
United States Antimony
Corporation-Montana August 18, 1995

10.10 Yellow Jacket Venture Agreement July 7, 1990
10.11 Agreement Between Excel-Mineral
Company and Bobby C.Hamilton August 29, 1991
10.12 Letter Agreement September 1, 1991
10.13 Columbia-Continental Lease
Agreement Revision April 3, 1993
10.14 Settlement Agreement with
Excel Mineral Company July 1993
10.15 Memorandum Agreement July 1993
10.16 Termination Agreement September 12, 1993
10.17 Amendment to Assignment of
Lease (Geosearch) September 9, 1994
10.18 Series B Stock Certificate to
Excel-Mineral Company, Inc. December 25, 1993
10.19 Division Order and Purchase
and Sale Agreement March 27, 1995
10.20 Inventory and Sales Agreement January 1, 1995
10.21 Processing Agreement July 1, 1995
10.22 Release and settlement agreement
between Bobby C. Hamilton and
United States Antimony Corporation November 15, 1995
10.23 Columbia-Continental Lease
Agreement September 27, 1996
10.24 Release of Judgment February 28, 1996
10.25 Covenant Not to Execute July 30, 1990
99.1 CERCLA Letter from U.S.
Forest Service February 11, 1994

Documents filed with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996, and Form 10QSB for the period ended September 31,
1997:
Exhibit No. Item Dated
---------- ---- ------

10.26 Warrant Agreements Various
10.27 Letter from EPA, Region 10 August 21, 1997

There were no reports on Form 8-K filed during the quarter ended December 31,
1997.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

UNITED STATES ANTIMONY CORPORATION
(Registrant)

By: /s/ John C. Lawrence
John C. Lawrence, President, Director and Principal
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

By: /s/ John C. Lawrence Date: April 14, 1998
-------------------- --------------
John C. Lawrence, Director and President
(Principal Executive, Financial and Accounting
Officer)

By: /s/ Walter L. Maguire, Sr. Date: April 14, 1998
-------------------------- --------------
Walter L. Maguire, Sr., Director

By: /s/ Robert A. Rice Date: April 14, 1998
------------------ --------------
Robert A. Rice, Director

<PAGE>

Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Exchange Act by Non-Reporting Issuers.

On September 2, 1997, the Company filed Schedule 14A, giving notice of
the annual meeting of Shareholders to be held October 3rd, 1997, a copy
of the filing is attached as an exhibit hereto.

<PAGE>

Report of Independent Accountant

The Board of Directors and Stockholders of
United States Antimony Corporation

I have audited the consolidated balance sheets of United States Antimony
Corporation and subsidiary as of December 31, 1997 and the related
consolidated statements of income, changes in stockholders' deficit and cash
flows for the year ended December 31, 1997. These financial statements are
the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for my opinion.

In my opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United States
Antimony Corporation and subsidiary as of December 31, 1997, and the
consolidated results of their operations and their cash flows for the year
ended December 31, 1997, in conformity with generally accepted accounting
principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has negative working capital, an
accumulated deficit and total stockholders' deficit that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

/s/JEFFREY R. MAICHEL, CPA

Spokane, Washington
April 14, 1998

<PAGE>

Report of Independent Accountants

The Board of Directors and Stockholders of
United States Antimony Corporation

We have audited the consolidated balance sheet of United States Antimony
Corporation and subsidiary as of December 31, 1996 and the related
consolidated statements of operations, changes in stockholders' deficit and
cash flows for the year then ended. These financial statements are the responsib
ility of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United States
Antimony Corporation and subsidiary as of December 31, 1996, and the
consolidated results of their operations and their cash flows for the year
then ended, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has negative working capital, an
accumulated deficit and total stockholders' deficit that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for environmental remediation liabilities in
1996.

/s/COOPERS & LYBRAND L.L.P.

Spokane, Washington
April 14, 1998

<PAGE>

United States Antimony Corporation and Subsidiary
Consolidated Balance Sheets
December 31, 1997 and 1996

1997 1996

ASSETS

Current assets:

Restricted cash $15,280
Accounts receivable $33,837
Inventories 463,282 556,249
Prepaid expenses 7,727 21,085
------- -------
Total current assets 486,289 611,171
Properties, plants and
equipment, net 637,022 670,081
Restricted cash, reclamation bonds 178,986 170,046
------- -------
Total assets $1,302,297 $1,451,298
========== ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Checks issued and payable $42,384 $29,491
Accounts payable 125,082 306,636
Accrued payroll and property taxes 118,801 93,454
Accrued payroll and other 43,707 39,823
Judgments payable 142,937 131,764
Accrued interest payable 320,287 792,240
Payable to related parties 31,707 644,752
Notes payable to bank 177,079 125,397
Note payable to Bobby C. Hamilton,
current 27,626 20,494
Debentures payable 335,000 650,000
Accrued reclamation costs, current 216,700 100,000
------- -------
Total current liabilities 1,581,310 2,934,051

Notes payable to bank, noncurrent 90,269 185,607
Note payable to Bobby C. Hamilton,
noncurrent 1,616,516 1,706,257
Accrued reclamation costs,
noncurrent 339,844 315,212
------- -------
Total liabilities 3,627,939 5,141,127
--------- ---------
Commitments and contingencies
Notes 1, 5 and 16)

Stockholders' deficit:
Preferred stock, $.01 par value,
10,000,000 shares authorized:
Series A: 4,500 shares issued
and outstanding (liquidation
preference $96,750 and $92,250) 45 45
Series B: 750,000 shares issued
and outstanding (liquidation
preference $780,000 and $772,500) 7,500 7,500
Series C: 2,560,762 shares issued
and outstanding(liquidation
preference $1,408,419) 25,608
Common stock, $.01 par value,
20,000,000 shares authorized;
13,065,434 and 12,627,434 shares
issued and outstanding 130,654 126,274
Additional paid-in capital 13,997,889 13,326,464
Accumulated deficit (16,487,338) (17,150,112)
----------- ----------
Total stockholders' deficit (2,325,642) (3,689,829)
----------- ----------
Total liabilities and stockholders'
deficit $1,302,297 $1,451,298
=========== ===========

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

United States Antimony Corporation and Subsidiary
Consolidated Statements of Operations
for the years ended December 31, 1997 and 1996

1997 1996
Revenues:
Sales of antimony products and other $4,293,409 $4,160,395
Sales of gold and silver 15,692 850,518
---------- ----------
4,309,101 5,010,913
---------- ----------
Cost of production:
Cost of antimony production and other 3,500,410 3,656,492
Cost of gold and silver production 1,175,708
---------- ----------
3,500,410 4,832,200
---------- ----------
Gross profit 808,691 178,713
---------- ----------
Other operating expenses:
Write down of mineral property and equipment 548,792
Provision for reclamation costs 202,234 82,326
Exploration and evaluations 188,361
Care-and-maintenance - Yellow Jacket 232,428
General and administrative 244,553 333,303
--------- ----------
867,576 964,421
Other (income) expense: --------- ----------
Gain on disposal of asset (45,000)
Interest expense 203,635 284,927
Interest Income and other (14,427) (10,680)
--------- ---------
189,208 229,247
--------- ---------
Loss before extraordinary item (248,093) (1,014,955)
Extraordinary gain on conversion
of debts to Series C
preferred stock (net of tax) 910,867
---------- ----------
Net income (loss) $662,774 $(1,014,955)
========== ==========
Basic net income (loss) per share
of common stock
Before extraordinary item $(0.02) $(0.08)
Extraordinary item 0.07
---------- ----------
Net income (loss) $ 0.05 $ 0.08)
========== ==========
Diluted net income (loss) per share
of common stock
Before extraordinary item $(0.02) $(0.08)
Extraordinary item 0.07
---------- ----------
Net income (loss) $0.05 $(0.08)
========== ==========
Basic weighted average shares outstanding 12,969,923 12,299,418
----------- -----------
Diluted weighted average shares outstanding 12,976,958 12,299,418
----------- -----------

