Stillwater Mining Reports Earnings for Third Quarter
BILLINGS, MT -- (Marketwire) -- 10/29/10 -- STILLWATER MINING COMPANY (NYSE: SWC)
-- Stronger PGM prices drive increased third-quarter earnings compared
with third quarter 2009
-- Mined ounce production improves, PGM prices weaken, compared with
second quarter 2010
-- Recycling volume strengthens over 2009
-- Acquisition of Marathon PGM Corporation in progress
Stillwater Mining Company today reported net profit for the 2010 third
quarter of $5.9 million, or $0.06 per diluted share, on revenues of $142.9
million. This compares to third quarter of 2009 net income of $4.2 million,
or $0.04 per diluted share, on revenues of $112.0 million. Stronger
realized PGM prices in the third quarter of 2010 more than offset lower
sales volumes in the third quarter of 2010 as compared to the third quarter
of 2009. For the first nine months of 2010, Stillwater Mining Company (the
'Company') reported net income of $33.8 million, or $0.34 per fully diluted
share, on revenues of $411.2 million. In the first nine months of 2009, the
Company reported a net loss of $2.9 million, or $0.03 per diluted share, on
revenues of $292.6 million. The first nine months of 2010 was characterized
by higher PGM prices and stronger performance from the Company's recycling
segment than in the same period last year.
Combined sales realizations increased during the third quarter of 2010 for
mined palladium and platinum ounces, averaging $687 per ounce, well above
the $574 per ounce realized in the third quarter of 2009. The total
quantity of mined palladium and platinum sold decreased to 120,500 ounces
in the third quarter of 2010, compared to 137,400 ounces sold during the
same period in 2009, reflecting delayed timing of ounces sold in the third
quarter of 2009 and lower average realized ore grades at the Stillwater
Mine in the third quarter of 2010.
The Company mines palladium and platinum from two underground mines located
in south-central Montana. The mines produced a total of 122,400 ounces of
palladium and platinum during the third quarter of 2010, an 8.7%
improvement over the 112,600 ounce production in the second quarter of
2010, still a 5.2% decrease from the 129,100 total ounces produced during
the third quarter of 2009. In the third quarter of 2010 production at the
Stillwater Mine increased to 89,600 ounces, an improvement over the 79,200
ounces produced in the second quarter of 2010, but remained below the
95,100 ounces produced in the third quarter of 2009. The second quarter of
2010 was affected by lower grade ore from the mix of stopes being mined,
diversion of production resources for a time into safety compliance and
maintenance activities, and increased ground support requirements that
impeded mining in some key areas for several weeks. Production at the
Company's East Boulder Mine was 32,800 ounces in the third quarter of 2010,
compared to 34,000 ounces in the same quarter of 2009.
Ore tons mined at both locations were consistent with planned production
aiding the third quarter of 2010 improvement although average realized ore
grades continued lower, particularly at the Stillwater Mine, where grades
in several lower off-shaft stopes are not yet back to plan levels. The
production mix at the Stillwater Mine during the second and third quarters
of 2010 tended to favor the upper west area of the mine, which is
inherently lower grade than the off-shaft area. Following the steep
cutbacks in capital spending during 2009, mine management has found it
necessary to increase its level of development spending in order to
preserve production flexibility when operational challenges arise. This
necessitated diverting some production resources into mine development as
the year progressed.
Mine production costs in the Company's existing mines generally increased
during the third quarter of 2010 compared to the third quarter of 2009. In
aggregate, total cash costs per ounce (a non-GAAP measure defined below)
averaged $402 in the third quarter of 2010, compared to total cash costs of
$357 per ounce for the same period in 2009. The Stillwater Mine's total
cash costs averaged $374 per ounce in the third quarter of 2010, compared
to the $344 per ounce achieved in the third quarter of 2009. The East
Boulder Mine's total cash costs averaged $480 per ounce during the third
quarter of 2010, compared to $391 per ounce during third quarter of 2009.
These per ounce increases reflected modestly higher operating expenses,
lower overall mine production and the effect on royalties and taxes of
higher PGM prices.
On September 7, 2010, the Company announced an agreement under which it
would acquire the PGM-copper assets of Marathon PGM Corporation
('Marathon'), a Canadian exploration company headquartered in Toronto and
listed on the Toronto Stock Exchange. Closing of the transaction is
contingent upon a favorable vote of the Marathon shareholders and securing
various regulatory approvals in Canada.
Marathon holds a number of PGM-copper assets that are of particular
interest to the Company, including a well-defined resource known as the
Marathon project located near the town of Marathon, Ontario, Canada at the
northern extremity of Lake Superior. The feasibility study for this
property contemplates producing about 200,000 ounces per year of palladium
and platinum, along with about 39 million pounds per year of copper, from
an open-pit operation expected to be in production by 2014. Cost of
constructing the mine is estimated to be about $400 million, to be funded
out of the Company's internally generated cash flow and supplemental
external financing. The feasibility study anticipates an active mine life
of approximately 12 years, although there may be resource potential to
extend the mine life.
The agreement provides that Marathon shareholders will receive 0.112
Stillwater common shares plus Cd$1.775 in cash and 0.5 shares of Marathon
Gold in exchange for each Marathon share. In total, the Company expects to
issue about 3.9 million new common shares and Cd$61.7 million in cash to
the Marathon shareholders in completing the acquisition for a total
acquisition cost of $118.0 million at the time of the announcement.
The Company's smelting and refining complex in Columbus, Montana processes
concentrates from the two mines and recycles spent catalyst material
received from third parties. A portion of the recycling material is
purchased for the Company's own account and the balance is toll processed
on behalf of others. In total, the Company processed recycling material
containing 78,500 ounces of platinum, palladium and rhodium through the
smelter and refinery during the third quarter of 2010, up 29.1% over the
60,800 ounces recycled during the third quarter of 2009. For the first nine
months of 2010, the Company processed 297,000 ounces, up 136,900 ounces
over the 160,100 ounces recycled during the first nine months of 2009. The
higher volumes in 2010 are a result of higher PGM prices and the
correspondingly stronger overall market incentive to collect recycling
material. The Company's recycling segment had net income for the third
quarter of 2010 of $3.1 million (including financing income), compared to
net income of $1.7 million in the third quarter of 2009.
