Stillwater Mining Reports Highest Earnings in a Decade
BILLINGS, MT -- (Marketwire) -- 02/22/11 -- STILLWATER MINING COMPANY (NYSE: SWC)
-- Earnings of $50.4 million for 2010
-- PGM prices increased throughout 2010 as global auto demand built and new
ETFs sparked investor interest
-- Shares available for trading doubled as Norilsk Nickel, the Company's
former majority shareholder, exited via a secondary offering in December
-- Acquisition of the PGM assets of Marathon PGM Corporation was completed
in November
-- Recycling volumes rebounded in 2010 from their steep decline in 2009
-- Mine production at Stillwater Mine suffered from operational and ore
grade challenges
Stillwater Mining Company today reported 2010 net income of $50.4 million,
or $0.51 per diluted share, on revenues of $555.9 million. Contributing to
the net income in 2010 were higher PGM prices and a recovery in recycling
volumes, along with continued focus on productivity and controlling costs.
The 2010 net income compares to a full-year 2009 net loss of $8.7 million,
or $0.09 per share, on revenues of $394.4 million. Factoring into the net
loss in 2009 was an $8.1 million non-cash charge related to the issuance
during the fourth quarter of approximately 1.8 million common shares to
retire $15 million principal amount of the Company's outstanding 1.875%
convertible debentures. Results for the year 2009 also reflected
significant operating losses incurred early in the year as production costs
in the Company's mines for a time exceeded the Company's average sales
realizations. However, restructuring efforts and a gradual increase in PGM
prices had reversed this trend by the end of the first quarter of 2010.
The Company's reported net income for the fourth quarter of 2010 was $16.5
million, or $0.16 per diluted share, on revenues of $144.7 million. For the
fourth quarter of 2009, the Company reported a net loss of $5.8 million, or
$0.06 per share, on revenues of $101.8 million. The 2009 fourth quarter
included the effect of the 2009 loss on the partial retirement of the
convertible debentures noted above.
Reflecting on 2010, Francis R. McAllister, Stillwater Chairman and CEO,
commented, 'This past year or so has been an extraordinary time for
Stillwater Mining Company. After going through the pain of the economic
recession and corporate restructuring in late 2008 and early 2009, it was
refreshing to see the PGM markets gradually get back on their feet during
2009 and then move ahead dramatically in 2010. We observed as we issued
our 2009 Annual Report in early 2010 that the economic stars seemed to be
aligned in favor of the platinum-group metals, given the worldwide demand
for automobiles -- and therefore for catalytic converters -- rebounding,
constrained production of these metals and the apparent winding down of
palladium exports from the old Russian government stockpiles. Not only did
PGM prices increase during 2010 as we had predicted, but the market price
of palladium, our principal product, doubled and converged upward toward
the market price of platinum -- advancing from 21% of the price of platinum
at the bottom of the recession to 45% at the end of 2010. In view of the
interchangeability of the two metals in many applications, this convergence
simply makes economic sense.
'With the recovery of the PGM markets, we were able to refocus some of our
attention in 2010 on growth opportunities, allowing us to diversify our
operations with the goal of building value for our shareholders. In
November, we closed the acquisition of the PGM assets of Marathon PGM
Corporation, a Canadian exploration company with an attractive PGM-copper
project situated near the town of Marathon, Ontario on the north shore of
Lake Superior. The transaction was valued at US$173.4 million (which
included $36.0 million of deferred income tax liability assumed). The
Marathon project is currently in the permitting phase, with construction
hopefully to begin in 2013 and mining the following year. The feasibility
study on the project, based upon currently completed drilling, indicates
about a 12-year mine life, with annual production of approximately 200,000
palladium and platinum ounces, along with about 37 million pounds of copper
per year. Construction cost is projected to fall between $400 million and
$450 million, to be firmed up by a detailed engineering study to be
conducted over the next 18 months or so.
'The Marathon project in our view not only brings us a financially
attractive growth opportunity, but it also advances our diversification
efforts on several fronts. With most of the world's PGM production coming
from Russia and South Africa, we view the acquisition of a Canadian PGM
property as offering us operating and geographic diversity within another
very stable political environment. While the Marathon project certainly
falls within our core focus of palladium and platinum, it also offers us
involvement in the copper market, which has strong fundamentals of its own
at this time and is an area where our management group has substantial
experience. The PGM cost structure of the Marathon project, with the
potential for copper credits, at recent metal prices would reduce our
average corporate PGM cash cost per ounce.
'Along with the Marathon project, the Company also acquired from Marathon
PGM Corporation the Geordie Lake property, a promising, partially explored
PGM prospect about eight kilometers to the west of Marathon, and an
interest in an exploration property in Manitoba known as Bird River.
Following the completion of the Marathon transaction, we announced our
intent to also acquire other exploration properties between Marathon and
Geordie Lake from Benton Resources Corp. To facilitate exploration of all
these properties, we recently organized a dedicated exploration team,
comprised of geologists from our own operations and from Marathon. We
expect to spend between $4 and $5 million in 2011 on exploring these
Canadian properties and perhaps others. During 2010, the Company also
exercised an option to purchase a 15% interest in Marathon Gold
Corporation, successor to the non-PGM assets that Marathon PGM held prior
to the acquisition which includes an attractive gold discovery in
Newfoundland that they have announced.