The accompanying notes are an integral part of the consolidated financial
statements

<PAGE>

United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows
for the years ended December 31, 1997 and 1996

1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $662,774 $(1,014,955)
Adjustments to reconcile net income (loss)
to net cash provided by(used in) operations:
Depreciation and amortization 170,095 192,445
Write down of mineral property and equipment 548,792
Provision for reclamation costs 202,234 82,326
Gain on disposal of assets (45,000)
Extraordinary gain on conversion of debts
to Series C preferred stock (910,867)
Issuance of common stock to directors as
compensation 2,565 6,000
Issuance of common stock to employee as
compensation 1,250
Issuance of common stock for mineral lease 6,250
Change in:
Restricted cash (15,280) 4,598
Accounts receivable 33,837 77,083
Inventories 92,967 (105,748)
Prepaid expenses 13,358 (11,045)
Reclamation bonds (8,940)
Accounts payable (174,805) 7,190
Accrued payroll and property taxes 25,347 21,682
Accrued payroll and other 3,884 (7,462)
Judgments payable 11,173 (16,101)
Accrued interest payable 33,500 120,110
Payable to related parties (40,531) (1,595)
Accrued reclamation costs (60,902) (77,307)
Net cash provided by (used in) operating --------- ---------
activities 40,409 (211,487)
--------- ---------
Cash flows from investing activities:
Proceeds from disposal of assets 45,000
Purchase of properties, plant
and equipment (137,036) (129,576)
--------- ---------
Net cash used in investing activities (137,036) (84,576)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock
and warrants 210,000 127,560
Proceeds from notes payable to bank 30,437 238,297
Payments on notes payable to bank (74,094) (42,117)
Increase in checks issued and payable 12,893 29,491
Payments on note payable to
Bobby C. Hamilton (82,609) (62,968)
-------- --------
Net cash provided by financing activities 96,627 290,263
-------- --------
Net decrease in cash 0 (5,800)
Cash, beginning of year 0 5,800
-------- --------
Cash, end of year $ 0 $ 0
======== ========
</TABLE>

<PAGE>

United States Antimony Corporation and Subsidiary
Consolidated Statements of Cash Flows, Continued:
for the years ended December 31, 1997 and 1996

1997 1996
Supplemental disclosures:
Cash paid during the year for interest $170,135 $164,817

Non-Cash Financing activities:
Series C preferred stock issued in
connection with debt conversion 488,848
Accrued interest converted to Series C
preferred stock and warrants 511,141
Payable to related parties converted to
Series C preferred stock 566,828
Debentures payable converted to Series C
preferred stock 315,000
Account payable converted to Series C
preferred stock 15,450

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

United States Antimony Corporation and Subsidiary
Consolidated Statements of Changes in Stockholders' Deficit
for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
Preferred Stock
--------------------------------------
Series A Series B Series C Common Stock Additional Accumu-
-------- ------ ------- -------------- Paid-In lated
Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Total
------ ------- --------- ------- ------ ------ ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1995 4,500 $45 750,000 $7,500 12,113,434 $121,134 $13,190,544 $(16,135,157) $(2,815,934)

Issuance of stock
for cash 460,000 4,600 92,960 97,560
Value attributed to
issuance of
warrants 30,000 30,000
Issuance of stock to
employee for
compensation 5,000 50 1,200 1,250
Issuance of stock for
mining lease 25,000 250 6,000 6,250
Issuance of stock to
directors for
compensation 24,000 240 5,760 6,000
Net loss (1,014,955) (1,014,955)
----- ----- --------- ----- ------ ------ --------- ------ ---------- ----------- -----------
Balances,
December 31,
1996 4,500 45 750,000 7,500 12,627,434 126,274 13,326,464 (17,150,112) (3,689,829)

Issuance of stock
for cash 420,000 4,200 173,000 177,200
Value attributed to
issuance of
warrants 32,800 32,800
Issuance of stock in
connection with coversion
of debts 2,560,762 $25,608 463,240 488,848
Issuance of stock to
directors for
compensation 18,000 180 2,385 2,565
Net income 662,774 662,774
----- ----- --------- ----- ------ ------- --------- ------ ---------- --------- ---------
Balances,
December 31,
1996 4,500 $45 750,000 $7,500 2,560,762 $25,608 13,065,434 $130,654 $13,997,889 $(16,487,338)$(2,325,642)
===== ==== ======== ===== ====== ====== ========= ======== ========== =========== ===========

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

United States Antimony Corporation and Subsidiary
Notes to Consolidated Financial Statements

1. Background of Company and Basis of Presentation:

AGAU Mines, Inc., predecessor of United States Antimony Corporation
("USAC" or "the Company"), was incorporated in June 1968 as a Delaware
Corporation to mine gold and silver. USAC was incorporated in Montana in
January 1970 to mine and produce antimony products. In June 1973, AGAU Mines,
Inc. was merged into USAC. In December 1983, the Company suspended its
antimony mining operations when it became possible to purchase antimony raw
materials more economically from foreign sources.

On September 1, 1991, the Company entered into an agreement with
HoltraChem, Inc. ("HoltraChem") whereby the Company would process raw material
purchased by HoltraChem into finished antimony products. The Company would
then deliver the finished products to HoltraChem for sale, and share in the
profits or losses from sales with HoltraChem on a 50/50 basis. On July 1,
1995, the Company and HoltraChem terminated the 1991 agreement and entered
into an Inventory and Sales Agreement and a Processing Agreement ("The
Agreements"). The Agreements gave rise to the creation of a wholly owned
subsidiary, United States Antimony Corporation-Montana ("USAM"), that
participates with HoltraChem and its subsidiary, HoltraChem-Montana, Inc.
("HCMI"), in the processing and sale of antimony products. While the
Agreements still provide for the sharing of profits or losses from sales,
after deduction of certain costs, on a 50/50 basis, they also require the
Company to fund and own 50% of the antimony inventory up to $750,000. The
Company funds the acquisition of 50% of the antimony inventory through the
Company's contribution of 50% of its share of profits. USAM also receives a
processing fee from HoltraChem for the finished antimony inventory, which is
included in sales of antimony products. All intercompany profits in the
inventory are eliminated in consolidation. In consideration of the Company's
financial participation in carrying antimony inventory, HoltraChem agreed to
provide additional marketing efforts to increase product sales to 10 million
pounds of antimony products per year. The Agreements expire on December 31,
1999.

The principal business of the Company has been the production of antimony
products through USAM in Montana and the mining and milling of gold at the
Yellow Jacket mine in Idaho. The consolidated financial statements of the
Company include the accounts of USAM, a wholly owned subsidiary, and its
proportionate share of the joint activities of the Company and HoltraChem. All
intercompany balances and transactions have been eliminated.

The Company is pursuing the acquisition of 50% interest in United States
Antimony, Mexico S.A. de C.V. ("USAMSA") to mine, mill and produce antimony
metal and other raw materials from certain states in Mexico. At December 31,
1997, the Company had invested $89,014 in property, plant and equipment in
Mexico.