Reflecting on the Company's third-quarter performance, Francis R.
McAllister, Stillwater Chairman and CEO, commented, 'Despite a few
continuing challenges in this year's third quarter (more or less as
expected), on the whole we are very pleased with the Company's current
direction and outlook. As is customary in these quarter-end analyses, we
have compared performance for this year's third quarter with the same
period last year. Third-quarter earnings encouragingly were a bit stronger
year on year, mostly the result of higher PGM prices this year. But I also
note that our third-quarter reported earnings of $5.9 million declined
fairly sharply from the $14.6 million we reported for this year's second
quarter, and I believe that deserves some comment. Upon review, several
factors contributed to the lower earnings in the third quarter of 2010:
-- The Company's average realized prices for palladium and platinum, which
largely are market driven, declined in the third quarter of 2010 to
$687 per ounce from $725 per ounce in the second quarter of 2010.
Market prices for these metals peaked in late April and early May, then
fell off in response to the European debt crisis, and only regained
their earlier strength late in the third quarter of 2010. As a result,
third-quarter platinum and palladium revenues were $1.8 million lower
than in the second quarter.
-- By-product sales declined by $2.6 million in the third quarter of 2010
from the second quarter of 2010, reflecting a difference in timing of
sales. Most of the by-product metals in inventory are anticipated to
be sold by the end of the fourth quarter of 2010.
-- Employee and contract labor costs increased by about $2.5 million in
the third quarter of 2010 from the second quarter of 2010, in part as a
result of scheduled labor rate increases that were effective on July 1,
2010.
-- Depreciation and depletion expense increased by $1.5 million in the
third quarter of 2010 from the second quarter of 2010, reflecting new
facilities placed in service and depletion of development costs in
accessing the new lower west area of the Stillwater Mine.
'Aside from the higher labor and contractor costs, the effect of most of
these factors is anticipated to improve in the fourth quarter of 2010.
'We are updating directionally our earlier mine production guidance of
490,000 ounces of palladium and platinum for the full year of 2010. At
present it appears that production will be in the range of 480,000 to
490,000 ounces for the full year of 2010. We also are updating our 2010
guidance with regard to total cash costs per ounce, increasing our earlier
estimate of $385 per ounce to between $395 and $400 per ounce. Capital
spending for the full year of 2010 remains targeted at $57 million,
consistent with our earlier guidance.' Elaborating further on mine planning
for 2011, Mr. McAllister added, 'With the return of higher metal prices
this year, we have broadened our initial plans for 2011 and beyond to
include consideration of opportunities to expand production longer-term at
our Montana mines. In particular, driving the tunnel boring machine at the
East Boulder Mine out further to the west, ultimately perhaps extending our
resource access out another 8,700 feet -- although we would only complete
about 1,500 feet in 2011. As this additional footage is drilled and
evaluated, there may be opportunities to expand production. Similarly, at
the Stillwater Mine there is existing infrastructure on the east side of
the mine that is not currently in production. We intend to add staff to
support production within this area in 2011, and at the same time we are
considering new development to the east on several mining levels. However,
any significant mining in these areas will require added ventilation
raises, which will take several years to complete.
'We also are enthusiastic about the recent progress in our recycling
business. The new crushing and sampling facility in Columbus, which
expands our capacity to process recycled PGMs, is now operational. Our new
automated x-ray assay system is on site and installation is in progress:
this should be in place, calibrated and ready to begin operating around the
end of 2010. The potential for much more rapid turnaround of recycling
material is attracting considerable supplier interest, and we believe it
has the potential to set a new standard for the recycling industry.'
Addressing the expiring PGM supply agreement with Ford Motor Company, Mr.
McAllister continued, 'We are often asked about the implications to our
business of the upcoming expiration of our supply agreement with Ford at
the end of this year. The Ford contract has been a superb agreement that
has worked to our benefit when PGM prices were low and to Ford's benefit
when PGM prices were high. It has provided Ford with a dedicated source of
supply from our mines and has provided us with a steady and assured market
for our mine production. However, the terms of the Ford supply agreement
were negotiated initially more than ten years ago, and the world has
changed considerably over that decade. It seems unlikely today that we will
replace the existing Ford supply agreement with one that has comparable
floor and ceiling prices. And, given our price outlook, we believe the
elimination of contractual floor and ceiling prices will benefit our
shareholders as it is the equivalent of eliminating forward PGM hedges.
'The expiration of the Ford contract will not have an adverse impact on the
Company's ability to sell its product. First, we could sell our mine
production of 500,000 ounces per year, more or less, in the open market --
on average, an additional 2,000 ounces of palladium and platinum per
trading day. This is an amount the PGM markets could easily absorb without
disruption -- we currently trade about 1,500 ounces daily of PGMs from our
recycling activities in these markets. Second, we have been in discussions
with several continuing and new PGM end-users over the past few months and
conclude there is more market interest in our North American production
than we can supply. And third, of course, we could do some of each --
contracting for a portion of our mine production and leaving the remainder
available for spot transactions.
'As I have often commented before, we have been working for several years
now to position the Company for the day when the floor prices in our supply
agreements expire. These strategic efforts have included initiatives to
increase mining productivity and reduce production costs per ounce, market
development programs to strengthen demand for our key products, and pursuit
of diversification opportunities to mitigate inherent business risk.
'In that vein, let me add just a few brief comments on our latest announced
diversification effort to acquire the PGM-copper assets of Marathon PGM
Corporation ('Marathon'), a Canadian exploration company headquartered in
Toronto. This acquisition would maintain the Company's focus in PGMs, has
the benefit of being located in North America, establishes a position for
us in an attractive mining district and diversifies our operations both as
to geography and product with its copper endowment. In other words, the
acquisition is naturally a good fit for Stillwater and we are delighted at
the opportunity to combine these excellent properties with the Company's
other unique mining assets.'
