Stillwater Mining Reports Record Quarterly Earnings for the First Quarter
BILLINGS, MT -- (Marketwire) -- 05/03/11 -- STILLWATER MINING COMPANY (NYSE: SWC)
-- Net income of $36.2 million or $0.34 per diluted share -- nearly triple
first quarter 2010 earnings
-- Mined PGM production increased to 131,200 ounces
-- Continued strong prices for palladium and platinum
Stillwater Mining Company today reported record net income for the 2011
first quarter of $36.2 million, or $0.34 per diluted share, on revenues of
$170.1 million. This compares to first quarter of 2010 net income of $13.4
million, or $0.14 per diluted share, on revenues of $133.5 million.
The Company mines palladium and platinum from two underground mines located
in south-central Montana. The mines produced a total of 131,200 ounces of
palladium and platinum during the first quarter of 2011, a 1.7% improvement
over the 129,000 ounce production in the first quarter of 2010 and an 8.3%
increase from the 121,100 ounces produced during the fourth quarter of
2010.
Production at the Company's Stillwater Mine increased to 98,600 ounces, an
improvement of 2.4% over the 96,300 ounces produced in the first quarter of
2010 and an increase of 13.9% over the 86,600 produced in the fourth
quarter of 2010. Production at the Company's East Boulder Mine was 32,600
ounces in the first quarter of 2011, compared to 32,700 ounces in the same
quarter of 2010 and a decrease of 5.5% from the 34,500 ounces produced in
the fourth quarter of 2010.
Combined sales realizations increased during the first quarter of 2011 for
mined palladium and platinum ounces, averaging $994 per ounce, 54.3% above
the $644 per ounce realized in the first quarter of 2010, reflecting higher
market prices for palladium and platinum and the absence of contract
ceiling prices on platinum in 2011. The total quantity of mined palladium
and platinum sold decreased to 115,100 ounces in the first quarter of 2011,
compared to 135,100 ounces sold during the same period in 2010, as a result
of sales timing differences between the two quarters.
Mine production costs increased during the first quarter of 2011 compared
to the first quarter of 2010. Total cash costs per mined ounce (a non-GAAP
measure defined below) averaged $437 in the first quarter of 2011, compared
to total cash costs of $364 per ounce for the first quarter of 2010, and
total cash costs of $432 per ounce in the fourth quarter of 2010. The
Company's full year 2011 guidance for total cash costs per ounce is about
$430, up from the $397 averaged in the 2010 period. The increase in 2011
reflects a rising cost trend in 2010 plus an expectation of continuing
general inflation for wages and materials, staffing growth, and the effect
of higher average sales realizations on royalties and taxes during 2011.
This is partially offset by the slightly higher mine production expected in
2011. The $437 per ounce reported for the 2011 first quarter is a little
higher than guidance, in part because of higher royalties and taxes than
planned. This results from higher PGM prices than originally projected and
also from timing differences in by-product and recycling credits. At this
point, the Company is maintaining its total cash costs guidance of $430 per
mined ounce for the full period of 2011.
The Stillwater Mine's total cash costs averaged $430 per ounce in the first
quarter of 2011, compared to the $339 per ounce achieved in the first
quarter of 2010. The East Boulder Mine's total cash costs averaged $459
per ounce during the first quarter of 2011, compared to $439 per ounce
during first quarter of 2010. These per ounce increases reflect higher
overall operating expenses, including the effect on royalties and taxes of
higher PGM prices and increases in maintenance costs.
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 115,600 ounces of palladium, platinum and rhodium through the
smelter and refinery during the first quarter of 2011, down slightly from
the 119,300 ounces recycled during the first quarter of 2010. The
Company's recycling segment had net income for the first quarter of 2011 of
$2.9 million (including financing income), flat with the net income of $2.9
million reported for the first quarter of 2010.