The financial statements have been prepared on a going concern basis
which assumes realization of assets and liquidation of liabilities in the
normal course of business. At December 31, 1997, the Company has negative
working capital of approximately $1.1 million, an accumulated deficit of
approximately $16.5 million and a total stockholders' deficit of approximately
$2.3 million. These factors, among others, indicate that there is substantial
doubt that the Company will be able to meet its obligations and continue in
existence as a going concern. The financial statements do not include any
adjustments that may be necessary should the Company be unable to continue as
a going concern.

<PAGE>

Notes to Consolidated Financial Statements Continued

1. Background of Company and Basis of Presentation, Continued:

To improve the Company's financial condition, the following actions have
been initiated or taken by management:

. The Company submitted a proposal to the holders of defaulted
debentures and certain other creditors to convert their principal and some or
all of their accrued interest to Series C preferred stock. During 1997, the
proposal was approved by the Company's shareholders and a substantial amount
of debt and accrued interest was converted to series C preferred stock (see
Note 9).

. In August 1996, the Company placed the Yellow Jacket mine on a
care-and-maintenance basis in order to reduce operating losses and conserve
cash flow.

. Beginning in 1995, the Company assembled and prepared financial
information necessary to regain compliance with the reporting requirements of
the Securities and Exchange Commission to enhance the marketability of its
stock. During 1996, $127,560 was generated through sales of 460,000 shares of
unregistered common stock to existing stockholders and others. During 1997,
the Company generated $210,000 through sales of 420,000 shares of unregistered
common stock and warrants to existing shareholders. Of these proceeds,
$100,000 has been designated for investment in the Company's Mexican project.
The Company plans to raise additional equity funding through additional stock
sales. However, there can be no assurance that the Company will be able to
successfully raise additional capital through the sale of its stock.

. During 1997, the Company obtained listing on the over-the-counter
electronic bulletin board with Empire Securities of Spokane, Washington, as a
registered trader of its stock. This process will enhance shareholder
liquidity and increase the Company's ability to obtain additional equity
financing.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. Concentration of Risk:

The Company, through its arrangements with HoltraChem, purchases the
majority of its antimony used in the production of finished antimony products
from Chinese producers through metal brokers. All antimony product sales are
made through an arrangement with HCMI (see Note 1). During the years ended
December 31, 1997 and 1996, 14% and 22% of the Company's revenues from
antimony products were from one customer. These antimony sales represented 14%
and 19% of total revenues for the years ended December 31, 1997 and 1996,
respectively. If the sales agreement with HCMI were terminated, management
believes that other chemical distribution companies would be available to
fulfill the Company's needs. However, if the supply of antimony from China is
reduced, it is possible that the Company's antimony product operations could
be adversely affected.

Many of the Company's competitors in the antimony industry have
substantially more capital resources and market share than the Company.
Therefore, the Company's ability to maintain its market share can be
significantly affected by factors outside of the Company's control.

<PAGE>

2. Concentration of Risk, Continued:

The Company's revenues from antimony sales are strongly influenced by
world prices for such commodities, which fluctuate and are affected by
numerous factors beyond the Company's control, including inflation and
worldwide forces of supply and demand. The aggregate effect of these factors
is not possible to accurately predict.

3. Summary of Significant Accounting Policies:

Restricted Cash

Restricted cash consists of cash held for investment in the Company's
Mexican project and reclamation performance bonds.

Inventories

Inventories consist of an undivided tenant in common interest with HCMI
in antimony metal, metal in process and finished goods that are stated at the
lower of first-in, first-out cost or estimated net realizable value. Since the
Company's inventory is a commodity with a sales value that is subject to world
prices for antimony that are beyond the Company's control, a significant
change in the world market price of antimony could have a significant effect
on the Company's operations.

Properties, Plants and Equipment

The Company's gold-producing property rights are recorded at the lower of
cost or estimated net realizable value. The property rights are depleted using
the units-of-production method. Production facilities and equipment are stated
at the lower of cost or estimated net realizable value and are depreciated
using the straight-line method over their estimated useful lives. Vehicles and
office equipment are stated at cost and are depreciated using the
straight-line method over estimated useful lives of three to five years.
Maintenance and repairs are charged to operations as incurred. Betterments of
a major nature are capitalized. When assets are retired or sold, the costs and
related allowances for depreciation and amortization are eliminated from the
accounts and any resulting gain or loss is reflected in operations.
Management's calculations of proven and probable ore reserves are based on
engineering and geological estimates including minerals prices and operating
costs. Changes in the geological and engineering interpretation of various ore
bodies, mineral prices and operating costs may change the Company's estimates
of proven and probable reserves. It is reasonably possible that certain of the
Company's estimates of proven and probable reserves will change in the near
term, resulting in a change in amortization and liability accrual rates in
future reporting periods.

Management of the Company periodically reviews the net carrying value of
all of its properties on a property-by-property basis. These reviews consider
the net realizable value of each property to determine whether a permanent
impairment in value has occurred and the need for any asset write-down. The
Company considers current metal prices, cost of production, proven and
probable reserves and salvage value of the property and equipment in its
valuation.

<PAGE>

3. Summary of Significant Accounting Policies, Continued:

Properties, Plants and Equipment, Continued

Management's estimates of metal prices, recoverable proven and probable
ore reserves and operating capital and reclamation costs are subject to risks
and uncertainties of change affecting the recoverability of the Company's
investment in its properties, plants and equipment. Although management has
made its best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which could
adversely affect management's estimate of net cash flows expected to be
generated from its properties and the need for asset impairment write-downs.

The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No.
121 requires that an impairment loss be recognized when the estimated future
cash flows (undiscounted and without interest) expected to result from the use
of an asset are less than the carrying amount of the asset. Measurement of an
impairment loss is based on the estimated fair value of the asset if the asset
is expected to be held and used. During 1995, the Company acquired the
remaining 40% net profits interest and related equipment in the Yellow Jacket
mine for $500,000 (see Note 10). During the fourth quarter of 1996, the
Company reviewed the economic recoverability of the remaining unamortized
carrying value of the net profits interest and wrote off the remaining
$463,057 carrying value. If ongoing exploration efforts are unsuccessful and a
decision is made to permanently close the property, an accrual for closure
costs will be necessary. Other property with a carrying value of $85,735 was
also written off during 1996.

Some of the Company's gold revenues are generated from unpatented mining
claims. Any adverse changes to the United States government regulations
regarding the availability or cost of mining on government owned properties
could significantly affect the Company's operations.

Reclamation and Remediation

The Company's operations are subject to reclamation and closure
requirements. Minimum standards for mine reclamation have been established by
various governmental agencies. Costs are estimated based primarily upon
environmental and regulatory requirements and are accrued and charged to
expense over the expected economic life of the operation using the
units-of-production method. The liability for reclamation is classified as
current or noncurrent based on the expected timing of expenditures. Closure
costs are not accrued for mines on a care-and-maintenance basis until, if and
when, a decision to close the mine is made.

The Company accrues costs associated with environmental remediation
obligations when it is probable that such costs will be incurred and they are
reasonably estimatable. Costs of future expenditures for environmental
remediation are not discounted to their present value. Such costs are based on
management's current estimate of amounts that are expected to be incurred when
the remediation work is performed within current laws and regulations. The
Company has restricted cash balances that have been provided to ensure
performance of its reclamation obligations.

In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities"
("SOP 96-1"). SOP 96-1 provides authoritative guidance with respect to
specific accounting issues that are present in the recognition, measurement,
display and disclosure of environmental remediation liabilities. The
provisions of SOP 96-1 are effective for fiscal years beginning after December
15, 1996. The Company adopted the provisions of the SOP 96-1 during 1996. The
adoption of the provisions of SOP 96-1 had no material effect on the results
of operations or financial condition of the Company.