Cash Flow and Liquidity
During the third quarter of 2010, the Company revised its cash management
guidelines to extend the available investment maturities on a portion of
its cash balances, broaden the suite of permissible investments, and adjust
the percentage limits on certain classes of investments. As a result, a
large share of the Company's holdings that previously were treated as cash
are now classified on the balance sheet as short-term, available-for-sale
investments. All of these short-term investments remain highly liquid, but
technically they no longer meet the strict definition of cash and cash
equivalents.
At September 30, 2010, the Company's available cash and cash equivalents
(excluding $38.1 million of restricted cash) totaled $56.7 million, down
$23.3 million from June 30, 2010, and down $110.0 million from December 31,
2009. However, if we include the Company's available-for-sale investments,
total available cash and investments at September 30, 2010, was $259.0
million, up $30.9 million from $228.1 million at June 30, 2010 and up $57.8
million from $201.2 million at the end of 2009. Net working capital --
comprised of total current assets (including available cash and short-term
investments), less current liabilities -- increased over the quarter to
$334.9 million at September 30, 2010, from $316.9 million at June 30, 2010,
and from $269.5 million at December 31, 2009. Recycling inventories and
advances decreased by $14.8 million during the quarter.
Net cash provided by operating activities (which includes changes in
working capital) totaled $44.5 million in the third quarter of 2010,
compared to $31.7 million of cash provided in the third quarter of 2009.
The increase in cash from operations in the third quarter of 2010 mostly
reflects the earnings benefit of higher PGM prices. Capital expenditures
were $10.9 million in the third quarter of 2010, up from $7.1 million in
the third quarter of 2009.
Outstanding debt at September 30, 2010, was $196.0 million, unchanged from
June 30, 2010, and December 31, 2009. The Company's total debt includes
$166.5 million outstanding in the form of convertible debentures due in
2028 (with a date of first call in March 2013) and $29.5 million of Exempt
Facility Revenue Bonds due in 2020.
Third Quarter Results -- Details
For the third quarter of 2010, the Company's mine production was 122,400
PGM ounces including 89,600 ounces from the Stillwater Mine and 32,800
ounces from the East Boulder Mine. For the comparable quarter of 2009, the
mines produced 129,100 ounces including 95,100 ounces at the Stillwater
Mine and 34,000 ounces at the East Boulder Mine. The production decline at
the Stillwater Mine was attributable to several factors, including lower
grades from the mix of stopes being mined, and diversion of production
resources into maintenance projects.
Revenues for the third quarter of 2010 were $142.9 million, up 27.6% from
the $112.0 million recorded in the third quarter of 2009. Proceeds from
sales of mined PGMs and by-products totaled $88.2 million in the third
quarter of 2010, 3.0% higher than the $85.6 million in the same quarter of
2009, as higher PGM prices in the third quarter of 2010 more than offset
the effect of lower mine production. Recycling revenues increased to $54.7
million from $26.2 million in the third quarter of 2009. Resales of
purchased metal generated $0.2 million in revenue during the third quarter
of 2009. There were no resales of purchased metal during the third quarter
of 2010.
Sales out of mine production totaled 120,500 ounces in the third quarter of
2010 at an overall average realization of $687 per ounce, down from 137,400
ounces at $574 per ounce in the third quarter of 2009, which was higher
than normal due to the timing of sales. The Company's average realization
on palladium sales from mine production was $471 per ounce in the third
quarter of 2010, compared to $360 per ounce for the same period in 2009
reflecting the average floor price in the automotive contracts in place
during 2009. The Company's average net realization on platinum was $1,448
per ounce in the third quarter of 2010 and $1,174 per ounce in the third
quarter of 2009. Comparing these prices to the market, the London Bullion
Metals Association afternoon posted prices per ounce for palladium and
platinum were $573 and $1,662, respectively, on September 30, 2010, and
$294 and $1,287, respectively, on September 30, 2009.
During the third quarter of 2010, the Company processed 78,500 total ounces
of PGMs from recycled catalytic materials, including both purchased and
tolled material. By comparison, in the third quarter of 2009, the Company
processed 60,800 ounces of recycled material. The Company delivered for
sale a total of 48,900 ounces of platinum, palladium and rhodium from
recycled inventories during the third quarter of 2010 at an overall average
price of $1,099 per ounce; for the third quarter of 2009, the Company sold
37,000 recycled ounces at an average realization of $686 per ounce. The
increased level of activity in the third quarter of 2010 reflected a much
higher level of PGM recycling activity worldwide as a result of higher
metals prices.
Costs of metals sold (before depreciation and amortization expense)
increased to $109.9 million in the third quarter of 2010 from $80.8 million
in the third quarter of 2009. Mining costs included in costs of metals sold
increased to $58.2 million in the 2010 third quarter from $55.8 million in
the 2009 third quarter, the result of increased royalties and taxes based
on higher PGM prices, and modestly higher labor and contractor expenses.
Recycling costs, which primarily reflect the cost of acquiring spent
catalytic materials for processing, totaled $51.7 million in the third
quarter of 2010, much higher than the $24.7 million reported in the third
quarter of 2009. The increase was due to higher recycling volumes
processed and sold and to the higher value of the materials acquired for
processing. Costs in the third quarter of 2009 also included the purchase
for resale of 400 ounces of palladium, platinum and rhodium at a cost of
$0.2 million. There were no costs incurred during the third quarter of
2010 for metal purchases.
Depreciation and amortization expense decreased to $18.1 million in the
third quarter of 2010 from $18.5 million in the same period of 2009. The
decrease is attributable to lower mined ounces produced and sold in the
third quarter of 2010.