'In mid-December we also announced that our former controlling shareholder,
an affiliate of the large Russian mining company MMC Norilsk Nickel, had
completed a secondary offering, selling all their Stillwater common shares.
In June of 2003, Norilsk Nickel acquired a 55% equity interest in
Stillwater paying $100 million in cash and about 877,000 ounces in
palladium metal, valued at that time at about $179 per ounce, as the
balance of their purchase price. The 2003 acquisition was a strategic
marketing investment by Norilsk Nickel to provide the U.S. auto industry
with assurance that there would be adequate supplies of palladium to meet
their catalytic converter requirements. By 2010 the objectives of their
marketing strategy had been met and Norilsk Nickel determined that they
would dispose of their Stillwater interest along with certain other assets
in order to better focus on their core business. Although Stillwater did
not receive any of the proceeds of the Norilsk Nickel secondary offering,
we do benefit by virtually doubling the number of our shares trading
without diluting any of our other shareholders. The oversubscribed
offering closed at $19.50 per share, a small discount to the share price at
the time of announcement.'
Mine production decreased somewhat during 2010 at the Stillwater Mine and
the East Boulder Mine, which extract ore containing palladium and platinum
from a deposit in the Beartooth Mountains of south-central Montana. The two
mines produced a total of 485,100 ounces of palladium and platinum during
2010, a decrease of 8.5% from the 529,900 ounces produced in 2009.
Production at the Company's Stillwater Mine decreased to 351,700 ounces
from the 393,800 ounces during 2009, while East Boulder Mine production
declined to 133,400 ounces from 136,100 ounces in 2009. The decrease in
production reflects lower-than-planned ore grades in the lower off-shaft
area at the Stillwater Mine and a limitation on available mining areas at
the East Boulder Mine that had been recognized in their 2010 mine plan.
Mining costs, on a per-ounce basis, also increased in 2010 compared to the
year earlier. Total cash costs per ounce, after by-product and recycling
credits, averaged $397 in 2010, 10.3% above 2009 total cash costs per ounce
of $360. By-product and recycling credits increased in 2010 as a result of
stronger PGM prices and recycling volumes. If total cash costs are
considered before the benefit of by-product and recycling credits, 2010
total cash costs as adjusted would be $480 per ounce, or 13.1% above the
comparable $417 per ounce for 2009. Stillwater Mine's total cash costs
(with the benefit of credits) averaged $380 per ounce in 2010 or 10.5% more
than the $344 per ounce achieved in 2009. East Boulder mine costs (with the
benefit of credits) averaged $442 per ounce in 2010, 8.6% more than $407
per ounce in 2009. Most of the increase in total cash costs per ounce was
attributable to the lower ounce production in 2010.
Combined sales realizations improved through the year 2010 for mined
palladium and platinum ounces and averaged $721 per ounce, up from $549 per
ounce realized in 2009. Average metal prices increased throughout 2010.
Fourth quarter 2010 sales realizations strengthened to average $844 per
ounce, compared to $579 per ounce averaged during the fourth quarter of
2009.
The Company's smelting and refining complex in Columbus, Montana processes
mine concentrates and recycles spent catalyst materials 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 for a
fee. Volumes of recycling materials available for processing had fallen off
in late 2008 and in 2009, as the steep drop in PGM prices reduced the
incentive to collect and recycle spent automotive catalysts and fewer cars
were scrapped. However, the recycling market recovered substantially during
2010. In total, the Company processed recycling material containing 399,400
ounces of platinum, palladium and rhodium through the smelter and refinery
during 2010, up 59.1% from the 251,000 ounces recycled during 2009 and
essentially equal to the 398,000 ounces processed in 2008. In the fourth
quarter of 2010, the Company fed 102,400 recycling ounces to the smelter,
compared to 90,900 ounces fed in the same period of 2009. The Company's
recycling business had net income for the year 2010 of $11.5 million
(including associated financing income), compared to earnings of $5.9
million in 2009.
Commenting on the performance of Stillwater's existing operations, Mr.
McAllister observed, 'Despite a few challenges with production at the
Stillwater Mine in 2010, overall we are extremely pleased with the
Company's performance for the year. Our 2010 reported net income of $50.4
million makes 2010 the best year financially that we have had in almost a
decade. Even after funding $63.6 million of the Marathon acquisition out of
internal cash flow, our cash position remains stronger at the end of 2010
than it was when the year started. Both mines continue to perform very
well, with excellent productivity and good cost control. The Stillwater
Mine problems in 2010 were almost entirely due to realizing a slightly
lower grade than expected within certain stopes in the off-shaft area of
the mine -- an issue we can plan around in the future -- and some
unscheduled remediation work during the second quarter. East Boulder Mine
is consistently performing on plan.
'Our recycling business recovered nicely during 2010 after the steep drop
in processing volumes during 2009. The new crushing and sampling unit and
automated x-ray facility that will increase our ability to handle large
volumes of recycling material are now installed and coming on line. Most of
the installation work was handled by our own employees, who took the
concept and ran with it. The original smelter furnace, which sits next to
the new furnace that was placed into service in May 2009, has now been
stripped of its old refractory brick and is ready to be reconfigured as a
slag cleaning furnace during 2011. And we are currently evaluating several
additional technological improvements that potentially could add to our
operating and financial performance in the future.