<PAGE>

3. Summary of Significant Accounting Policies, Continued:

Reclamation and Remediation, Continued

It is reasonably possible that, due to uncertainties associated with
defining the nature and extent of environmental contamination, application of
laws and regulations by regulatory authorities, and changes in remediation
technology, the ultimate cost of remediation and reclamation could change in
the future. The Company continually reviews its accrued liabilities for such
remediation and reclamation costs as evidence becomes available indicating
that its remediation and reclamation liability has changed. During 1997, the
Company accrued an additional $202,234 to its reclamation liabilities.

Income Taxes

The Company records deferred income tax liabilities and assets for the
expected future income tax consequences of events that have been recognized in
its financial statements. Deferred income tax liabilities and assets are
determined based on the temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the temporary differences are expected
to reverse.

Revenue Recognition

Sales of gold concentrates are recorded when received by the smelter, at
estimated metal prices based on estimated contained metal in concentrates.
Recorded values are adjusted periodically and upon final settlement. Sales of
antimony products are recorded upon shipment to the customer.

Income (Loss) Per Common Share

In February 1997, the Financial Accounting Standards Board Issued SFAS No.
128, "Earnings Per Share," which became effective for the Company for
reporting periods ending after December 15, 1997. Under the provisions of
SFAS No. 128, primary and full-diluted earnings per share were replaced with
basic and diluted earnings per share. Basic earnings per share is arrived at
by dividing net income (loss) available to common stockholders by the
weighted-average number of common shares outstanding and does not include the
impact of any potentially dilutive common stock equivalents. The diluted
earnings per share calculation is arrived at by dividing net income (loss) by
the weighted-average number of shares outstanding, adjusted for the dilutive
effect of outstanding stock options, the conversion impact of convertible
preferred stock, and shares issuable under other contracts.

During 1997 and 1996 the Company had outstanding common stock warrants that
were exercisable at prices higher than the trading value of the Company's
stock and, therefore, antidilutive. Accordingly, the warrants have no affect
on the calculation of basic or diluted weighted-average number of shares. In
1997, the Company had 2,560,762 shares of Series C preferred stock that were
outstanding at December 31, 1997. The Series C preferred stock is convertible
into common stock of the Company and considered in the calculation of diluted
weighted-average number of shares outstanding during 1997.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting the components of comprehensive income prominently within the
financial statements. Comprehensive income includes net income plus certain
transactions that are reported directly within stockholders' equity.

3. Summary of Significant Accounting Policies, Continued:

Recent Accounting Pronouncements, Continued

The provisions of this statement are effective with the first quarter of
1998 financial statements and will have no material impact on financial
position or results of operations of the Company.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
provisions of this statement require the disclosure of financial information
about a company's operating segments in interim and annual financial
statements. The definition of operating segments is to be based upon internal
management practices of the company. The statement is effective in 1998 and
its adoption will have no material impact on the financial condition or
results of operations of the Company.

4. Properties, Plants and Equipment:

The major components of the Company's properties, plants and equipment at
December 31, 1997 and 1996 were as follows:

1997 1996

Gold mill and equipment(1) $37,890 $37,890
Gold mining equipment(1) 1,265,392 1,262,891
Antimony mining buildings and equipment(2) 168,746 168,746
Antimony mill and equipment(2) 518,190 518,190
Chemical processing buildings 222,408 210,116
Chemical processing equipment 829,063 800,518
USAMSA(3) 89,014
Other 51,807 47,123
--------- ---------
3,182,510 3,045,474
Less accumulated depreciation and --------- ---------
depletion (2,545,488) (2,375,393)
--------- ---------
$637,022 $670,081
========= =========

(1) During 1996, the Company removed the mill at Yankee Fork and some
of the mining and milling equipment as part of the reclamation process.
Substantially all of the remaining assets are fully depreciated.

(2) At December 31, 1997 and 1996, substantially all of these assets
are fully depreciated and the antimony milling buildings and equipment are
idle.

(3) Amount represents the Company's expenditures in USAMSA plant and
equipment.

<PAGE>

5. Mineral Property Leases:

Yellow Jacket Mine

On February 19, 1988, the Company obtained an assignment from Geosearch,
Inc. ("Geosearch") of all of its rights, title and interest in and to the
lease agreement dated July 8, 1987 by and between Yellow Jacket Mines, Inc.,
the Company and Geosearch. In consideration of the assignment of the lease,
the Company agreed to conduct certain exploration and to provide a preliminary
mining plan which, if justified, would result in applications for permitting
and bonding purposes with the state of Idaho, the U.S. Forest Service and
other agencies to mine and mill gold. The Company also agreed to pay Geosearch
a 12.5% net operating profits interest until the Company recovered its full
investment in the property, and thereafter, Geosearch would receive a 15% net
operating profits interest. The Company agreed to pay Geosearch a minimum
monthly payment of $1,000 during the months of January through April, if
operations are closed due to weather, and $2,000 per month for the months of
May through December of each year until the mill was operational. After the
mill was built at the Yellow Jacket mine in 1990 and placed in operation, the
Company paid Geosearch $25,000 per year in staggered installments, with all
payments accumulated and credited against the net operating profits due
Geosearch. Net operating profits and guaranteed minimum payments paid to
Geosearch apply to a $600,000 maximum amount.

In March 1994, Geosearch filed an action in the Seventh Judicial District
Court, Custer County, Idaho, alleging breach of the 1988 assignment of lease.
The lawsuit requested recovery of $94,013 in past royalties and accrued
interest thereon. On September 9, 1994, the Company settled the litigation by
agreeing to an amendment to the assignment of lease. The amendment calls for
the payment of past royalties and accrued interest through the assignment of
5% of gross receipts from gold production at the Yellow Jacket mine. The
unpaid balance accrues interest at 10% per annum until paid in full and is
included in judgments payable (see Note 6). In 1995, pursuant to the
settlement agreement, the Company issued 50,000 shares of its unregistered
common stock and 100,000 common stock purchase warrants exercisable at $.35 to
Geosearch (see Note 12). The Company also paid $4,000 in legal fees incurred
by Geosearch.

The underlying lease with Yellow Jacket Mines, Inc. requires the payment
of a net smelter royalty of 5% with a minimum annual royalty of $27,500.
During the years ended December 31, 1997 and 1996, the Company incurred
$27,500 and $41,635, respectively, in royalties and interest expense related
to these agreements.

Continental-Columbia Claims

On March 15, 1989, the Company entered into a lease agreement with Yellow
Jacket Mines, Inc. to lease a group of patented and unpatented mining claims
(the Continental-Columbia claims) in Lemhi County, Idaho. The
Continental-Columbia claims are contiguous to the Company's Yellow Jacket
claims. The initial term of the lease was for 5 years with a right to renew
for an additional 5-year period. In consideration for the lease, the Company
agreed to pay Yellow Jacket Mines, Inc. a production royalty and minimum
royalty payments during the term of the agreement. On April 1, 1993, the lease
agreement was revised to waive the minimum guaranteed royalty due March 1,
1993 of $15,000 in lieu of a commitment from the Company to expend at least
$10,000 in exploration and development work on the Continental-Columbia
claims.

<PAGE>

5. Mineral Property Leases, Continued:

Continental-Columbia Claims, Continued

The revision also provided for the renewal of the lease on an annual
basis and granted the Company a first right of refusal should the Company
terminate the lease and another party express interest in the property.