Reviewing the Company's performance, Francis R. McAllister, Stillwater's
Chairman and CEO, commented, 'Overall, I am pleased with our performance
during first quarter. Palladium prices did trend down during the first
quarter, likely as a result of the uncertainty surrounding the effect of
rising oil prices and the Japanese earthquake and tsunami damage to the
outlook for automobile production. However, I believe these factors will
have a relatively short term impact on PGM demand and we will continue to
experience the benefits of robust PGM, and specifically palladium, market
dynamics over the intermediate to longer term.
'Our total mined PGM production of 131,200 ounces was very strong and
higher than expected for the quarter. The first quarter results might
suggest mine output is ahead of our annual production guidance of 500,000
combined palladium and platinum ounces. The higher production levels were
the result of more tons mined than anticipated, improved ore grades in the
lower off shaft area of the Stillwater Mine and resumption of production
from the east side of the mine, as we have discussed recently. While I am
pleased with this improvement, it is not yet clear to what extent the first
quarter production rates will be sustainable in the second and third
quarters. Consequently, at least for now, we are maintaining our 2011
guidance estimate of 500,000 PGM ounces.
'The Company continues to make progress in the assessment phase of the
recently announced Blitz and Graham Creek development projects, located
adjacent to our existing mines. Depending on the quality of the resource,
these projects provide an avenue for future extension or expansion of the
Company's production. Some assumptions and estimates have been adjusted as
we have completed further scoping on these projects. In particular, we
have implemented changes to our approach on the Blitz project increasing
its cost and scope but shortening initial project development time from 5
years to an estimated 3.5 years, while at the same time accelerating the
required development and providing the necessary infrastructure to begin
production. Although the Blitz project will share some facilities with the
Stillwater Mine, it will be operated independently of the Stillwater
operation. The cost is now authorized to be $180.0 million over about six
years, compared with the previous spending projection of $68.0 million,
which should be sufficient to carry the Blitz project into full production.
Although this increase in total cost for the Blitz project is substantial,
the effect on 2011 capital expenditures will be negligible, and we are not
revising our earlier guidance of $120.0 million for 2011 capital spending
at this time. I am particularly excited about these projects as they may
represent a new platform for expanding the Company's production from the
J-M Reef.
'The recycling business was strong during the first quarter, and we saw
significant increases in recycling revenues compared to first quarter last
year and fourth quarter of 2010. Recycling volumes fed to the furnace were
down slightly early in the quarter but strengthened as the quarter
progressed. As planned, during the first quarter of 2011 we commissioned
our new state-of-the-art assay laboratory which utilizes an automated x-ray
facility that provides very accurate results with much faster turnaround
times than conventional fire assay methods.
'We continue to make progress with the Marathon PGM-Copper project. We have
now assembled a strong management team for this operation headed by Stan
Emms, a successful mining industry veteran. In addition, we recently
announced a voluntary harmonization agreement with the Ontario Ministry of
Environment to have the Marathon PGM-Copper project be subject to the
Ontario Environmental Assessment Act (EAA). In the Province of Ontario,
activities associated with mine development, are subject to the provincial
EAA, while private mining development projects that trigger the Federal
Environmental Assessment Act are reviewed by the federal government.
Stillwater requested that a joint federal/provincial review panel be
established in order to better coordinate all federal and provincial
assessment activities related to the Marathon project. We are hopeful that
through this voluntary harmonization agreement, the coordinated review will
help to facilitate the approval process. In addition, this effort fits
well with Stillwater's corporate culture of transparency and its proactive
approach to environmentally and socially responsible development.
'I would also like to add that I am extremely pleased with the performance
of our operations teams for many reasons but specifically for their
emphasis on safety. Safety is a paramount focus for Stillwater. We truly
believe that when we make safety our first priority, effective and
efficient production will follow. Our teams continued to demonstrate this
focus during the 2011 first quarter. The Company's safety incident rate
(including contractors on site), measured in terms of reportable incidents
per 200,000 hours worked, averaged a rate of 2.8 during first quarter of
2011. Even though we target an incident rate of zero, this is a very good
result.'