'As we discussed last quarter, in early 2010 we assembled a team of
experienced geologists and engineers to evaluate the potential of various
undeveloped areas along the J-M Reef. In its assessments, the team
considered such factors as prospective ore grades, cost to develop and
mine, availability of infrastructure, and the likely timeline required.
Nine separate projects were considered, and two projects quickly emerged as
the preferred options. The first, known as the Blitz project, extends the
existing Stillwater Mine development about 20,000 feet toward the eastern
extremity of the J-M Reef by driving two parallel drifts on the 5,000 and
5,200 levels. The other, the Graham Creek project, will extend the existing
East Boulder Mine development about 8,200 feet toward the west using an
existing tunnel boring machine. Although these were both engineered as
five-year projects with no contribution to production until ventilation
raises can be installed during the last year of development, we will
evaluate opportunities to bring on production earlier if attractive areas
are identified.'
Turning to 2011 guidance for investors, Mr. McAllister added, 'After
carefully reviewing our plans for 2011, we now feel comfortable in giving
public guidance for this year. As we had indicated previously, we find that
our operations seem to function optimally with targeted mine production of
approximately 500,000 palladium and platinum ounces per year. We have
structured our mine plans toward achieving that level of production in
2011, assuming some continuation of the lower grades seen in the off-shaft
at Stillwater last year, and resuming some production on the east side of
the mine to offset that reduction. The east side was shut down in 2008
when PGM prices dropped -- grades on the east side tend to be higher than
average, but mining efficiency there is hindered by poor ground conditions.
At the current higher PGM prices, it makes sense to incur the higher cost
in order to benefit from the extra production. It appears that our average
cost per ounce across the two mines should average about $430 per ounce (a
non-GAAP measure) in 2011. That is up about 8% over the $397 per ounce
averaged in 2010, but it actually is better than the average costs realized
in the second half of 2010. Capital expenditures are budgeted at $120
million for the year, up from just $50.3 million in 2010. Of that total,
about $10 million is attributable to the Marathon project, another $10
million to the Blitz and Graham Creek efforts, and about $8 million is for
a new slag cleaning circuit at our Columbus smelter operation. The
remaining funds will go for equipment replacement and toward an expanded
mine development program.
'In summary,' Mr. McAllister concluded, 'during 2011 we will maintain our
focus on the sustainability of our operations, investing in improvements to
developed state and mining efficiency. We will also emphasize growing the
Company's recycling business. We are currently in the process of assembling
a project team for Marathon and will continue to advance the permitting
process there. We will expand our corporate expenditures for exploration
and for marketing palladium -- both programs that were sharply cut back in
2009 -- and will continue research into new technological avenues. And so
long as our cash flow remains strong, we will seek additional investment
opportunities to build value for our shareholders.'
Cash Flow and Liquidity
At December 31, 2010, the Company's available balance of cash and cash
equivalents and highly liquid short-term investments (excluding restricted
cash) was $208.4 million, up from $201.2 million at December 31, 2009, and
it reported $196.0 million of debt outstanding. Available cash and cash
equivalents at December 31, 2010, was $19.4 million, down from $166.7
million at December 31, 2009. Late in 2010, the Company expended cash of
$63.6 million (along with issuing 3.88 million common shares) in its
acquisition of the PGM assets of Marathon PGM Corporation. The Company also
restructured its investment guidelines during 2010, so that a larger share
of available liquidity is now in short-term investments rather than in cash
and cash equivalents. Working capital associated with the recycling
business, constituting marketable inventories and related recycling
advances, increased to $41.5 million at the end of 2010, from $28.6 million
at the end of 2009.
Net cash provided by operating activities (which includes changes in
working capital) totaled $28.6 million in the 2010 fourth quarter and
$123.9 million for the full year. By comparison, $8.0 million of cash was
provided from operations in the fourth quarter of 2009 and $59.7 million
for the full year 2009. Cash generation strengthened in 2010 primarily as a
result of increased market prices for palladium and platinum, the Company's
primary products.
Capital expenditures in 2010 totaled $50.3 million, of which $14.7 million
pertained to the 2010 fourth quarter. Capital spending in 2009 totaled
$39.5 million, of which $7.3 million was spent during the fourth quarter of
2009. The Company increased capital spending modestly in its 2010 budget in
response to higher PGM prices and correspondingly higher projected cash
availability during 2010.
Outstanding debt at December 31, 2010, was $196.0 million, essentially
unchanged from the end of 2009. The Company's total debt includes $166.5
million outstanding in the form of convertible debentures due in 2028 and
$29.5 million of Exempt Facility Revenue Bonds due in 2020.
Fourth Quarter Results -- Details
In the fourth quarter of 2010, the Company's mining operations produced
121,100 ounces of palladium and platinum, including 86,600 ounces from the
Stillwater Mine and 34,500 ounces from East Boulder Mine. For the
comparable quarter of 2009, Stillwater Mine produced 102,800 ounces and
East Boulder Mine produced 35,500 ounces of palladium and platinum. The
12.4% decrease in total output between 2010 and 2009 is mostly the result
of lower average realized ore grades at the Stillwater Mine.