The Company did not renew the lease until October 1996, at which time a
new agreement was consummated. Under the new agreement, the Company issued
25,000 shares of its restricted common stock for the first fiscal year of the
lease. For the second and ensuing years, the Company will pay 1% of net
smelter royalties from the Yellow Jacket mine with a guaranteed minimum of
$10,000 annually. Also, if the Continental-Columbia claims are brought into
production, the Company will pay 5% of the net smelter royalties with a
guaranteed $10,000 annual minimum and the 1% net smelter royalty from the
Yellow Jacket production will cease. The Company has the right to renew or
cancel the lease on an annual basis. In October of 1997, the
Continental-Columbia lease expired and the Company notified Yellow Jacket
Mines, Inc. that it would not renew the lease agreement.

6. Judgments Payable:

At December 31, 1997 and 1996, the Company owed the following judgments
payable:

1997 1996
Payable to:
Trustee for former legal
counsel's bankruptcy estate $47,623(1) $60,772
Geosearch, Inc. (see Note 5) 95,314(2) 70,992
------ ------
$142,937 $131,764
======= =======

(1)Includes interest at the Federal Judgment Rate, which approximated 6%
during 1997 and 1996. The amount is collateralized by certain equipment.
(2)Includes interest at 10% per annum.

<PAGE>

7. Payable to Related Parties:

Amounts payable to related parties at December 31, 1997 and 1996
were as follows (see Note 15).

1997 1996

An entity owned by John C. Lawrence,
president and director $573
John C. Lawrence, president and director (1) -0- $553,954
Walter L. Maguire, Sr., director (1) -0- 27,000
Walter L. Maguire, Jr., a former director(2) 31,134 29,344
Robert Rice, director (1) -0- 34,454
------ -------
$31,707 $644,752
====== =======

(1)During 1997, amounts payable to these directors were converted to
Series C preferred stock(see Note 9).

(2)Interest accrues on this liability at 10% per annum.

Transactions affecting the payable to Mr. Lawrence during 1997 and
1996 were as follows:

1997 1996

Balance, beginning of year $553,954 $590,479
Equipment rental charges 33,620 44,715
Salary and vacation expense 54,000
Other advances 10,262 4,843
Payments (86,776) (110,083)
Balance converted to Series C
preferred stock 511,060
------- --------
Balance, end of year $-0- $553,954
======= ========

8. Notes Payable to Bank:

Notes payable to First State Bank of Thompson Falls, Montana ("First
State Bank") at December 31, 1997 were as follows:

Five-year term note payable bearing interest at 2.5% over the
bank's daily Adjustable Rate ("ARM"), an index based on the Wall
Street Prime Rate which was 8.5% at December 31, 1997. The note
is payable monthly from 5% of receipts from all Company sales up
to $5,155 per month.

The note is collateralized by certain equipment and patented and
unpatented mining claims in Sanders County, Montana. The note is
personally guaranteed by John C. Lawrence. The note
is due on August 1, 2001. $139,233

Note payable under a revolving line-of-credit agreement bearing
interest at 2.5% over the bank's daily ARM rate, which was 8.5%
at December 31,1997. The note is collateralized by certain
equipment and patented and unpatented mining claims in
Sanders County, Montana. The maximum borrowing under the line
of credit is $50,000. Principal and accrued interest is due at
maturity on August 1, 1998 and is personally guaranteed
by John C. Lawrence. 22,677

<PAGE>

8. Notes Payable to Bank, Continued:

Note payable under a revolving line-of-credit agreement bearing
interest at 2.5% over the bank's daily ARM rate, which was 8.5% at
December 31, 1997. The note is collateralized by certain
equipment and patented and unpatented mining claims in Sanders
County, Montana. The maximum borrowing under the line of credit is
$75,000. Principal and accrued interest is due at maturity on
September 1, 1998 and is personally guaranteed by John C. Lawrence.
75,000

One-year note payable bearing interest at 2.0% over the Wall Street
Prime Rate, which was 8.5% at December 31, 1997. The note is secured
by certain patented and unpatented mining claims in Sanders County,
Montana and is payable in monthly installments of $4,525. The note is
due on August 1, 1998. 30,438
------
267,348
Less current portion 177,079
-------
Noncurrent portion $90,269
=======

Based on the interest rates in effect at December 31, 1997, principal
payments on the notes payable are due as follows:

Year Ending
December 31,

1998 $177,079
1999 54,630
2000 35,639
--------
$267,348
========

The note agreements require the Company to maintain certain minimum insurance
coverages. At December 31, 1997, the Company was in compliance with these
requirements.

9. Debentures Payable:

On April 15, 1985 and May 2, 1988, the Company issued $300,000 of
convertible debentures and $350,000 of subordinated convertible debentures,
respectively. Both debenture issues were unsecured, convertible into common
stock of the Company at any time prior to their maturity date and required
semiannual interest payments of 10%. At December 31, 1996, the Company had
amounts due the Walter L. Maguire 1935 Trust, an entity whose beneficiaries
include Walter L. Maguire, Sr., and Walter L. Maguire, Jr., stockholders of
the Company, totaling $335,000 in the form of subordinated convertible
debentures of $135,000 and $200,000 in convertible debentures. Walter L.
Maguire, Sr., is also a director of the Company. The Company also had $315,000
of subordinated convertible debentures outstanding to other stockholders and
individuals at December 31, 1996.

The convertible and subordinated convertible debentures were scheduled to
mature on April 14, 1991 and April 14, 1993, respectively. No interest or
principal payments had been made on either debenture issue since 1989, and the
debentures were in default.

<PAGE>

9. Debentures Payable, Continued:

On February 21, 1996, a proposal was submitted to the holders of
defaulted convertible and subordinated convertible debentures and holders of
related-party debt offering an opportunity to convert their debenture
principal and accrued interest into common stock of the Company. On August 8,
1996, the proposal was revised to offer debenture and other debt holders
conversion rights into a Series C preferred stock that would be convertible
into common stock of the Company. The proposal, which was subject to
shareholder ratification, offered to issue one share of convertible Series C
preferred stock for each $.55 of defaulted principal and accrued interest to
December 31, 1996 associated with both classes of debentures. On October 3,
1997, at the Company's annual meeting of shareholders, the August 8, 1996
proposal to debt holders was ratified.

On November 21, 1997, the Company submitted the final Offer to Purchase
All of the Issued and Outstanding Ten Percent (10%) Subordinated Convertible
Debentures and Ten Percent (10%) Convertible Debentures of United States
Antimony Corporation (the "Offer") to debenture holders.

Acceptance of the Offer required conversion of 100% of the defaulted
principal and at least 70% of the accrued interest on the debentures as of
December 31, 1996.

Tendering debenture holders had the option of:

(i) receiving a pro rata portion of quarterly cash payments for up to 30% of
accrued interest on tendered debentures from a $5,000 monthly "sinking fund"
to be established by the Company, or

(ii) converting all or a portion of such accrued interest into Series C shares
and receiving warrants to purchase common stock of the Company for each $0.55
of accrued interest which was converted to Series C shares in excess of the
70% threshold. ( see Note 12).

Pursuant to the Offer, tenders of debentures could be withdrawn at any
time prior to the December 31, 1997 expiration date.

The terms of the Offer included that the Company would purchase,
convert and pay for (by issuance of Series C shares and warrants, as
applicable) all debentures and debts validly tendered. Unless the Company
failed to issue the Series C shares and/or warrants upon surrender of
debentures, any debentures properly tendered pursuant to the Offer and
accepted for conversion would cease to accrue interest after December 31,
1996. Any debentures not surrendered in the Offer (or surrendered or
withdrawn prior to the expiration date) would remain defaulted obligations of
the Company.