Cash Flow and Liquidity
At March 31, 2011, the Company's available cash and cash equivalents
(excluding $35.1 million of restricted cash) totaled $43.3 million, up $24
million from December 31, 2010. However, including the Company's
available-for-sale investments, total available cash and investments at
March 31, 2011, was $218.9 million, up $10.5 million from $208.4 million at
December 31, 2010. Net working capital -- comprised of total current assets
(including available cash and short-term investments), less current
liabilities -- increased over the quarter to $335.8 million at March 31,
2011, from $291.2 million at December 31, 2010. Recycling inventories
increased year over year by $32.2 million due both to increased metal
prices and inventory volume.
Net cash provided by operating activities (which includes changes in
working capital) totaled $33.9 million in the first quarter of 2011,
compared to $29.8 million of cash provided in the first quarter of 2010.
The increase in cash from operations in the first quarter of 2011 is
primarily due to the earnings benefit of higher PGM prices. Capital
expenditures were $23.2 million in the first quarter of 2011, up from $10.7
million in the first quarter of 2010.
Outstanding debt at March 31, 2011, was $196.0 million, unchanged from
December 31, 2010. 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.
First Quarter Results - Details
For the first quarter of 2011, the Company's mine production was 131,200
PGM ounces including 98,600 from the Stillwater Mine and 32,600 ounces at
the East Boulder Mine. The production increase at the Stillwater Mine was
attributable to several factors including more tons mined than anticipated,
improved ore grades in the lower off shaft area and adding production from
the east side of the mine.
Revenues for the first quarter of 2011 were $170.1 million, up 27.4% from
the $133.5 million recorded in the first quarter of 2010. Proceeds from
sales of mined PGMs and by-products totaled $122.0 million in the first
quarter of 2011, 28.2% higher than the $95.2 million in the same quarter of
2010, as higher PGM prices in the first quarter of 2011 more than offset
the effect of decrease in mined ounces sold during the quarter. Recycling
revenues increased 42.7% to $48.1 million from $33.7 million in the first
quarter of 2010. There were no resales of purchased metal during the first
quarter of 2011. Resales of purchased metal generated $4.6 million in
revenue during the first quarter of 2010.
Sales out of mine production totaled 115,100 ounces in the first quarter of
2011 at an overall average realization of $994 per ounce, down from 135,100
ounces at $644 per ounce in the first quarter of 2010. Sales ounces trailed
production in the quarter due to normal timing differences. The Company's
average realization on palladium sales from mine production was $784 per
ounce in the first quarter of 2011, compared to $413 per ounce for the same
period in 2010. The Company's average net realization on platinum was
$1,782 per ounce in the first quarter of 2011 and $1,428 per ounce in the
first quarter of 2010. Comparing these prices to the market, the London
Bullion Market Association afternoon posted prices per ounce for palladium
and platinum were $766 and $1,773, respectively, on March 31, 2011, and
$479 and $1,645, respectively, on March 31, 2010.
During the first quarter of 2011, the Company processed 115,600 total
ounces of PGMs from recycled catalytic materials, including both purchased
and tolled material. In the first quarter of 2010, the Company processed
119,300 ounces of recycled material. The Company delivered for sale a total
of 42,800 ounces of palladium, platinum and rhodium from recycled
inventories during the first quarter of 2011 at an overall average price of
$1,122 per ounce; for the first quarter of 2010, the Company sold 36,000
recycled ounces at an average realization of $899 per ounce.
Costs of metals sold (before depreciation and amortization expense)
increased to $105.4 million in the first quarter of 2011 from $93.5 million
in the first quarter of 2010. Mining costs included in costs of metals sold
increased to $60.3 million in the 2011 first quarter from $57.9 million in
the 2010 first quarter, the result of overall higher operating expenses
including the effect on royalties and taxes of higher PGM prices and
increases in maintenance costs. Recycling costs, which primarily reflect
the cost of acquiring spent catalytic materials for processing, totaled
$45.2 million in the first quarter of 2011, much higher than the $31.0
million reported in the first quarter of 2010. The increase was due to
higher recycling volumes processed and sold and the related higher market
value of the materials acquired for processing.