General and administrative ('G&A') costs, including marketing and
exploration expenses, increased to $8.4 million in the third quarter of
2010 from $6.8 million in the same period of 2009, resulting from higher
than planned expenses for business development and employee severance costs
in 2010. G&A costs in the third quarter of 2009 included a $0.3 million
write-down of trade receivables.
Reported net income for the third quarter of 2010 of $5.9 million included,
by business segment, net income of $12.0 million from mining operations and
net income of $3.1 million from recycling activities, less corporate costs
of $9.2 million.
The Company's reported net income of $4.2 million for the third quarter of
2009 included, by business segment, net income of $10.8 million from mining
operations and net income of $1.7 million from recycling activities, less
corporate costs of $8.3 million.
First Nine Months' Results -- Details
In the first nine months of 2010, the Company's mining operations produced
364,000 PGM ounces including 265,100 ounces from the Stillwater Mine and
98,900 ounces from the East Boulder Mine. For the comparable period in
2009, total mine production of 391,600 ounces included Stillwater Mine
production of 291,000 ounces and East Boulder production of 100,600.
Challenges at the Stillwater Mine this year have included lower-grade
mining areas, diversion of production resources for a period into mine
maintenance, and increased ground control measures in a key part of the
off-shaft that impeded mining for several weeks.
Revenues for the first nine months of 2010 totaled $411.2 million, up 40.5%
from $292.6 million in the first nine months of 2009. Proceeds from sales
of mined PGMs totaled $276.0 million in the first nine months of 2010, up
from $226.7 million in the same period of 2009. Recycling revenues
increased to $130.6 million from $60.2 million in the first nine months of
2009. Higher total recycling revenue in the first nine months of 2010 was
a result of both higher sales volumes and higher PGM prices. Resales of
purchased metal generated revenue of $4.6 million and $5.8 million during
the first nine months of 2010 and 2009, respectively.
Sales of palladium and platinum from mine production totaled 372,300 ounces
in the first nine months of 2010 at an overall average realization of $683
per ounce, down from 387,700 ounces at $540 per ounce in the same period of
2009. The Company's average realization for the first nine months of 2010
on palladium sales from mine production was $456 per ounce, compared to
$362 per ounce for the first nine months of 2009, reflecting the average
floor price in the automotive contracts during 2009. The comparable average
realization on platinum, net of contractual ceiling prices on 14% of mine
production, was $1,465 per ounce for the first nine months of 2010 and
$1,089 per ounce for the comparable period in 2009.
During the first nine months of 2010, the Company processed about 297,000
ounces of PGMs from recycled catalytic materials, including both purchased
catalyst and toll material processed on behalf of others for a fee. By
comparison, in the first nine months of 2009, the Company processed about
160,100 ounces of recycled material. Of the purchased catalyst material
processed, the Company sold a total of 121,600 ounces of platinum,
palladium and rhodium during the first nine months of 2010 at an overall
average price of $1,042 per ounce; for the first nine months of 2009, the
Company sold 73,100 recycled ounces at an average realization of $784 per
ounce.
Costs of metals sold (before depreciation and amortization expense)
increased to $297.6 million in the first nine months of 2010 from $218.1
million in the first nine months of 2009. Mining costs included in costs of
metals sold increased to $171.0 million in the first nine months of 2010
from $156.8 million in the same period in 2009, driven by growth in
royalties and taxes as a result of higher PGM prices, as well as some small
increases in mine operating costs. Recycling costs, largely comprised of
the cost to purchase spent catalytic materials for processing, totaled
$121.9 million in the first nine months of 2010, up from $55.6 million in
the first nine months of 2009. The increase in cost was attributable to
the higher value of the contained metals in the material purchased for
recycling and the higher volumes purchased. Costs for the first nine months
of 2010 also included $4.6 million for the purchase of 10,000 ounces of
palladium for resale; the same period of 2009 included about $5.7 million
for the purchase of 12,600 ounces of palladium, 2,900 ounces of platinum
and a few ounces of rhodium for resale.
Depreciation and amortization expense increased to $53.2 million in the
first nine months of 2010 compared to $52.8 million in the same period of
2009. The increase is attributable to slightly higher amortization rates
per ton in 2010.
General and administrative costs (G&A), including marketing and exploration
expenses, totaled $23.4 million for the first nine months of 2010 and $20.4
million in the first nine months of 2009. The increase was primarily a
result of higher business development and severance costs.
The Company's reported net income of $33.8 million for the first nine
months of 2010 included, by business segment, $52.1 million of income from
mining operations and $9.4 million of income from recycling activities,
less corporate costs of $27.7 million.
The Company reported a net loss of $2.9 million for the first nine months
of 2009 included, by business segment, $16.7 million of income from mining
operations and $5.0 million of income from recycling activities, less
corporate costs of $24.6 million.
_________________________________
Stillwater Mining Company has scheduled its 2010 third quarter results
conference call at 10:00 a.m. Mountain Daylight Time (12:00 p.m. Eastern
Daylight Time) on October 29, 2010. Dial-in numbers:
United States: (800) 288-8961
International: (612) 288-0329
The conference call will also be simultaneously webcast on the Company's
website www.stillwatermining.com in the Investor Relations section.
A replay of the conference call will be available on the Company's website
or by a telephone replay, numbers (800) 475-6701 (U.S.) and (320) 365-3844
(International), access code 176322, through November 5, 2010, ending at
11:59 p.m. Mountain Daylight Time.
_________________________________
Stillwater Mining Company is the only U.S. producer of palladium and
platinum and is the largest primary producer of platinum group metals
outside of South Africa and the Russian Federation. The Company's shares
are traded on the New York Stock Exchange under the symbol SWC. Information
on Stillwater Mining can be found at its Website: www.stillwatermining.com.