<PAGE>

9. Debentures Payable, Continued:

The offer was extended to current and former debt-holder directors of the
Company, and to certain vendors who had past due accounts owed by the
Company. The table below summarizes tenders received by the Company prior to
the expiration of the Offer, and the Series C shares and warrants issued.

<TABLE>
<CAPTION>
Shares of
Series C
Preferred stock Warrants
Debt Amount Issued Issued
<S> <C> <C> <C>
Subordinated Convertible Debenture Principal $215,000 390,909
Accrued interest as of December 31, 1996 (1) 165,816 301,484 90,445

Convertible Debenture Principal 100,000 181,818
Accrued interest as of December 31, 1996 (2) 53,987 98,158

Principal amount due John C. Lawrence, director 511,060 929,200
Accrued interest as of December 31, 1996 (1) 285,652 519,367 155,810

Principal amount due Robert A. Rice, director 28,768 52,305
Accrued interest as of December 31, 1996 (1) 5,686 10,338 3,101

Principal amount due Walter L. Maguire,
Sr.,director(3) 27,000 49,091

Account payable due a vendor (3) 15,450 28,092
------- ------ ------
$1,408,419 2,560,762 249,356
========= ========= =======
</TABLE>

(1) 100% of the accrued interest as of December 31, 1996 related to this
debt was converted to Series C preferred stock and warrants.

(2) 70% of the accrued interest as of December 31, 1996 related to this
debt was converted to Series C preferred stock. The balance of accrued
interest ($23,140) is to be paid in equal monthly installments from a monthly
"sinking fund" to be established by the Company (see Note 12).

(3) Non-interest bearing

The Company recorded the issuance of the 2,560,762 shares of Series C
preferred stock at the average of the bid/ask price of the Company's common
stock at December 31, 1997, as quoted by Empire Securities. The valuation was
based on the average bid/ask price of the Company's common stock since no
market exists for the Series C preferred stock and it is convertible into
common stock on a share for share basis. In connection with the issue of
Series C preferred stock and warrants the Company recorded an extraordinary
gain of $910,867, net of income tax.

At December 31, 1997, $200,000 of convertible debentures and $135,000 of
subordinated convertible debentures due to the Walter L. Maguire 1935 Trust
remained in default.

<PAGE>

10. Note Payable to Bobby C. Hamilton:

On July 7, 1990, the Company entered into a mining venture agreement with
BumbleBee Inc. ("BumbleBee"), a company controlled by Bobby C. Hamilton
("Hamilton"), a stockholder and creditor of the Company, to explore, develop
and operate the Company's Yellow Jacket property. Pursuant to the agreement,
the Company contributed its leasehold interest in the Yellow Jacket property
and the use of certain mining and milling equipment to the venture. Hamilton
contributed $500,000 cash, and in exchange received a 40% net profits interest
in gold production from the mine when it was developed.

The venture developed a mine and mill at the property and began gold
production in 1991. The mine did not operate profitably and Hamilton continued
to advance cash to the Company to maintain operations. In December 1994, the
Company attempted to quantify and clarify amounts due Hamilton as a result of
his advances to the Company and from previous debt and stock price guarantees
without success.

On August 1, 1995, the Company filed a complaint in the United States
District Court of Idaho against Hamilton and BumbleBee. The complaint sought
declaratory and injunctive relief from a judicial determination by the court
of the amounts due and owing Hamilton and BumbleBee and of the effect of
various debt and repayment agreements between the Company and Hamilton.

On November 15, 1995, the action was settled and Hamilton's obligation
was determined to be $1,800,000, which included $500,000 for the purchase of
Hamilton's 40% net profits interest in the Yellow Jacket mine. The unsecured
debt accrues interest at 7.5%, is payable from 10% of the Company's gross
sales from all operations and requires a minimum payment of $150,000 annually,
including interest. The settlement agreement released all security interests
Hamilton had in the Company's real and personal properties, recovered 916,667
shares of Series B preferred stock and two patented mining claims held by him
as security and terminated the Yellow Jacket venture agreement with BumbleBee.
The settlement agreement also extinguished all previous stock price guarantees
to Hamilton and required his surrender of 150,000 shares of the Company's
common stock to the Company. In connection with the settlement, the Company canc
eled warrants granted to Hamilton to purchase 500,000 shares of common stock
at $.25 per share and issued Hamilton 500,000 shares of the Company's
unregistered common stock in connection with the purchase of his 40% net
profits interest in the Yellow Jacket property.

Based on the minimum annual payment requirement, principal payments on
the Hamilton note payable are due as follows:

Year Ending
December 31,

1998 $27,626
1999 29,771
2000 32,082
2001 34,573
2002 37,257
Thereafter 1,482,833
---------
$1,644,142
=========

<PAGE>

11. Accrued Interest Payable

Accrued interest payable at December 31, 1997 and 1996 was as
follows:

1997 1996

John C. Lawrence(1) $ -0- $285,652
Debentures payable(2) 320,287 506,588
------- -------
$320,287 $792,240
======= =======

(1) John C. Lawrence is a director and president of the Company.
Accrued interest as of December 31, 1996 was converted to Series C
preferred stock (see Note 9) during 1997.

(2) Includes accrued interest of $297,148 and $263,648 for 1997
and 1996, respectively, on debentures owned by the Walter L. Maguire 1935
Trust, of which Walter L. Maguire, Sr. and Walter L. Maguire, Jr., are
beneficiaries. Walter L. Maguire, Sr., is a director of the Company. At
December 31, 1997, accrued interest includes $23,140 of accrued interest on a
tendered convertible debenture (see Note 9) to be paid to the tendering holder
in monthly installments from a "sinking fund" to be established by the
Company.

Interest expense incurred on related-party debentures owned by the
Walter L. Maguire 1935 Trust was $33,500 for each year ended December 31, 1997
and 1996. During 1997 no interest expense was incurred on Mr. Lawrence's debt
and $127,957 was incurred on Mr. Hamilton's debt (a stockholder). Interest
expense incurred on Mr. Lawrence's and Mr. Hamilton's debts was $187,901
during 1996.

12.Stockholders' Deficit:

Stock Warrants

The Company's Board of Directors has the authority to issue incentive
stock warrants for the purchase of common stock to directors and employees of
the Company. The Company has also issued warrants in exchange for services
rendered the Company and in settlement of certain litigation.

Transactions in stock warrants are as follows:

Number of Expiration
Warrants Option Prices Date

Balance, December 31, 1995 290,000 $0.25-$0.35 (A)
Warrants issued to employees 25,000 $0.50 (B)
Warrants issued in connection
with stock sale 200,000 $0.70 (C)
Warrants expired (290,000) $0.25-$0.35 (A)
------- ----------
Balance, December 31, 1996 225,000 $0.50-$0.70

<PAGE>

12. Stockholders' Deficit, Continued:

Stock Warrants, Continued

Warrants issued in connection with
debt conversion to Series C
preferred stock 249,356 $0.70 (E)
Warrants issued in
connection with stock sale 420,000 $0.80 (D)
------- ----------
Balance, December 31, 1997 894,356 $0.50-$0.80
======= ==========

(A) Warrants were exercisable at December 31, 1995, but expired
before being exercised during 1996.

(B) Warrants are exercisable on or before January 1, 1999.

(D) Warrants are exercisable on or before March 18, 2000.

(E) Warrants are exercisable on or before December 31, 2000.