There were no purchases of metals for resale on the open market during the
first quarter of 2011. The cost of purchasing 10,000 ounces of palladium
for re-sale in the first quarter of 2010 was $4.6 million.
Depreciation and amortization expense decreased to $16.1 million in the
first quarter of 2011 from $18.5 million in the same period of 2010. The
decrease is attributable to a lower depreciable base in our fixed asset
accounts in 2011, as many assets were depreciated out during 2010.
General and administrative ('G&A') costs, including marketing and
exploration expenses, increased to $7.7 million in the first quarter of
2011 from $6.9 million in the same period of 2010. Marketing and
exploration spending are being increased substantially during 2011.
Reported net income for the first quarter 2011 of $36.2 million included,
by business segment, net income of $45.9 million from mining operations,
net income of $2.9 million from recycling activities (including financing
income), less $0.3 million of costs associated with the Marathon
properties, a $4.1 million income tax provision, about $1.2 million of
unallocated net interest expense and corporate costs of $7.0 million. The
net profit of $13.4 million recorded for the first quarter 2010 included,
by business segment, $19.1 million of income from mining operations and
$2.9 million income from recycling activities (including financing income),
less corporate costs of $6.9 million, about $1.5 million of unallocated net
interest expense and a $0.2 million income tax provision.
Stillwater Mining Company will host its 2011 first quarter results
conference call in conjunction with its annual meeting of shareholders, to
be convened at approximately 3:30 p.m. Eastern Time on May 3, 2011. The
conference call dial-in numbers are (888) 276-0007 (U.S.) and (612)
332-0637 (International). The conference call will be webcast
simultaneously via the Company's Web site at www.stillwatermining.com. A
replay of the conference call will be available on the Company's Web site
and by telephone (800) 475-6701 (U.S.) and (320) 365-3844 (International),
access code 202316, for one week following the event.
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 Web site:
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. Such statements also
include, but are not limited to, comments regarding the acquisition and
plans for 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; future 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. 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. Additional information regarding factors that
could cause results to differ materially from management's expectations is
found in the Company's 2010 Annual Report on Form 10-K on file with the
United States Securities and Exchange Commission and available on the
Company's website.
Consolidated Financial Statements and Key Factors Tables
Stillwater Mining Company
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
--------------------
2011 2010
--------- ---------
Revenues
Mine production $ 121,980 $ 95,199
PGM recycling 48,081 33,650
Other - 4,622
--------- ---------
Total revenues 170,061 133,471
Costs and expenses
Costs of metals sold
Mine production 60,250 57,863
PGM recycling 45,154 30,995
Other - 4,622
--------- ---------
Total costs of metals sold 105,404 93,480
Depletion, depreciation and amortization
Mine production 15,801 18,457
PGM recycling 262 44
--------- ---------
Total depletion, depreciation and amortization 16,063 18,501
--------- ---------
Total costs of revenues 121,467 111,981
Marketing 853 468
General and administrative 6,362 6,421
Research and development 459 -
Gain on disposal of property, plant and equipment (19) (217)
--------- ---------
Total costs and expenses 129,122 118,653
Operating income 40,939 14,818
Other income (expense)
Other 8 6
Interest income 782 401
Interest expense (1,635) (1,633)
Foreign currency transaction gain 182 -
--------- ---------
Income before income tax provision 40,276 13,592
Income tax provision (4,084) (233)
--------- ---------
