Stillwater Mining (SWC) 10-Q 2005 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2005.

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                    to                    

Commission file number 1-13053

STILLWATER MINING COMPANY

(Exact name of registrant as specified in its charter)

Delaware	81-0480654
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1321 Discovery Drive Billings, Montana	59102
(Address of principal executive offices)	(Zip Code)

(406) 373-8700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YESo NOþ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2): YESþ NOo

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2): YESo NOþ

At November 2, 2005, the Company had outstanding 90,906,690 shares of common stock, par value $0.01 per share.

STILLWATER MINING COMPANY

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

INDEX

PART I — FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosure About Market Risk	36
Item 4. Controls and Procedures	38
PART II – OTHER INFORMATION	39
Item 1. Legal Proceedings	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Submission of Matters to a Vote of Security Holders	39
Item 5. Other Information	39
Item 6. Exhibits	40
SIGNATURES	41
Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer
Section 1350 Certification
Section 1350 Certification

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Stillwater Mining Company
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share amounts)

	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Revenues:
Mine production	$	62,996		$	88,034		$	203,030		$	204,681
PGM Recycling		24,025			23,824			65,983			52,010
Sales of palladium received in the Norilsk Nickel transaction and other		32,097			32,707			102,919			72,774
Total revenues		119,118			144,565			371,932			329,465
Costs and expenses:
Cost of metals sold:
Mine production		49,242			65,406			144,714			132,280
PGM Recycling		22,552			22,062			61,872			48,206
Sales of palladium received in Norilsk Nickel transaction and other		30,255			28,313			95,882			54,737
Total cost of metals sold		102,049			115,781			302,468			235,223
Depreciation and amortization:
Mine production		19,353			13,635			60,094			43,541
PGM Recycling		14			12			41			35
Total depreciation and amortization		19,367			13,647			60,135			43,576
Total costs of revenues		121,416			129,428			362,603			278,799
General and administrative		4,933			6,674			14,822			14,323
Loss on disposal of property, plant and equipment		107			2,017			182			1,942
Total costs and expenses		126,456			138,119			377,607			295,064
Operating income (loss)		(7,338	)		6,446			(5,675	)		34,401
Other income (expense)
Interest income		1,275			488			3,468			1,159
Interest expense		(3,041	)		(7,875	)		(8,719	)		(15,137	)
Income (loss) before income taxes and cumulative effect of change in accounting		(9,104	)		(941	)		(10,926	)		20,423
Income tax (provision) (see Note 10)		(10	)		(3	)		(13	)		(3	)
Income (loss) before cumulative effect of change in accounting		(9,114	)		(944	)		(10,939	)		20,420
Cumulative effect of change in accounting method					—			—			6,035
Net income (loss)	$	(9,114	)	$	(944	)	$	(10,939	)	$	26,455
Other comprehensive (loss)		(9,180	)		(5,103	)		(11,137	)		(2,189	)
Comprehensive income (loss)	$	(18,294	)	$	(6,047	)	$	(22,076	)	$	24,266

See notes to consolidated financial statements

3

Stillwater Mining Company
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share amounts)
(Continued)

	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of change in accounting	$	(9,114	)	$	(944	)	$	(10,939	)	$	20,420
Cumulative effect of change in accounting		—			—			—			6,035
Net income (loss)	$	(9,114	)	$	(944	)	$	(10,939	)	$	26,455
Weighted average common shares outstanding
Basic		90,775			90,288			90,626			90,111
Diluted		90,775			90,288			90,626			90,372
Basic earnings (loss) per share
Income (loss) before cumulative effect of change in accounting	$	(0.10	)	$	(0.01	)	$	(0.12	)	$	0.22
Cumulative effect of change in accounting		—			—			—			0.07
Net income (loss)	$	(0.10	)	$	(0.01	)	$	(0.12	)	$	0.29
Diluted earnings (loss) per share
Income (loss) before cumulative effect of change in accounting	$	(0.10	)	$	(0.01	)	$	(0.12	)	$	0.22
Cumulative effect of change in accounting		—			—			—			0.07
Net income (loss)	$	(0.10	)	$	(0.01	)	$	(0.12	)	$	0.29

See notes to consolidated financial statements

4

Stillwater Mining Company
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)