In the 2010 fourth quarter, total cash costs, after by-product and
recycling credits, were $432 per ounce, a 22.7% increase over the fourth
quarter 2009 average of $352 per ounce. Excluding the benefit of
by-product and recycling credits, total cash costs in the fourth quarter of
2010 averaged $506 per ounce, up 20% compared to the $404 per ounce
averaged in the fourth quarter of 2009. Much of this increase in cost per
ounce is attributable to the lower ounce production in 2010.
Sales from mine production totaled 117,100 ounces in the fourth quarter of
2010 at an overall average realization of $844 per ounce, compared to
128,000 ounces at $579 per ounce in the fourth quarter of 2009. The
Company's average realization on palladium sales from mine production was
$619 per ounce in the 2010 fourth quarter, compared to $374 per ounce in
the same period of 2009. Palladium realizations during 2009 benefited from
the floor prices in the auto contracts, and consequently were higher than
the corresponding market prices. The comparable average realization on
platinum, reduced by the effect of contractual price caps on 14% of
production in both periods, was $1,557 per ounce in the fourth quarter of
2010, up from $1,296 per ounce in the 2009 fourth quarter.
During the fourth quarter of 2010, the Company processed about 102,400
ounces of PGMs from recycled catalytic materials. By comparison, in the
fourth quarter of 2009, the Company processed about 90,900 ounces of
recycled material. The Company processes both recycled material it
purchases from third parties and material it toll processes on behalf of
others for a fee. Volumes of material available for recycling increased in
2010 in response to higher PGM prices.
Revenues for the fourth quarter 2010 totaled $144.7 million, up 42.1% from
$101.8 million realized in the fourth quarter of 2009. Proceeds from sales
of mined PGMs totaled $105.1 million in the 2010 fourth quarter, up from
$80.2 million in the same quarter of 2009, reflecting higher PGM prices
during the fourth quarter 2010. Recycling revenues increased to $38.0
million in the fourth quarter of 2010 from $21.6 million in the 2009 fourth
quarter because of the higher sales volumes and realized prices in 2010.
Resales of finished metal purchased in the open market generated $1.6
million in revenue during the fourth quarter of 2010.
Costs of metals sold (before depletion, depreciation and amortization
expense) increased to $96.1 million in the 2010 fourth quarter from $72.7
million in the fourth quarter of 2009. Mining costs included in costs of
metals sold increased to $58.9 million in the 2010 fourth quarter from
$52.4 million in the 2009 fourth quarter, reflecting some cost inflation
and increased royalties and taxes on the higher sales revenues. Recycling
costs, largely comprised of the cost to purchase spent catalytic materials
for processing, totaled $35.4 million in the fourth quarter of 2010,
compared to $20.3 million in the fourth quarter of 2009, reflecting both
the greater volume of material recycled and higher metal values in the
fourth quarter 2010. The cost to purchase 3,000 ounces of palladium for
resale added $1.8 million to fourth quarter 2010 costs.
Depletion, depreciation and amortization expense increased to $18.4 million
in the 2010 fourth quarter from $17.6 million in the same period of 2009.
The increase is attributable to the capital placed into service during the
fourth quarter 2010, offset in part by lower mine production.
General and administrative ('G&A') costs increased to $12.7 million in the
fourth quarter of 2010 from $8.0 million in the 2009 fourth quarter, mostly
reflecting one-time expenses in 2010 associated with the Marathon
acquisition of approximately $1.5 million and contractual support for the
Norilsk Nickel secondary offering of Stillwater shares of approximately
$5.0 million.
Consolidated net income of $16.5 million recorded for the fourth quarter of
2010 included, by business segment, $27.9 million of income from mining
operations and $2.7 million income from recycling activities (including
associated financing income), less corporate costs including $12.7 million
of G&A expense and about $1.3 million of unallocated net interest expense.
The net loss of $5.8 million recorded for the fourth quarter 2009 included,
by business segment, $10.2 million of income from mining operations and
$1.5 million income from recycling activities (including associated
financing income), less corporate costs including $7.9 million of G&A
expense and about $1.5 million of unallocated net interest expense. There
was also a non-cash inducement loss of $8.1 million recorded in fourth
quarter 2009, reflecting the value of excess shares issued in a transaction
that exchanged equity for $15.0 million of outstanding debentures during
the 2009 fourth quarter.
Year End Results -- Details
For the full year 2010, Stillwater Mining Company produced 485,100 ounces
of palladium and platinum from its mining operations, including 351,700
ounces from the Stillwater Mine and 133,400 ounces from the East Boulder
Mine. In 2009, the Company's mines produced 529,900 ounces -- 393,800
ounces at Stillwater and 136,100 ounces at East Boulder. The lower
production during 2010 reflected lower ore grades realized in the off-shaft
area at the Stillwater Mine, as well as diversion of some production effort
into unscheduled remediation during the second quarter of 2010.
Palladium and platinum sold from mine production during 2010 totaled
489,400 ounces at an overall average realization of $721 per ounce,
compared to 515,700 ounces sold during 2009 at a combined average
realization of $549 per ounce. Broken out by metal, total sales from mine
production in 2010 included 377,600 ounces of palladium at an average
realization of $495 per ounce and platinum sales of 111,800 ounces at an
average realization, net of the contractual price ceiling on 14% of mine
production, of $1,488 per ounce. In 2009, sales of mined palladium totaled
392,800 ounces at an average realized price, including the benefit of floor
prices, of $365 per ounce and platinum sales totaled 122,900 ounces at an
average price, net of the price ceiling, of $1,137 per ounce in 2009.