Net income $ 36,192 $ 13,359
--------- ---------
Other comprehensive loss, net of tax (190) (194)
--------- ---------
Comprehensive income $ 36,002 $ 13,165
========= =========
Weighted average common shares outstanding
Basic 102,334 97,041
Diluted 110,580 98,117
Basic earnings per share
--------- ---------
Net income $ 0.35 $ 0.14
========= =========
Diluted earnings per share
--------- ---------
Net income $ 0.34 $ 0.14
========= =========
Stillwater Mining Company
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
March 31, December 31,
2011 2010
------------ ------------
ASSETS
Cash and cash equivalents $ 43,320 $ 19,363
Investments, at fair market value 175,531 188,988
Inventories 141,553 101,806
Trade receivables 7,854 7,380
Deferred income taxes 24,527 17,890
Other current assets 10,617 13,940
------------ ------------
Total current assets 403,402 349,367
Property, plant and equipment, net of $393,877
and $378,390 of accumulated depletion,
depreciation and amortization 523,718 509,787
Restricted cash 35,070 38,070
Other noncurrent assets 12,356 12,246
------------ ------------
Total assets $ 974,546 $ 909,470
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 22,599 $ 19,405
Accrued compensation and benefits 26,041 24,746
Property, production and franchise taxes
payable 10,019 10,999
Other current liabilities 8,924 3,052
------------ ------------
Total current liabilities 67,583 58,202
Long-term debt 196,019 196,010
Deferred income taxes 60,496 53,859
Accrued workers compensation 6,679 7,155
Asset retirement obligation 6,888 6,747
Other noncurrent liabilities 7,076 4,425
------------ ------------
Total liabilities 344,741 326,398
------------ ------------
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; 103,009,568 and 101,881,816
shares issued and outstanding 1,030 1,019
Paid-in capital 772,195 761,475
Accumulated deficit (142,378) (178,570)
Accumulated other comprehensive loss (1,042) (852)
------------ ------------
Total stockholders' equity 629,805 583,072
------------ ------------
Total liabilities and stockholders' equity $ 974,546 $ 909,470
============ ============
Stillwater Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
--------------------
2011 2010
--------- ---------
Cash flows from operating activities
Net income $ 36,192 $ 13,359
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion, depreciation and amortization 16,063 18,501
Gain on disposal of property, plant and equipment (19) (217)
Accretion of asset retirement obligation 141 130
Amortization of debt issuance costs 246 245
Stock based compensation and other benefits 3,100 2,966
Changes in operating assets and liabilities:
Inventories (40,064) (6,935)
Trade receivables (474) (5,057)
Accrued compensation and benefits 1,290 (659)
Accounts payable 3,194 3,644
Property, production and franchise taxes payable 1,671 1,265
Workers compensation (476) 874
Restricted cash 3,000 (25)
Other 10,008 1,672
--------- ---------
Net cash provided by operating activities 33,872 29,763
--------- ---------
Cash flows from investing activities
Capital expenditures (23,185) (10,727)
Purchase of long-term investment (616) -
Proceeds from disposal of property, plant and
equipment 21 265
Purchases of short-term investments (65,295) (44,046)
Proceeds from maturities of short-term investments 78,442 12,973
--------- ---------
Net cash used in investing activities (10,633) (41,535)
--------- ---------
Cash flows from financing activities
Issuance of common stock 718 251
--------- ---------
Net cash provided by financing activities 718 251
--------- ---------
Cash and cash equivalents
Net increase (decrease) 23,957 (11,521)
Balance at beginning of period 19,363 166,656
--------- ---------
Balance at end of period $ 43,320 $ 155,135
========= =========
Stillwater Mining Company
Key Operating Factors
(Unaudited)
Three Months Ended
March 31,
---------------------
2011 2010
---------- ----------
OPERATING AND COST DATA FOR MINE PRODUCTION
Consolidated:
Ounces produced (000)
Palladium 101 99
Platinum 30 30
---------- ----------
Total 131 129