Some statements contained in this report are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and, therefore, involve uncertainties or risks that could cause
actual results to differ materially. These statements may contain words
such as 'desires,' 'believes,' 'anticipates,' 'plans,' 'expects,'
'intends,' 'estimates' or similar expressions. These statements are not
guarantees of the Company's future performance and are subject to risks,
uncertainties and other important factors that could cause its actual
performance or achievements to differ materially from those expressed or
implied by these forward-looking statements. Such statements include, but
are not limited to, comments regarding the proposed acquisition of Marathon
PGM Corporation; the global automotive market and the outlook for
automobile production and sales; contract negotiations and the future
ability to sell the Company's products; expansion plans and realignment of
operations; costs, grade, production and recovery rates; permitting; labor
matters; financing needs and the terms and availability of future credit
facilities; capital expenditures; increases in processing capacity; cost
reduction measures; safety performance; timing for engineering studies;
environmental permitting and compliance; litigation exposures; and
anticipated changes in global supply and demand and prices for PGM
materials. Additional information regarding factors that could cause
results to differ materially from management's expectations is found in the
Company's 2009 Annual Report on Form 10-K on file with the United States
Securities and Exchange Commission and available on the Company's website.
Financial Statements and Key Factors Tables
Stillwater Mining Company
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues
Mine production $ 88,222 $ 85,552 $ 275,991 $ 226,691
PGM recycling 54,650 26,207 130,591 60,166
Other - 245 4,622 5,752
--------- --------- --------- ---------
Total revenues 142,872 112,004 411,204 292,609
Costs and expenses
Costs of metals sold
Mine production 58,203 55,816 171,046 156,754
PGM recycling 51,686 24,698 121,937 55,608
Other - 243 4,622 5,741
--------- --------- --------- ---------
Total costs of metals
sold 109,889 80,757 297,605 218,103
Depletion, depreciation
and amortization
Mine production 17,951 18,504 52,997 52,667
PGM recycling 129 45 212 134
--------- --------- --------- ---------
Total depletion,
depreciation and
amortization 18,080 18,549 53,209 52,801
--------- --------- --------- ---------
Total costs of
revenues 127,969 99,306 350,814 270,904
Marketing 404 367 1,679 1,602
General and administrative 8,042 6,404 21,714 18,770
(Gain)/loss on disposal
of property, plant and
equipment 29 402 (179) 602
--------- --------- --------- ---------
Total costs and
expenses 136,444 106,479 374,028 291,878
Operating income 6,428 5,525 37,176 731
Other income (expense)
Other (20) 27 (11) 76
Interest income 636 386 1,569 1,471
Interest expense (1,633) (1,724) (4,902) (5,182)
--------- --------- --------- ---------
Income (loss) before income
tax benefit 5,411 4,214 33,832 (2,904)
Income tax benefit 472 - - -
--------- --------- --------- ---------
Net income (loss) $ 5,883 $ 4,214 $ 33,832 $ (2,904)
--------- --------- --------- ---------
Other comprehensive income
(loss), net of tax (200) 92 (378) 139
--------- --------- --------- ---------
Comprehensive income (loss) $ 5,683 $ 4,306 $ 33,454 $ (2,765)
========= ========= ========= =========
Weighted average common shares
outstanding
Basic 97,809 94,579 97,531 94,257
Diluted 99,022 95,401 98,685 94,257
Basic earnings (loss) per share
--------- --------- --------- ---------
Net income (loss) $ 0.06 $ 0.04 $ 0.35 $ (0.03)
========= ========= ========= =========
Diluted earnings (loss)
per share
--------- --------- --------- ---------
Net income (loss) $ 0.06 $ 0.04 $ 0.34 $ (0.03)
========= ========= ========= =========
Stillwater Mining Company
Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
September 30, December 31,
2010 2009
------------ ------------
ASSETS
Cash and cash equivalents $ 56,692 $ 166,656
Investments, at fair market value 202,260 34,515
Inventories 95,456 88,967
Trade receivables 6,016 2,073
Deferred income taxes 18,951 18,130
Other current assets 7,893 8,680
------------ ------------
Total current assets 387,268 319,021
Property, plant and equipment, net of
$363,396 and $311,449 of accumulated
depletion, depreciation and amortization 340,596 358,866
Restricted cash 38,070 38,045
Other noncurrent assets 12,304 9,263
------------ ------------
Total assets $ 778,238 $ 725,195
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 15,432 $ 8,901
Accrued compensation and benefits 25,057 26,481
Property, production and franchise taxes
payable 9,011 10,405
Other current liabilities 2,903 3,689
------------ ------------
Total current liabilities 52,403 49,476
Long-term debt 196,002 195,977
Deferred income taxes 18,951 18,130
Accrued workers compensation 7,360 4,737
Asset retirement obligation 6,608 6,209
Other noncurrent liabilities 6,580 3,855
------------ ------------
Total liabilities 287,904 278,384
------------ ------------
Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000
shares authorized; none issued - -
Common stock, $0.01 par value, 200,000,000
shares authorized; 97,867,420 and
96,732,185 shares issued and outstanding 978 967
Paid-in capital 684,927 674,869
Accumulated deficit (195,103) (228,935)
Accumulated other comprehensive loss (468) (90)
------------ ------------
Total stockholders' equity 490,334 446,811
------------ ------------