	September			December 31,
	30, 2005			2004
ASSETS
Current assets
Cash and cash equivalents	$	108,060		$	96,052
Restricted cash		2,685			2,650
Investments		29,223			13,150
Inventories		93,326			159,942
Accounts receivable		25,732			18,186
Deferred income taxes		3,886			6,247
Other current assets		14,865			7,428
Total current assets		277,777			303,655
Property, plant and equipment, net		441,159			434,924
Other noncurrent assets		6,486			6,139
Total ass ets	$	725,422		$	744,718
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	15,293		$	15,029
Accrued payroll and benefits		15,180			13,395
Property, production and franchise taxes payable		6,554			9,183
Current portion of long-term debt and capital lease obligations		1,867			1,986
Portion of debt repayable upon liquidation of finished palladium in inventory		12,360			19,076
Fair value of derivative instruments		16,102			4,965
Other current liabilities		4,297			3,604
Total current liabilities		71,653			67,238
Long-term debt and capital lease obligations		134,543			143,028
Deferred income taxes		3,886			6,247
Other noncurrent liabilities		19,476			15,476
Total liabilities		229,558			231,989
Commitments and contingencies
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;90,852,298and 90,433,665 shares issued and outstanding		908			904
Paid-in capital		609,707			604,177
Accumulated deficit		(94,857	)		(83,918	)
Accumulated other comprehensive loss		(16,102	)		(4,965	)
Unearned compensation — restricted stock awards		(3,792	)		(3,469	)
Total stockholders’ equity		495,864			512,729
Total liabilities and stockholders’ equity	$	725,422		$	744,718

See notes to consolidated financial statements

5

Stillwater Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Cash flows from operating activities
Net income (loss)	$	(9,114	)	$	(944	)	$	(10,939	)	$	26,455
Adjustments to reconcile net income (loss ) to net cash provided by operating activities:
Depreciation and amortization		19,367			13,647			60,135			43,576
Inventory Adjustment		1,427			—			1,427			—
Cumulative effect of change in accounting method		—		��	—			—			(6,035	)
Stock issued under employee benefit plans		1,152			755			3,470			2,842
Amortization of debt issuance costs		140			4,258			459			4,700
Share-based compensation		656			412			1,711			686
Loss on disposal of property, plant and equipment		107			2,017			182			1,942
Changes in ope rating assets and liabilities :
Inventories		22,171			38,356			65,189			39,238
Accounts receivable		(2,727	)		(730	)		(7,546	)		(14,744	)
Accounts payable		756			1,415			264			2,727
Other		(4,027	)		1,331			(4,172	)		(1,115	)
Net cash provided by operating activities		29,908			60,517			110,180			100,272
Cash flows from investing activities
Capital expenditures		(26,565	)		(20,905	)		(66,787	)		(55,797	)
Purchases of investments		(29,223	)		(14,100	)		(51,894	)		(25,100	)
Proceeds from sale and maturities of investments		—			3,500			35,821			11,700
Net cash used in investing activities		(55,788	)		(31,505	)		(82,860	)		(69,197	)
Cash flows from financing activities
Proceeds from long-term financing, net		—			140,000			—			140,000
Payments on long -term debt and capital lease obligations		(7,397	)		(128,241	)		(15,342	)		(129,205	)
Issuance of common stock, net of stock issue costs		21			267			30			2,747
Payment for debt issuance costs		—			(3,756	)		—			(3,838	)
Net cash provided by (used in) financing activities		(7,376	)		8,270			(15,312	)		9,704
Cash and cash equivalents
Net increase (decrease)		(33,256	)		37,282			12,008			40,779
Balance at beginning of period		141,316			39,158			96,052			35,661
Balance at end of period	$	108,060		$	76,440		$	108,060		$	76,440

See notes to consolidated financial statements

6

Stillwater Mining Company
Notes to Consolidated Financial Statements
(Unaudited)

Note 1 — General

     In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of the Stillwater Mining Company (the “Company”) as of September 30, 2005, and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2005 and 2004. Certain prior-period amounts in the consolidated statements of cash flows related to cash equivalents and investments have been reclassified to conform to the current period’s presentation. The results of operations for the three- and nine- month periods are not necessarily indicative of the results to be expected for the full year. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2004 Annual Report on Form 10-K.

Note 2 — Inventories

Inventories consisted of the following:

	September 30,		December 31,
(in thousands)	2005		2004
Metals Inventory
Raw ore	$	996	$	672
Concentrate and in-process		18,914		20,512
Finished goods		31,434		42,777
Palladium inventory from Norilsk Nickel transaction		29,245		84,835
		80,589		148,796
Materials and supplies		12,737		11,146
	$	93,326	$	159,942

During the third quarter of 2005, the Company reduced the aggregate inventory carrying value of certain of its in-process and finished goods inventories by $1.4 million to reflect costs in excess of market value.