During 1997, the Company issued 249,356 warrants in connection with
the conversion of certain debts owed by the Company (see Note 9). The rights,
preferences, privileges and limitations of the warrants issued upon conversion
of the debts are set forth below:

Exercise Price and Terms. Each warrant entitles the holder thereof to
purchase, at any time after issuance for a period of three years, one share of
common stock at a price of $0.70 per share, subject to adjustment in
accordance with the anti-dilution and other provisions referred to below. The
warrants expire three years after issuance unless extended at the sole option
of the Board of Directors of the Company. The holder of any warrant may
exercise such warrant by surrendering the certificate representing the warrant
to the Company, with the subscription attached to such certificate properly
completed and executed, together with payment of the exercise price. The
warrants may be exercised in whole or in part at the applicable exercise price
until the date of expiration of the warrants. No fractional shares will be
issued upon the exercise of the warrants.

Limitations on Transfer. The warrants are non-transferable by the holders
thereof during the three-year exercise period.

Antidilution Provisions. The exercise price and the number of
shares of common stock issuable upon exercise of the warrants are subject to
adjustment upon the occurrence of certain events, including stock dividends,
stock splits, combinations or reclassification of common stock, or sale by the
Company of shares of its common stock (other securities convertible into or
exercisable for common stock) at a price per share or share equivalent below
the then-applicable exercise price of the warrants or the then-current market
price of the common stock. Additionally, an adjustment would be made in the
case of a reclassification or exchange of common stock, consolidation or
merger of the Company with or into another corporation, or sale of all or
substantially all of the assets of the Company, in order to enable warrant
holders to acquire the kind and number of shares of stock or other securities
or property in such event by a holder of that number of shares of common stock
that would have been issued upon exercise of the warrant immediately prior to
such event.

<PAGE>

12. Stockholders' Deficit, Continued:

Antidilution Provisions, Continued

No adjustment to the exercise price of the shares subject to the warrants will
be made for dividends (other than stock dividends), if any, paid on the common
stock or for securities issued to employees, consultants or directors
pursuant to plans and arrangements approved by the Board of Directors and
securities issued to lending or leasing institutions approved by the
Board of Directors.

Due to the low volume of trading in the Company's common stock
and the financial condition of the Company, the Company has estimated that the
warrants issued to employees during 1996 have minimal value. Accordingly, the
pro forma effect on net loss and net loss per share for the year ended
December 31, 1996 would be immaterial if the Company accounted for stock
warrants in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation."

Issuance of Common Stock for Cash

During 1997, the Company sold 420,000 shares of its unregistered
common stock and warrants for $210,000. Walter L. Maguire Sr., a director,
purchased 206,000 shares and a trust related to Mr. Maguire purchased 4,000
shares of the unregistered common stock sold during 1997.

During 1996, the Company sold 460,000 shares of its unregistered
common stock and warrants for $127,560. The sales were as follows:

Share Sale Price
Purchaser Shares Price Total

Houston Resources(1) 150,000 $0.20 $30,000
Judith and Philip Knoff(2) 75,000 $0.20 15,000
The Maguire Foundation(4) 75,000 $0.20 15,000
Robert A. Rice(3) 25,000 $0.20 5,000
Delaware Royalty Co.(1) 100,000 $0.55 55,000
Yellow Jacket Mines Inc. 10,000 $0.25 2,500
Other 25,000 $0.2024 5,060
------- ---------- -------
Total 460,000 $0.20-$0.55 $127,560
======= ========== =======

(1) Companies owned or controlled by Al Dugan, an existing
shareholder.

(2) Sister and brother-in-law of John C. Lawrence, director and
president of the Company.

(3) Director of the Company.

(4) A foundation related to Walter L. Maguire, Sr., a
shareholder and director.

<PAGE>

12. Stockholders' Deficit, Continued:

Issuance of Common Stock in Exchange for Services

During 1996, the Company issued 5,000 shares of its unregistered
common stock to a key employee as compensation. The stock was valued at $1,250
based on the estimated fair value of the stock.

For the years ended December 31, 1997 and 1996, the Company issued
shares of its unregistered common stock to directors of the Company as
compensation for their attendance at Board of Director meetings (see Note 15).
The above shares were valued at 75% of the market value of the stock at the
time they were issued.

Preferred Stock

The Company's Articles of Incorporation authorize 10,000,000 shares
of $.01 par value preferred stock. Subject to amounts of outstanding preferred
stock, additional shares of preferred stock can be issued with such rights and
preferences, including voting rights, as the Board of Directors shall
determine.

During 1986, Series A restricted preferred stock was established by
the Board of Directors. These shares are nonconvertible, nonredeemable and are
entitled to a $1.00 per share per year cumulative dividend. Series A preferred
stockholders have voting rights for directors only and liquidation preference
equal to $45,000 plus dividends in arrears. At December 31, 1997, cumulative
dividends in arrears amounted to $51,750 or $11.50 per share.

During 1993, Series B restricted preferred stock was established by
the Board of Directors and 1,666,667 shares were issued in connection with the
final settlement of litigation related to the nonpayment of royalties under a
sublease contract. The Series B preferred stock is in preference to the
Company's common stock and Series A preferred stock, has no voting rights and
is entitled to cumulative dividends of $.01 per share when and if declared by
the Board of Directors. In the event of dissolution or liquidation of the
Company, the preferential amount payable to Series B restricted preferred
stockholders is $1.00 per share plus all dividends in arrears. The Series B
preferred stock was convertible into common stock of the Company prior to
December 31, 1995. No dividends have been declared or paid to the Series B
shareholders. In 1995, 916,667 shares of Series B stock were surrendered to
the Company in connection with the settlement of litigation against Bobby C.
Hamilton (see Note 10). Cumulative dividends in arrears were $30,000 at
December 31, 1997.

During 1997, the Company issued 2,560,762 shares of Series C preferred
stock in connection with the conversion of certain debts owed by the Company
(see Note 9). The rights, preferences, privileges and limitations of the
Series C shares issued upon conversion of the debts are set forth below:

Designation. The class of Convertible Preferred Stock, Series C, $0.01 par
value per share, shall consist of up to 3.8 million shares of the Company.

Optional Conversion. A holder of Series C shares shall have the right to
convert the Series C shares, at the option of the holder, at any time within
18 months following issuance, into shares of common stock at the ratio of 1:1,
subject to adjustment as provided below.

<PAGE>

12. Stockholders' Deficit, Continued:

Preferred Stock, Continued

Voting Rights. The holders of Series C shares shall have the right to
that number of votes equal to the number of shares of common stock issuable
upon conversion of such Series C shares.

Liquidation Preference. In the event of any liquidation or winding up of the
Company, the holders of Series C shares shall be entitled to receive in
preference to the holders of common stock an amount per share equal to $0.55,
subject to the preferences of the holders of the Company's outstanding Series
A and Series B preferred stock.

Registration Rights. Twenty percent (20%) of the underlying common stock
issuable upon conversion of the Series C shares shall be entitled to
"piggyback" registration rights when, and if, the Company files a registration
statement for its securities or the securities of any other stockholder.

Redemption. The Series C shares are not redeemable by the Company.

Antidilution Provisions. The conversion price of the Series C shares shall be
subject to adjustments to prevent dilution in the event that the Company
issues additional shares at a purchase price less than the applicable
conversion price (other than shares issued to employees, consultants and
directors pursuant to plans and arrangements approved by the Board of
Directors and securities issued to lending or leasing institutions approved by
the Board of Directors). In such event, the conversion price shall be
adjusted according to a weighted-average formula, provided that a holder of
Series C shares purchases his pro rata share of the securities being sold in
the dilutive financing. The initial conversion price for the Series C shares
shall be $0.55.

Protective Provisions. The consent of a majority in interest of the holders
of Series C shares shall be required for any action which (i) alters or
changes the rights, preferences or privileges of the Series C shares
materially and adversely; or (ii) creates any new class of shares having
preference over or being on a parity with the Series C shares.