The level of recycling activity increased during 2010, with a total of
399,400 ounces of spent catalytic material processed, up from 251,000
ounces processed in 2009. The Company processes both recycling material
purchased from third parties and material tolled on behalf of third parties
for a fee. The higher volumes processed in 2010 reflected increased PGM
prices that incentivized more catalyst recycling worldwide.
Total Company revenues for 2010 equaled $555.9 million, up substantially
from $394.4 million of revenue in the previous year, as higher PGM prices
and higher recycling volumes prevailed in 2010. Sales of mined PGM ounces
contributed $381.0 million to 2010's total revenue and $306.9 million to
2009's revenue, with the difference driven by price. Recycling revenues
more than doubled to $168.6 million in 2010 from $81.8 million in 2009, as
the volume of recycled materials processed increased, coupled with higher
PGM market prices. Other sales, mostly of metal purchased to meet resale
obligations, contributed $6.2 million to 2010 revenue, up from $5.8 million
in 2009.
Costs of metals sold, excluding depletion, depreciation and amortization
expense, increased by 35.6% to $393.7 million for 2010 from $290.8 million
in 2009, driven mostly by the growth in recycling activity. The costs of
mining operations included here increased by 10.0% to $230.0 million in
2010 from $209.1 million in 2009, reflecting 2010 increases in labor and
materials costs, along with higher royalties and taxes on the increased
revenue. Recycling costs of metals sold increased by 107.3% to $157.3
million in 2010 from $75.9 million in 2009, mirroring the higher sales
volumes. Most of the costs of recycling represent costs to purchase the
spent catalyst material itself, as the actual processing is a relatively
small portion of the total cost. Costs of other miscellaneous metals
purchased for resale totaled $6.4 million in 2010, up from $5.7 million the
year before.
Depletion, depreciation and amortization expense increased to $71.6 million
in 2010 from $70.4 million in 2009. The increase reflects the additional
capital placed into service in 2010, offset in part by lower mine
production.
Marketing -- The Company limited its market development efforts for
palladium to some extent during 2010. The Company spent $2.4 million in
support of marketing programs during 2010, up slightly from $2.0 million in
2009.
General and administrative -- Executive marketing expenses discussed above,
general and administrative costs were $33.0 million in 2010, compared to
$25.1 million in 2009, a 31.5% increase, due to approximately $1.5 million
in acquisition expenses and approximately $5.0 million in contractual
support of the Norilsk Nickel secondary offering, a write-down of $0.6
million in advances for inventory purchases and increased share-based
compensation expense. The Company also recorded valuation allowances
totaling $1.2 million in early 2009, including adjustments to trade
receivables, long-term investments and advances, and inventories. The
Company also recorded an $8.1 million inducement loss in 2009 for shares
issued in a transaction exchanging equity for $15.0 million of outstanding
debentures.
The Company's consolidated net income for the full year 2010 was $50.4
million. Broken out by business segment, mining operations contributed
$80.0 million and recycling contributed $11.5 million of earnings
(including associated financing income). At the corporate level, G&A
expense totaled $35.5 million and unallocated net interest expense equaled
$5.6 million.
The Company's net loss for the full year 2009 was $8.7 million. Breaking
this out by business segment, mining operations contributed $26.9 million
and recycling contributed $6.4 million of earnings (including associated
financing income). At the corporate level, G&A expense totaled $28.2
million for the year and unallocated net interest expense equaled $5.7
million. An $8.1 million inducement loss for shares issued to retire debt
was also recorded as a corporate item.
_______________________________
Stillwater Mining Company will host its 2010 year-end results conference
call at 12:00 noon Eastern Standard Time on February 22, 2011. The
conference call dial-in numbers are 800-230-1951 (U.S.) and 612-332-0632
(International). The conference call will simultaneously be webcast on the
Internet via the Company's website at www.stillwatermining.com. To access
the conference call on the Company's website, go to the Investor Relations
section under Presentations and click on the link to the conference call.
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 192919, through March 1, 2011, ending at 11:59
p.m. Eastern Standard 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 news release 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 economic environment, the timing
and cost of the Marathon development, the outlook for the Company's
operations, the expectation of future automotive PGM supply agreements,
expansion and development plans, the status of research efforts,
projections of mining costs, ore grades, production and recovery rates,
permitting, labor matters, financing needs and the terms of future credit
facilities, capital expenditures, changes in processing capacity, cost
reduction measures, safety, timing for engineering studies and
environmental permitting and compliance, future surety requirements,
outstanding litigation and views on the palladium and platinum market.
Additional information regarding factors that could cause results to differ
materially from management's expectations is found in the section entitled
'Risk Factors' in the Company's 2010 Annual Report on Form 10-K. The
Company intends that the forward-looking statements contained herein be
subject to the above-mentioned statutory safe harbors. Investors are
cautioned not to rely on forward-looking statements. The Company disclaims
any obligation to update forward-looking statements.