Total liabilities and stockholders'
equity $ 778,238 $ 725,195
============ ============
Stillwater Mining Company
Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Cash flows from operating
activities
Net income (loss) $ 5,883 $ 4,214 $ 33,832 $ (2,904)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depletion, depreciation and
amortization 18,080 18,549 53,209 52,801
Lower of cost or market
inventory adjustment - 982 - 6,613
(Gain)/loss on disposal of
property, plant and
equipment 29 402 (179) 602
Accretion of asset retirement
obligation 136 153 399 450
Amortization of debt issuance
costs 244 264 734 793
Stock based compensation and
other benefits 4,083 3,167 9,571 8,479
Changes in operating assets and
liabilities:
Inventories 13,754 3,865 (6,425) (9,689)
Trade receivables 279 162 (3,943) 212
Accrued compensation and
benefits (976) 35 (1,432) 1,094
Accounts payable 1,148 (4,791) 6,531 (4,877)
Property, production and
franchise taxes payable 690 1,420 1,331 1,070
Workers compensation 874 (1,101) 2,623 (2,024)
Restricted cash - 2,100 (25) (350)
Other 228 2,248 (909) (589)
--------- --------- --------- ---------
Net cash provided by operating
activities 44,452 31,669 95,317 51,681
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (10,935) (7,094) (35,522) (32,282)
Purchases of long-term
investments (2,941) - (2,941) -
Proceeds from disposal of
property, plant and
equipment 192 149 457 195
Purchases of short-term
investments (61,111) - (187,743) (20,947)
Proceeds from maturities of
short-term investments 6,989 1,995 19,962 20,781
--------- --------- --------- ---------
Net cash used in investing
activities (67,806) (4,950) (205,787) (32,253)
--------- --------- --------- ---------
Cash flows from financing
activities
Principal payments on debt - - - (97)
Issuance of common stock 65 - 506 -
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities 65 - 506 (97)
--------- --------- --------- ---------
Cash and cash equivalents
Net increase (decrease) (23,289) 26,719 (109,964) 19,331
Balance at beginning of
period 79,981 154,407 166,656 161,795
--------- --------- --------- ---------
Balance at end of period $ 56,692 $ 181,126 $ 56,692 $ 181,126
========= ========= ========= =========
Stillwater Mining Company
Key Factors
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
OPERATING AND COST DATA
FOR MINE PRODUCTION
Consolidated:
Ounces produced (000)
Palladium 95 99 281 301
Platinum 27 30 83 91
---------- ---------- ---------- ----------
Total 122 129 364 392
========== ========== ========== ==========
Tons milled (000) 279 277 813 811
Mill head grade
(ounce per ton) 0.48 0.50 0.48 0.52
Sub-grade tons milled
(000) (1) 18 24 64 69
Sub-grade tons mill head
grade (ounce per ton) 0.17 0.21 0.17 0.19
Total tons milled (000) (1) 297 301 877 880
Combined mill head grade
(ounce per ton) 0.46 0.48 0.46 0.49
Total mill recovery (%) 91 91 91 91
Total operating costs per
ounce (Non-GAAP) (2) $ 344 $ 302 $ 321 $ 311
Total cash costs per ounce
(Non-GAAP) (2) $ 402 $ 357 $ 386 $ 363
Total production costs per
ounce (Non-GAAP) (2) $ 555 $ 502 $ 533 $ 499
Total operating costs per
ton milled (Non-GAAP) (2) $ 142 $ 130 $ 133 $ 138
Total cash costs per ton
milled (Non-GAAP) (2) $ 166 $ 153 $ 160 $ 161
Total production costs per
ton milled (Non-GAAP) (2) $ 229 $ 215 $ 221 $ 222
Stillwater Mine:
Ounces produced (000)
Palladium 69 73 204 223
Platinum 20 22 61 68
---------- ---------- ---------- ----------
Total 89 95 265 291
========== ========== ========== ==========
Tons milled (000) 182 184 527 545
Mill head grade
(ounce per ton) 0.53 0.55 0.54 0.57
Sub-grade tons milled
(000) (1) 15 12 50 34
Sub-grade tons mill head
grade (ounce per ton) 0.19 0.23 0.17 0.19
Total tons milled (000) (1) 197 196 577 579
Combined mill head grade
(ounce per ton) 0.50 0.53 0.50 0.55
Total mill recovery (%) 92 92 92 92
Total operating costs per
ounce (Non-GAAP) (2) $ 320 $ 292 $ 304 $ 301
Total cash costs per ounce
(Non-GAAP) (2) $ 374 $ 344 $ 365 $ 349
Total production costs per
ounce (Non-GAAP) (2) $ 522 $ 481 $ 505 $ 473
Total operating costs per
ton milled (Non-GAAP) (2) $ 146 $ 142 $ 140 $ 151
Total cash costs per ton
milled (Non-GAAP) (2) $ 170 $ 167 $ 168 $ 175
Total production costs per
ton milled (Non-GAAP) (2) $ 238 $ 233 $ 232 $ 238
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
OPERATING AND COST DATA
FOR MINE PRODUCTION
(Continued)
East Boulder Mine:
Ounces produced (000)
Palladium 26 26 77 78
Platinum 7 8 22 23
---------- ---------- ---------- ----------
Total 33 34 99 101
========== ========== ========== ==========
Tons milled (000) 97 93 286 266
Mill head grade
(ounce per ton) 0.38 0.39 0.38 0.40
Sub-grade tons milled
(000) (1) 3 12 14 35
Sub-grade tons mill head
grade (ounce per ton) 0.10 0.20 0.16 0.19
Total tons milled (000) (1) 100 105 300 301
Combined mill head grade
(ounce per ton) 0.37 0.37 0.37 0.38
Total mill recovery (%) 89 89 89 89
Total operating costs per
ounce (Non-GAAP) (2) $ 412 $ 329 $ 368 $ 341
Total cash costs per ounce
(Non-GAAP) (2) $ 480 $ 391 $ 442 $ 404
Total production costs per
ounce (Non-GAAP) (2) $ 647 $ 562 $ 608 $ 572
Total operating costs per
ton milled (Non-GAAP) (2) $ 135 $ 107 $ 122 $ 114
Total cash costs per ton
milled (Non-GAAP) (2) $ 157 $ 127 $ 146 $ 135
Total production costs per
ton milled (Non-GAAP) (2) $ 211 $ 182 $ 201 $ 191
(1) Sub-grade tons milled includes reef waste material only. Total tons
milled includes ore tons and sub-grade tons only. See 'Proven and
Probable Ore Reserves - Discussion' in the Company's 2009 Annual Report
on Form 10-K for further information.