========== ==========
Tons milled (000) 293 278
Mill head grade (ounce per ton) 0.48 0.51
Sub-grade tons milled (000) (1) 22 16
Sub-grade tons mill head grade (ounce per ton) 0.19 0.19
Total tons milled (000) (1) 315 294
Combined mill head grade (ounce per ton) 0.46 0.48
Total mill recovery (%) 91 91
Total operating costs per ounce (Non-GAAP) (2) $ 338 $ 300
Total cash costs per ounce (Non-GAAP) (2) $ 437 $ 364
Total production costs per ounce (Non-GAAP) (2) $ 556 $ 505
Total operating costs per ton milled (Non-GAAP) (2) $ 141 $ 132
Total cash costs per ton milled (Non-GAAP) (2) $ 182 $ 160
Total production costs per ton milled (Non-GAAP) (2) $ 232 $ 221
Stillwater Mine:
Ounces produced (000)
Palladium 76 74
Platinum 23 22
---------- ----------
Total 99 96
========== ==========
Tons milled (000) 194 179
Mill head grade (ounce per ton) 0.54 0.57
Sub-grade tons milled (000) (1) 17 16
Sub-grade tons mill head grade (ounce per ton) 0.21 0.18
Total tons milled (000) (1) 211 195
Combined mill head grade (ounce per ton) 0.51 0.54
Total mill recovery (%) 92 92
Total operating costs per ounce (Non-GAAP) (2) $ 338 $ 279
Total cash costs per ounce (Non-GAAP) (2) $ 430 $ 339
Total production costs per ounce (Non-GAAP) (2) $ 556 $ 467
Total operating costs per ton milled (Non-GAAP) (2) $ 158 $ 137
Total cash costs per ton milled (Non-GAAP) (2) $ 201 $ 167
Total production costs per ton milled (Non-GAAP) (2) $ 260 $ 230
Stillwater Mining Company
Key Operating Factors (continued)
(Unaudited)
Three Months Ended
March 31,
---------------------
2011 2010
---------- ----------
OPERATING AND COST DATA FOR MINE PRODUCTION
(Continued)
East Boulder Mine:
Ounces produced (000)
Palladium 25 25
Platinum 7 8
---------- ----------
Total 32 33
========== ==========
Tons milled (000) 99 99
Mill head grade (ounce per ton) 0.37 0.37
Sub-grade tons milled (000) (1) 5 -
Sub-grade tons mill head grade (ounce per ton) 0.11 -
Total tons milled (000) (1) 104 99
Combined mill head grade (ounce per ton) 0.36 0.37
Total mill recovery (%) 89 89
Total operating costs per ounce (Non-GAAP) (2) $ 337 $ 363
Total cash costs per ounce (Non-GAAP) (2) $ 459 $ 439
Total production costs per ounce (Non-GAAP) (2) $ 557 $ 618
Total operating costs per ton milled (Non-GAAP) (2) $ 106 $ 120
Total cash costs per ton milled (Non-GAAP) (2) $ 144 $ 145
Total production costs per ton milled (Non-GAAP) (2) $ 175 $ 204
(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 2010 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 Operating Factors (continued)
(Unaudited)
Three Months Ended
(in thousands, where noted) March 31,
---------------------
2011 2010
---------- ----------
SALES AND PRICE DATA
Ounces sold (000)
Mine production:
Palladium (oz.) 91 104
Platinum (oz.) 24 31
---------- ----------
Total 115 135
---------- ----------
PGM recycling: (1)
Palladium (oz.) 26 19
Platinum (oz.) 14 14
Rhodium (oz.) 3 3
---------- ----------
Total 43 36
---------- ----------
Other: (2)
Palladium (oz.) - 10
By-products from mining: (3)
Rhodium (oz.) - 1
Gold (oz.) 2 2
Silver (oz.) 2 2
Copper (lb.) 175 261
Nickel (lb.) 340 312
Average realized price per ounce (4)
Mine production:
Palladium ($/oz.) $ 784 $ 413
Platinum ($/oz.) $ 1,782 $ 1,428
Combined ($/oz.)(5) $ 994 $ 644
PGM recycling: (1)
Palladium ($/oz.) $ 653 $ 365
Platinum ($/oz.) $ 1,696 $ 1,390
Rhodium ($/oz.) $ 2,260 $ 1,864
Other: (2)
Palladium ($/oz.) $ - $ 462
By-products from mining: (3)
Rhodium ($/oz.) $ - $ 2,458
Gold ($/oz.) $ 1,383 $ 1,100
Silver ($/oz.) $ 33 $ 16
Copper ($/lb.) $ 4.18 $ 3.08
Nickel ($/lb.) $ 10.57 $ 8.21
Average market price per ounce (4)
Palladium ($/oz.) $ 791 $ 441
Platinum ($/oz.) $ 1,793 $ 1,563
Combined ($/oz.)(5) $ 1,002 $ 697
(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
Consolidated Statement of Operations and Comprehensive Income)
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
Consolidated Statement of Operations and Comprehensive Income. 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 Consolidated Statement of Operations and
Comprehensive Income.