Consolidated Financial Statements, Ore Reserves and Key Factors Tables
Stillwater Mining Company
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
REVENUES
Mine production $ 105,053 $ 80,201 $ 381,044 $ 306,892
PGM recycling 38,021 21,622 168,612 81,788
Other 1,600 - 6,222 5,752
--------- --------- --------- ---------
Total revenues 144,674 101,823 555,878 394,432
COSTS AND EXPENSES
Costs of metals sold
Mine production 58,940 52,386 229,986 209,140
PGM recycling 35,373 20,312 157,310 75,920
Other 1,757 - 6,379 5,741
--------- --------- --------- ---------
Total costs of metals sold 96,070 72,698 393,675 290,801
Depletion, depreciation and
amortization
Mine production 18,124 17,572 71,121 70,239
PGM recycling 260 44 472 178
--------- --------- --------- ---------
Total depletion,
depreciation and
amortization 18,384 17,616 71,593 70,417
--------- --------- --------- ---------
Total costs of revenues 114,454 90,314 465,268 361,218
Marketing 736 385 2,415 1,987
General and administrative 11,302 7,480 33,016 25,080
Impairment of long-term
investments - - - 119
Losses on trade receivables
and advances for inventory
purchases 595 - 595 1,051
(Gain)/loss on disposal of
property, plant and equipment 51 87 (128) 689
--------- --------- --------- ---------
Total costs and expenses 127,138 98,266 501,166 390,144
OPERATING INCOME (LOSS) 17,536 3,557 54,712 4,288
OTHER INCOME (EXPENSE)
Other 5 3 (6) 79
Interest income 575 375 2,144 1,846
Interest expense (1,634) (1,619) (6,536) (6,801)
Foreign currency transaction
gain 51 - 51 -
Induced conversion loss - (8,097) - (8,097)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT (PROVISION) 16,533 (5,781) 50,365 (8,685)
Income tax benefit (provision) - 30 - 30
--------- --------- --------- ---------
NET INCOME (LOSS) $ 16,533 $ (5,751) $ 50,365 $ (8,655)
--------- --------- --------- ---------
Other comprehensive income
(loss), net of tax (384) (69) (762) 70
--------- --------- --------- ---------
COMPREHENSIVE INCOME (LOSS) $ 16,149 $ (5,820) $ 49,603 $ (8,585)
========= ========= ========= =========
Weighted average common shares
outstanding
Basic 99,260 96,617 97,967 94,852
Diluted 107,861 96,617 99,209 94,852
Basic income (loss) per share
--------- --------- --------- ---------
Net income (loss) $ 0.17 $ (0.06) $ 0.51 $ (0.09)
========= ========= ========= =========
Diluted income (loss) per share
--------- --------- --------- ---------
Net income (loss) $ 0.16 $ (0.06) $ 0.51 $ (0.09)
========= ========= ========= =========
Stillwater Mining Company
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share data)
December 31, December 31,
2010 2009
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 19,363 $ 166,656
Investments, at fair market value 188,988 34,515
Inventories 101,806 88,967
Trade receivables 7,380 2,073
Deferred income taxes 17,890 18,130
Other current assets 13,940 8,680
------------ ------------
Total current assets 349,367 319,021
Property, plant and equipment, net 509,787 358,866
Restricted cash 38,070 38,045
Other noncurrent assets 12,246 9,263
------------ ------------
Total assets $ 909,470 $ 725,195
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 19,405 $ 8,901
Accrued compensation and benefits 24,746 26,481
Property, production and franchise taxes
payable 10,999 10,405
Other current liabilities 3,052 3,689
------------ ------------
Total current liabilities 58,202 49,476
Long-term debt 196,010 195,977
Deferred income taxes 53,859 18,130
Accrued workers compensation 7,155 4,737
Asset retirement obligation 6,747 6,209
Other noncurrent liabilities 4,425 3,855
------------ ------------
Total liabilities $ 326,398 $ 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; 101,881,816 and
96,732,185 shares issued and outstanding 1,019 967
Paid-in capital 761,475 674,869
Accumulated deficit (178,570) (228,935)
Accumulated other comprehensive loss (852) (90)
------------ ------------
Total stockholders' equity 583,072 446,811
------------ ------------
Total liabilities and stockholders'
equity $ 909,470 $ 725,195
============ ============
Stillwater Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Cash flows from operating
activities
Net income (loss) $ 16,533 $ (5,751) $ 50,365 $ (8,655)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depletion, depreciation and
amortization 18,384 17,616 71,593 70,417
Foreign currency transaction
gain (51) - (51) -
Lower of cost or market
inventory adjustments - 13 - 6,626
Induced conversion loss - 8,097 - 8,097
Restructuring costs - - - -
Impairment of long-term
investments and property,