(2) Total operating costs include costs of mining, processing and
administrative expenses at the mine site (including mine site overhead
and credits for metals produced other than palladium and platinum from
mine production). Total cash costs include total operating costs plus
royalties, insurance and taxes other than income taxes. Total
production costs include total cash costs plus asset retirement costs
and depreciation and amortization. Income taxes, corporate general and
administrative expenses, asset impairment write-down's, gain or loss on
disposal of property, plant and equipment, restructuring costs and
interest income and expense are not included in total operating costs,
total cash costs or total production costs. Operating costs per ton,
operating costs per ounce, cash costs per ton, cash costs per ounce,
production costs per ton and production costs per ounce are non-GAAP
measurements that management uses to monitor and evaluate the
efficiency of its mining operations. These measures of cost are not
defined under U.S. Generally Accepted Accounting Principles (GAAP).
Please see 'Reconciliation of Non-GAAP Measures to Costs of Revenues'
and the accompanying discussion for additional detail.
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three Months Ended Nine Months Ended
(in thousands, where noted) September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
SALES AND PRICE DATA
Ounces sold (000)
Mine production:
Palladium (oz.) 94 101 288 293
Platinum (oz.) 26 36 84 94
---------- ---------- ---------- ----------
Total 120 137 372 387
---------- ---------- ---------- ----------
PGM recycling: (1)
Palladium (oz.) 25 20 62 38
Platinum (oz.) 20 15 49 29
Rhodium (oz.) 3 3 10 7
---------- ---------- ---------- ----------
Total 48 38 121 74
---------- ---------- ---------- ----------
Other: (2)
Palladium (oz.) - - 10 12
Platinum (oz.) - - - 3
---------- ---------- ---------- ----------
Total - - 10 15
---------- ---------- ---------- ----------
By-products from mining: (3)
Rhodium (oz.) - 1 2 3
Gold (oz.) 3 3 7 7
Silver (oz.) 1 1 4 4
Copper (lb.) 132 216 610 604
Nickel (lb.) 239 240 894 669
Average realized price
per ounce (4)
Mine production:
Palladium ($/oz.) $ 471 $ 360 $ 456 $ 362
Platinum ($/oz.) $ 1,448 $ 1,174 $ 1,465 $ 1,089
Combined ($/oz)(5) $ 687 $ 574 $ 683 $ 540
PGM recycling: (1)
Palladium ($/oz.) $ 490 $ 244 $ 439 $ 280
Platinum ($/oz.) $ 1,622 $ 1,161 $ 1,534 $ 1,107
Rhodium ($/oz) $ 2,690 $ 1,385 $ 2,382 $ 2,282
Other: (2)
Palladium ($/oz.) $ - $ - $ 462 $ 213
Platinum ($/oz.) $ - $ - $ - $ 1,040
By-products from mining: (3)
Rhodium ($/oz.) $ 2,150 $ 1,581 $ 2,503 $ 1,379
Gold ($/oz.) $ 1,239 $ 973 $ 1,177 $ 941
Silver ($/oz.) $ 19 $ 16 $ 18 $ 14
Copper ($/lb.) $ 3.10 $ 2.44 $ 3.06 $ 1.94
Nickel ($/lb.) $ 8.32 $ 9.35 $ 8.64 $ 7.41
Average market price
per ounce (4)
Palladium ($/oz.) $ 495 $ 272 $ 477 $ 236
Platinum ($/oz.) $ 1,553 $ 1,230 $ 1,580 $ 1,143
Combined ($/oz)(5) $ 728 $ 525 $ 725 $ 456
(1) Ounces sold and average realized price per ounce from PGM recycling
relate to ounces produced from processing of catalyst materials.
(2) Ounces sold and average realized price per ounce from other relate to
ounces purchased in the open market for resale.
(3) By-product metals sold reflect contained metal. Realized prices reflect
net values (discounted due to product form and transportation and
marketing charges) per unit received.
(4) The Company's average realized price represents revenues, which include
the effect of any applicable agreement floor and ceiling prices,
hedging gains and losses realized on commodity instruments and
agreement discounts, divided by ounces sold. The average market price
represents the average London Bullion Market Association afternoon
postings for the actual months of the period.
(5) The Company reports a combined average realized and a combined average
market price of palladium and platinum at the same ratio as ounces
that are produced from the base metal refinery.
Reconciliation of Non-GAAP measures to costs of revenues
The Company utilizes certain non-GAAP measures as indicators in assessing
the performance of its mining and processing operations during any period.
Because of the processing time required to complete the extraction of
finished PGM products, there are typically lags from one to three months
between ore production and sale of the finished product. Sales in any
period include some portion of material mined and processed from prior
periods as the revenue recognition process is completed. Consequently,
while costs of revenues (a GAAP measure included in the Company's Statement
of Operations and Comprehensive Income/(Loss)) appropriately reflects the
expense associated with the materials sold in any period, the Company has
developed certain non-GAAP measures to assess the costs associated with its
producing and processing activities in a particular period and to compare
those costs between periods.
While the Company believes that these non-GAAP measures may also be of
value to outside readers, both as general indicators of the Company's
mining efficiency from period to period and as insight into how the Company
internally measures its operating performance, these non-GAAP measures are
not standardized across the mining industry and in most cases will not be
directly comparable to similar measures that may be provided by other
companies. These non-GAAP measures are only useful as indicators of
relative operational performance in any period, and because they do not
take into account the inventory timing differences that are included in
costs of revenues, they cannot meaningfully be used to develop measures of
profitability. A reconciliation of these measures to costs of revenues for
each period shown is provided as part of the following tables, and a
description of each non-GAAP measure is provided below.
Total Costs of Revenues: For the Company on a consolidated basis, this
measure is equal to consolidated costs of revenues, as reported in the
Statement of Operations and Comprehensive Income/(Loss). For the Stillwater
Mine, the East Boulder Mine, and other PGM activities, the Company
segregates the expenses within costs of revenues that are directly
associated with each of these activities and then allocates the remaining
facility costs included in consolidated costs of revenues in proportion to
the monthly volumes from each activity. The resulting total costs of
revenues measures for the Stillwater Mine, the East Boulder Mine and other
PGM activities are equal in total to consolidated costs of revenues as
reported in the Company's Statement of Operations and Comprehensive
Income/(Loss).