13. Income Taxes:

The components of the deferred tax assets and liabilities at December 31,
1997 and 1996 are as follows:

1997 1996

Net operating losses $2,038,989 $2,315,343
Properties, plants and equipment 185,937 185,937
Reclamation costs 141,172
--------- ---------
Total deferred tax assets 2,366,098 2,501,280
Less valuation allowance (2,366,098) (2,501,280)
--------- ---------
$ 0 $ 0
========= =========

<PAGE>

13. Income Taxes, Continued:

Statement of Financial Standards No. 109, "Accounting for Income Taxes,"
requires that a valuation allowance be provided if it is more likely than not
that some portion or all of a deferred tax asset will not be realized.
Although the Company has significant deferred tax assets, principally in the
form of net operating loss carryforwards, its ability to generate future
taxable income to realize the benefit of these assets will depend primarily on
curtailing losses at the Yellow Jacket mine and operating its antimony
division profitably. The market, capital and environmental factors associated
with this requirement are considerable and uncertain. Therefore, management
believes that a full valuation allowance of the net deferred tax assets is
appropriate at December 31, 1997 and 1996. However, if estimates of future
taxable income change, the valuation allowance could change in the future.

The change in the valuation allowance for the years ended December 31,
1997 and 1996 is as follows:

Balance, December 31, 1995 $2,156,196
Increase due to nonutilization
of net operating loss carryforwards 345,084
-----------
Balance, December 31, 1996 2,501,280
Decrease due to utilization of
net operating loss carryforwards (135,182)
-----------
Balance, December 31, 1997 $2,366,098
===========

During the year ended December 31, 1997, the Company utilized
approximately $813,000 of net operating losses for federal income tax
purposes.

At December 31, 1997, the Company had the following regular tax basis net
operating loss carryforwards:

Expiring in

2000 $1,081,196
2001 916,998
2002 715,731
2003 866,362
2004 568,416
2005 715,049
2006 512,877
2007 154,235
2011 466,163
---------
$5,997,027
=========

At December 31, 1997, the Company had net operating loss carryforwards for
alternative minimum tax purposes of approximately $6.1 million.

<PAGE>

14. Loss per common share

The following table presents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share ("EPS') computations
for the years ended December 31, 1997 and 1996:

1997
----
Per Share
Loss Shares Amounts
Basic EPS:
Loss before extraordiary item $(248,093) 12,969,923 $(0.02)
Effect of Dilutive Securites
Common stock warrants (1)
Series C preferred stock (2) 7,035
--------- ---------- ------
Diluted EPS:
Loss before extraordinary item $(248,093) 12,976,958 $(0.02)
========= ========== ======

1996
----
Per Share
Loss Shares Amounts
Basic EPS:
Loss $(1,014,955) 12,299,418 $(0.08)
Effect of Dilutive Securities
Common stock warrants(1)
--------- ---------- ------
Diluted EPS:
Loss $(1,014,955) 12,299,418 $(0.08)
========= ========== ======

(1) Common stock warrants totaling 894,356 and 225,000 outstanding during 1997
and 1996, respectively, were not included in the computation of diluted EPS
at December 31, 1997 or 1996 because the various exercise prices of the
warrants were greater than the average market price of the Company's common
stock.

(2) Series C preferred stock is convertible into common stock of the company
on a share-for-share basis. The effect on the computation of diluted
weighted average shares outstanding is based upon the potential conversion of
the shares into common stock for the period of time the preferred shares were
outstanding.

<PAGE>

15.Related-Party Transactions:

In addition to transactions described in Notes 7, 9, 10, 11 and 12,
during 1997 and 1996, the Company had the following transactions with related
parties:

. During 1997 and 1996, the Company issued 18,000 and 24,000
shares respectively, of its common stock to members of the Board of Directors
for their attendance at Board of Director meetings . The issuance represented
an award of 6,000 shares per year per director. The issuances have been
recorded in the consolidated financial statements as if they were issued in
the year they were earned. The restricted stock awards were recorded as
compensation expense based upon their estimated value at the date of issuance.

. At December 31, 1997, the Company owed Walter L. Maguire, Jr.,
a stockholder and former director, $31,134 for amounts advanced to the Company
by Mr. Maguire. Annual interest expense related to these notes was $1,790 for
both 1997 and 1996. In 1996, a company controlled by Mr. Maguire sold the
Company packaging materials for $32,066. At December 31, 1997, the Company
owed Mr. Maguire's company $5,997, representing the unpaid balance on this
purchase.

. During 1996 the Company recognized interest expense of $3,223
on a debt payable to Robert A. Rice, a stockholder and director.

. After the Company's office building was destroyed by fire in 1990,
the Company's president provided office space to Company at no charge through
1996.

16. Commitments and Contingencies:

Until 1989, the Company mined, milled and leached gold and silver in the
Yankee Fork Mining District in Custer County, Idaho. The metals were recovered
by a 150-ton per day gravity and flotation mill, and the concentrates were
leached with cyanide to produce a bullion product at the Preachers Cove mill,
which was located six miles north of Sunbeam, Idaho on the Yankee Fork of the
Salmon River. In 1994, the U.S. Forest Service, under the provisions of the
Comprehensive Environmental Response Liability Act of 1980 (CERCLA),
designated the cyanide leach plant as a contaminated site requiring cleanup of
the cyanide solution. The Company has been reclaiming the property and as of
December 31, 1997, the cyanide solution discharge was complete and the mill
has been removed. The Company anticipates having the cyanide leach residue
containment and/or disposal completely finished by 1999. In 1996, the Idaho
Department of Environmental Quality requested the Company sign a consent
decree related to completing the reclamation and remediation at the Preachers
Cove mill, which the Company signed in December 1996. Estimated costs to
reclaim this property have been accrued at December 31, 1997 and 1996. At
December 31, 1997, the liability for the remaining estimated costs to complete
remediation at the site was $171,500.

<PAGE>

16. Commitments and Contingencies, Continued:

On November 15, 1996, the Bureau of Land Management (BLM) notified the
Company that it may be a responsible party as defined under CERCLA for
hazardous substances released from uncontained mining tailings at a mining
site near Pine Creek, Idaho. The Company was one of 13 companies that had
received a similar notice.

In response to the notification, the Company informed the BLM that it is
neither a current or former owner of a site, has never been an operator, nor
has it shipped hazardous substances or arranged for the disposal of treatment
of hazardous substances in the Pine Creek area. Accordingly, the Company does
not consider itself a potentially responsible party under CERCLA for the Pine
Creek site. On August 21, 1997, the Company received correspondence from the
United States Environmental Protection Agency, Region 10, informing the
Company that it will not recommend that the Company be added to the litigation
involving contamination at the Pine Creek site.

17. Fair Value of Financial Instruments:

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined using available market information and
appropriate valuation methodologies. However, considerable judgment is
required to interpret market data and to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize in a current market exchange.

The carrying amounts for cash, restricted cash, accounts receivable, accounts
payable and accrued expenses are a reasonable estimate of their fair values.
The fair value of amounts payable to related parties and judgments payable
approximate their carrying values of $31,707 and $142,937, respectively, at
December 31, 1997 and $644,752 and $131,764, respectively, at December 31,
1996, based upon the contractual cash flow requirements.
It is not practicable to estimate the fair value of the $1.64 million
note payable to Hamilton. The payments are based upon future revenues, which
are uncertain. There are no similar financial instruments in the market to
which the value can be compared. It is also not practicable to estimate the
fair value of the $335,000 debentures which are in default. However,
management believes that the fair value of these debentures is significantly
lower than their carrying value.