plant and equipment - - - 119
Losses on trade receivables
and inventory purchases 595 - 595 1,051
(Gain)/loss on disposal of
property, plant and equipment 51 87 (128) 689
Accretion of asset retirement
obligation 139 156 538 606
Amortization of debt issuance
costs 245 243 979 1,036
Share based compensation and
other benefits 2,803 2,959 12,366 11,441
Changes in operating assets and
liabilities
Inventories (6,049) (13,104) (12,474) (22,793)
Trade receivables (1,364) 84 (5,307) 296
Accrued compensation and
benefits (303) 1,285 (1,735) 2,379
Accounts payable 3,671 (884) 10,202 (5,761)
Property, production and
franchise taxes payable (167) (2,007) 1,164 (937)
Workers compensation (205) - 2,418 (2,024)
Restricted cash - (2,100) (25) (2,450)
Other (5,702) 1,297 (6,603) (465)
--------- --------- --------- ---------
Net cash provided by operating
activities 28,580 7,991 123,897 59,672
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (14,741) (7,252) (50,263) (39,534)
Purchase of Marathon PGM
assets (61,224) - (63,649) -
Purchases of long-term
investments (3,342) - (3,858) -
Proceeds from disposal of
property, plant and equipment 13 408 470 603
Purchases of investments (55,950) (26,604) (243,693) (47,551)
Proceeds from maturities of
investments 68,997 10,978 88,959 31,759
--------- --------- --------- ---------
Net cash used in investing
activities (66,247) (22,470) (272,034) (54,723)
--------- --------- --------- ---------
Cash flows from financing
activities
Principal payments on debt - - - (97)
Issuance of common stock 338 9 844 9
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities 338 9 844 (88)
--------- --------- --------- ---------
Cash and cash equivalents
Net increase (decrease) (37,329) (14,470) (147,293) 4,861
Balance at beginning of period 56,692 181,126 166,656 161,795
--------- --------- --------- ---------
Balance at end of period $ 19,363 $ 166,656 $ 19,363 $ 166,656
========= ========= ========= =========
Proven and Probable Ore Reserves*
December 31, 2010
% %
Change Change
Average in in
Grade Contained Tons Ounces
Tons (Oz/Ton) Ounces from from
(000's) Pd Pt (000's) 2009 2009
------- -------- --------- ------ ------
Stillwater Mine
Proven Reserves 2,559 0.64 1,648 -1.80% -3.74%
Probable Reserves 13,116 0.62 8,176 -4.60% -5.89%
Total Stillwater Mine 15,675 0.63 9,824 -4.15% -5.54%
East Boulder Mine
Proven Reserves 2,059 0.41 848 1.13% -2.19%
Probable Reserves 23,064 0.40 9,199 2.02% -1.58%
Total East Boulder Mine 25,123 0.40 10,047 1.95% -1.64%
Total Proven Reserves 4,618 0.54 2,496 -0.52% -3.22%
Total Probable Reserves 36,180 0.49 17,375 -0.48% -3.66%
Total Proven and Probable
Reserves 40,798 0.49 19,871 -0.49% -3.60%
* In determining ore reserves at December 31, 2010, the Company applied the
trailing 12-quarter combined average PGM market price of $624 per ounce,
based upon the 12-quarter average palladium price of $381 per ounce and the
12-quarter average platinum price of $1,464.
Stillwater Mining Company
Key Factors Three months ended Twelve months ended
(Unaudited) December 31, December 31,
-------------------- --------------------
(In thousands, where noted) 2010 2009 2010 2009
--------- --------- --------- ---------
OPERATING AND COST DATA FOR
MINE PRODUCTION
Consolidated:
Ounces produced (000)
Palladium 93 106 374 407
Platinum 28 32 111 123
--------- --------- --------- ---------
Total 121 138 485 530
========= ========= ========= =========
Tons milled (000) 282 275 1,095 1,086
Mill head grade (ounce per ton) 0.47 0.53 0.48 0.52
Sub-grade tons milled (000) (1) 22 29 86 98
Sub-grade tons mill head grade
(ounce per ton) 0.18 0.21 0.17 0.20
Total tons milled (000) (1) 304 304 1,181 1,184
Combined mill head grade (ounce
per ton) 0.45 0.50 0.46 0.50
Total mill recovery (%) 90 91 91 91
Total operating costs per ounce
(Non-GAAP) (2) $ 361 $ 306 $ 331 $ 310
Total cash costs per ounce
(Non-GAAP) (2) $ 432 $ 352 $ 397 $ 360
Total production costs per
ounce (Non-GAAP) (2) $ 585 $ 485 $ 546 $ 495
Total operating costs per ton
milled (Non-GAAP) (2) $ 144 $ 139 $ 136 $ 139
Total cash costs per ton milled
(Non-GAAP) (2) $ 172 $ 160 $ 163 $ 161
Total production costs per ton
milled (Non-GAAP) (2) $ 233 $ 220 $ 224 $ 222
Stillwater Mine:
Ounces produced (000)
Palladium 66 79 271 302
Platinum 20 24 81 92
--------- --------- --------- ---------
Total 86 103 352 394
========= ========= ========= =========
Tons milled (000) 185 182 713 727
Mill head grade (ounce per ton) 0.50 0.60 0.53 0.58
Sub-grade tons milled (000) (1) 18 16 68 50
Sub-grade tons mill head grade
(ounce per ton) 0.20 0.21 0.18 0.20