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 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 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 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 Operating Cost per Ounce (Non-GAAP) in any
period is a general measure of extraction efficiency, and is affected by
the level of Total Operating Costs (Non-GAAP), by the grade of the ore
produced and by the volume of ore produced in the period.
Reconciliation of Non-GAAP Measures to Costs of Revenues
Three Months Ended
March 31,
(in thousands) 2011 2010
--------- ---------
Consolidated:
Reconciliation to consolidated costs of revenues:
Total operating costs (Non-GAAP) $ 44,300 $ 38,741
Royalties, taxes and other 13,048 8,262
--------- ---------
Total cash costs (Non-GAAP) $ 57,348 $ 47,003
Asset retirement costs 141 130
Depletion, depreciation and amortization 15,801 18,457
Depletion, depreciation and amortization (in
inventory) (317) (442)
--------- ---------
Total production costs (Non-GAAP) $ 72,973 $ 65,148
Change in product inventories (7,495) 4,691
Cost of PGM recycling 45,154 30,995
PGM recycling - depreciation 262 44
Add: Profit from PGM recycling 3,039 2,899
--------- ---------
Total consolidated costs of revenues (1) $ 113,933 $ 103,777
========= =========
Stillwater Mine:
Reconciliation to costs of revenues:
Total operating costs (Non-GAAP) $ 33,310 $ 26,865
Royalties, taxes and other 9,072 5,791
--------- ---------
Total cash costs (Non-GAAP) $ 42,382 $ 32,656
Asset retirement costs 131 120
Depletion, depreciation and amortization 11,987 12,698
Depletion, depreciation and amortization (in
inventory) 319 (520)
--------- ---------
Total production costs (Non-GAAP) $ 54,819 $ 44,954
Change in product inventories (6,620) 469
Add: Profit from PGM recycling 2,288 2,165
--------- ---------
Total costs of revenues $ 50,487 $ 47,588
========= =========
East Boulder Mine:
Reconciliation to costs of revenues:
Total operating costs (Non-GAAP) $ 10,990 $ 11,876
Royalties, taxes and other 3,976 2,471
--------- ---------
Total cash costs (Non-GAAP) $ 14,966 $ 14,347
Asset retirement costs 10 10
Depletion, depreciation and amortization 3,814 5,759
Depletion, depreciation and amortization (in
inventory) (636) 78
--------- ---------
Total production costs (Non-GAAP) $ 18,154 $ 20,194
Change in product inventories (875) (400)
Add: Profit from PGM recycling 751 734
--------- ---------
Total costs of revenues $ 18,030 $ 20,528
========= =========
PGM recycling and Other (2)
Reconciliation to costs of revenues:
Cost of open market purchases $ - $ 4,622
PGM recycling - depreciation 262 44
Cost of PGM recycling 45,154 30,995
--------- ---------
Total costs of revenues $ 45,416 $ 35,661
========= =========
(1) Revenues from the sale of mined by-products are credited against
gross production costs for Non-GAAP presentation. Revenues from
the sale of mined by-products are reported on the Company's financial
statements as mined revenue and are included in consolidated costs of
revenues. Total costs of revenues in the above table have been reduced
by $7.5 million and $8.2 million for the first quarter of 2011 and
2010, respectively.
(2) PGM recycling and Other include PGM recycling and metal purchased
on the open market for resale.