Total Production Costs (Non-GAAP): Calculated as total costs of revenues
(for each mine or consolidated) adjusted to exclude gains or losses on
asset dispositions, costs and profit from secondary recycling, and changes
in product inventories. This non-GAAP measure provides an indication of the
total costs incurred in association with production and processing in a
period, before taking into account the timing differences resulting from
inventory changes and before any effect of asset dispositions or secondary
recycling activities. The Company uses it as a comparative measure of the
level of total production and processing activities in a period, and may be
compared to prior periods or between the Company's mines. As noted above,
because this measure does not take into account the inventory timing
differences that are included in costs of revenues, it cannot be used to
develop meaningful measures of earnings or profitability.
When divided by the total tons milled in the respective period, Total
Production Cost per Ton Milled (Non-GAAP) -- measured for each mine or
consolidated -- provides an indication of the cost per ton milled in that
period. Because of variability of ore grade in the Company's mining
operations, production efficiency underground is frequently measured
against ore tons produced rather than contained PGM ounces. And because ore
tons are first actually weighed as they are fed into the mill, mill feed is
the first point at which production tons are measured precisely.
Consequently, Total Production Cost per Ton Milled (Non-GAAP) is a general
measure of production efficiency, and is affected both by the level of
Total Production Costs (Non-GAAP) and by the volume of tons produced and
fed to the mill.
When divided by the total recoverable PGM ounces from production in the
respective period, Total Production Cost per Ounce (Non-GAAP) -- measured
for each mine or consolidated -- provides an indication of the cost per
ounce produced in that period. Recoverable PGM ounces from production are
an indication of the amount of PGM product extracted through mining in any
period. Because extracting PGM material is ultimately the objective of
mining, the cost per ounce of extracting and processing PGM ounces in a
period is a useful measure for comparing extraction efficiency between
periods and between the Company's mines. Consequently, Total Production
Cost per Ounce (Non-GAAP) in any period is a general measure of extraction
efficiency, and is affected by the level of Total Production Costs
(Non-GAAP), by the grade of the ore produced and by the volume of ore
produced in the period.
Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated (for each
mine or consolidated) as total costs of revenues adjusted to exclude gains
or losses on asset dispositions, costs and profit from recycling
activities, depreciation and amortization and asset retirement costs and
changes in product inventories. The Company uses this measure as a
comparative indication of the cash costs related to production and
processing in any period. As noted above, because this measure does not
take into account the inventory timing differences that are included in
costs of revenues, it cannot be used to develop meaningful measures of
earnings or profitability.
When divided by the total tons milled in the respective period, Total Cash
Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated --
provides an indication of the level of cash costs incurred per ton milled
in that period. Because of variability of ore grade in the Company's mining
operations, production efficiency underground is frequently measured
against ore tons produced rather than contained PGM ounces. And because ore
tons are first weighed as they are fed into the mill, mill feed is the
first point at which production tons are measured precisely. Consequently,
Total Cash Cost per Ton Milled (Non-GAAP) is a general measure of
production efficiency, and is affected both by the level of Total Cash
Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.
When divided by the total recoverable PGM ounces from production in the
respective period, Total Cash Cost per Ounce (Non-GAAP) -- measured for
each mine or consolidated -- provides an indication of the level of cash
costs incurred per PGM ounce produced in that period. Recoverable PGM
ounces from production are an indication of the amount of PGM product
extracted through mining in any period. Because ultimately extracting PGM
material is the objective of mining, the cost per ounce of extracting and
processing PGM ounces in a period is a useful measure for comparing
extraction efficiency between periods and between the Company's mines.
Consequently, Total Cash Cost per Ounce (Non-GAAP) in any period is a
general measure of extraction efficiency, and is affected by the level of
Total Cash Costs (Non-GAAP), by the grade of the ore produced and by the
volume of ore produced in the period.
Total Operating Costs (Non-GAAP): This non-GAAP measure is derived from
Total Cash Costs (Non-GAAP) for each mine or consolidated by excluding
royalty, tax and insurance expenses from Total Cash Costs (Non-GAAP).
Royalties, taxes and insurance costs are contractual or governmental
obligations outside of the control of the Company's mining operations, and
in the case of royalties and most taxes, are driven more by the level of
sales realizations rather than by operating efficiency. Consequently, Total
Operating Costs (Non-GAAP) is a useful indicator of the level of production
and processing costs incurred in a period that are under the control of
mining operations. As noted above, because this measure does not take into
account the inventory timing differences that are included in costs of
revenues, it cannot be used to develop meaningful measures of earnings or
profitability.
When divided by the total tons milled in the respective period, Total
Operating Cost per Ton Milled (Non-GAAP) -- measured for each mine or
consolidated -- provides an indication of the level of controllable cash
costs incurred per ton milled in that period. Because of variability of ore
grade in the Company's mining operations, production efficiency underground
is frequently measured against ore tons produced rather than contained PGM
ounces. And because ore tons are first actually weighed as they are fed
into the mill, mill feed is the first point at which production tons are
measured precisely. Consequently, Total Operating Cost per Ton Milled
(Non-GAAP) is a general measure of production efficiency, and is affected
both by the level of Total Operating Costs (Non-GAAP) and by the volume of
tons produced and fed to the mill.
When divided by the total recoverable PGM ounces from production in the
respective period, Total Operating Cost per Ounce (Non-GAAP) -- measured
for each mine or consolidated -- provides an indication of the level of
controllable cash costs incurred per PGM ounce produced in that period.
Recoverable PGM ounces from production are an indication of the amount of
PGM product extracted through mining in any period. Because ultimately
extracting PGM material is the objective of mining, the co