Total tons milled (000) (1) 203 198 781 777
Combined mill head grade (ounce
per ton) 0.48 0.57 0.50 0.56
Total mill recovery (%) 91 92 92 92
Total operating costs per ounce
(Non-GAAP) (2) $ 359 $ 285 $ 317 $ 297
Total cash costs per ounce
(Non-GAAP) (2) $ 427 $ 328 $ 380 $ 344
Total production costs per
ounce (Non-GAAP) (2) $ 583 $ 454 $ 524 $ 469
Total operating costs per ton
milled (Non-GAAP) (2) $ 153 $ 148 $ 143 $ 150
Total cash costs per ton milled
(Non-GAAP) (2) $ 182 $ 171 $ 171 $ 174
Total production costs per ton
milled (Non-GAAP) (2) $ 248 $ 236 $ 236 $ 238
East Boulder Mine:
Ounces produced (000)
Palladium 27 27 103 105
Platinum 8 8 30 31
--------- --------- --------- ---------
Total 35 35 133 136
========= ========= ========= =========
Tons milled (000) 97 93 382 359
Mill head grade (ounce per ton) 0.40 0.40 0.39 0.40
Sub-grade tons milled (000) (1) 4 13 18 48
Sub-grade tons mill head grade
(ounce per ton) 0.10 0.20 0.15 0.20
Total tons milled (000) (1) 101 107 400 407
Combined mill head grade (ounce
per ton) 0.39 0.38 0.37 0.38
Total mill recovery (%) 89 89 89 89
Total operating costs per ounce
(Non-GAAP) (2) $ 367 $ 369 $ 368 $ 347
Total cash costs per ounce
(Non-GAAP) (2) $ 444 $ 420 $ 442 $ 407
Total production costs per
ounce (Non-GAAP) (2) $ 592 $ 577 $ 604 $ 572
Total operating costs per ton
milled (Non-GAAP) (2) $ 126 $ 121 $ 123 $ 116
Total cash costs per ton milled
(Non-GAAP) (2) $ 152 $ 137 $ 147 $ 136
Total production costs per ton
milled (Non-GAAP) (2) $ 203 $ 189 $ 201 $ 191
Stillwater Mining Company
Three Months ended Twelve months ended
(Unaudited) December 31, December 31,
-------------------- --------------------
(In thousands, where noted) 2010 2009 2010 2009
--------- --------- --------- ---------
SALES AND PRICE DATA
Ounces sold (000)
Mine production:
Palladium (oz.) 89 100 377 393
Platinum (oz.) 28 28 112 123
--------- --------- --------- ---------
Total 117 128 489 516
--------- --------- --------- ---------
PGM recycling: (5)
Palladium (oz.) 18 14 81 53
Platinum (oz.) 13 11 62 40
Rhodium (oz.) 3 2 13 9
--------- --------- --------- ---------
Total 34 27 156 102
--------- --------- --------- ---------
Other: (6)
Palladium (oz.) 3 - 13 12
Platinum (oz.) - - - 3
Rhodium (oz.) - - - -
--------- --------- --------- ---------
Total 3 - 13 15
--------- --------- --------- ---------
By-products from mining: (7)
Rhodium (oz.) - 1 2 4
Gold (oz.) 2 2 9 9
Silver (oz.) 1 1 5 6
Copper (lb.) 215 172 824 776
Nickel (lb.) 263 187 1,157 856
Average realized price per
ounce (3)
Mine production:
Palladium ($/oz.) $ 619 $ 374 $ 495 $ 365
Platinum ($/oz.) $ 1,557 $ 1,296 $ 1,488 $ 1,137
Combined ($/oz.)(4) $ 844 $ 579 $ 721 $ 549
PGM recycling: (5)
Palladium ($/oz.) $ 514 $ 288 $ 456 $ 282
Platinum ($/oz.) $ 1,557 $ 1,240 $ 1,539 $ 1,143
Rhodium ($/oz.) $ 2,262 $ 1,513 $ 2,354 $ 2,088
Other: (6)
Palladium ($/oz.) $ 533 $ - $ 479 $ 213
Platinum ($/oz.) $ - $ - $ - $ 1,041
Rhodium ($/oz.) $ - $ - $ - $ -
By-products from mining:(7)
Rhodium ($/oz.) $ - $ 2,293 $ 2,503 $ 1,543
Gold ($/oz.) $ 1,366 $ 1,116 $ 1,223 $ 983
Silver ($/oz.) $ 27 $ 18 $ 19 $ 15
Copper ($/lb.) $ 3.74 $ 2.83 $ 3.24 $ 2.14
Nickel ($/lb.) $ 9.10 $ 7.75 $ 8.74 $ 7.48
Average market price per
ounce (4)
Palladium ($/oz.) $ 673 $ 347 $ 525 $ 263
Platinum ($/oz.) $ 1,696 $ 1,389 $ 1,609 $ 1,204
Combined ($/oz.)(4) $ 919 $ 579 $ 773 $ 487
(1) Sub-grade tons milled includes reef waste material only. Total tons
milled includes ore tons and sub-grade tons only.
(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 depletion, depreciation and amortization. Income taxes, corporate
general and administrative expenses, asset impairment write-downs, gain
or loss on disposal of property, plant and equipment, restructuring
costs, 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.
(3) 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.
(4) The Company reports a combined average realized and market price of
palladium and platinum at the same ratio as ounces that are produced
from the base metal refinery.
(5) Ounces sold and average realized price per ounce from PGM recycling
relate to ounces produced from processing of catalyst materials.
(6) Ounces sold and average realized price per ounce from other relate to
ounces purchased in the open market for resale.
(7) 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.
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, 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 Stillwater Mine, 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, depletion, 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 t