     The market value of inventory is generally equal to the Company’s current cost of replacing the inventory, provided that: (1) the market value of the inventory may not exceed the estimated selling price of such inventory in the ordinary course of business less reasonably predictable costs of completion and disposal, and (2) the market value may not be less than net realizable value reduced by an allowance for a normal profit margin.

     The costs of PGM inventories as of any date are determined based on combined production costs per ounce and include all inventoriable production costs, including direct labor, direct materials, depreciation and amortization and other overhead costs relating to mining and processing activities incurred as of such date.

Note 3 — Share-Based Payments

     Prior to 2005, the Company elected to account for stock options and other stock-based compensation awards using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees. Accordingly, because stock options were granted at fair market value, no compensation expense had been recognized for stock options issued under the Company’s stock option plans. The Company had adopted the disclosure-only provisions of Statement of Financial Accounting Standard (SFAS) No. 123,Accounting for Stock-Based Compensation.

7

     Effective January 1, 2005, the Company elected early adoption of SFAS No. 123 (revised 2004),Share-BasedPayment(SFAS No. 123 (R)). SFAS No. 123 (R) replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123 (R) requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and determined on a fair-value-based measurement method. The fair values for stock options and other stock-based compensation awards issued to employees are estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

Three months ended September 30,	2005			2004
Weighted average expected lives (years)		3.7			3.7
Average interest rate		4.0	%		3.3	%
Volatility		56	%		63	%
Dividend yield		—			—

     The Company has elected to use the modified version of prospective application allowable under the transition provisions of SFAS No. 123 (R). Using this modified transition method, compensation cost is recognized for (1) all awards granted, modified, cancelled, or repurchased after the date of adoption and (2) the unvested portion of previously granted awards for which the requisite service has not yet been rendered as of the date of adoption, based on the fair value of those awards on the grant date. The compensation cost, including options and restricted stock, was approximately $0.7 million and $1.7 million for the three- and nine-month periods ended September 30, 2005, respectively.

     Pro forma information regarding net income (loss) and earnings (loss) per share is required by SFAS No. 123(R) for awards granted in prior periods and has been determined as if the Company had accounted for its stock options and other stock-based compensation awards under the fair value method of SFAS No. 123(R). Had the Company accounted for its stock options and other stock-based compensation awards under the fair value method in prior periods, the results would have been:

	Three Months Ended			Nine Months Ended
(in thousands except per share data)	September 30,			September 30,
	2004			2004
Net income (loss), as reported	$	(944	)	$	26,455
Add: Stock-based employee compensation expense included in reported net income (loss), net of tax		412			686
Deduct: Stock-based employee compensation expense determined under fair value based method, net of tax		(602	)		(1,206	)
Pro forma net income (loss)	$	(1,134	)	$	25,935
Earnings (loss) per share
Basic — as reported	$	(0.01	)	$	0.29
Basic — pro forma	$	(0.01	)	$	0.29
Diluted — as reported	$	(0.01	)	$	0.29
Diluted — pro forma	$	(0.01	)	$	0.29

8

     On May 3, 2005, the Company’s Board of Directors implemented the Stillwater Mining Company Non-Employee Directors’ Deferral Plan, which allows non-employee directors to defer all or any portion of the compensation received as directors, in accordance with the provisions of Section 409A of the Internal Revenue Code and associated Treasury regulations. All amounts deferred under this plan are fully vested, and each participant elects the deferral period and form of the compensation (cash or Company common stock). The plan permits the deferral of cash or stock compensation and provides a 20% match for any cash compensation deferred into the Company’s common stock. In accounting for this plan, the Company follows the provisions of APB Opinion No. 12,Omnibus Opinion – 1967on accounting for deferred compensation plans other than post-retirement plans in conjunction with EITF 97-14,Accounting for Deferred Compensation Arrangements Where Amounts Earned are Held in a Rabbi Trust and Invested.

Note 4 — Change in Amortization Method for Mine Development Assets

     Effective January 1, 2004, the Company changed its accounting method for amortizing capitalized mine development costs. These mine development costs include initial costs incurred to gain primary access to the ore reserves, plus ongoing development costs of footwall laterals and ramps driven parallel to the reef that are used to access and provide support for the mining stopes in the reef.

     Prior to 2004, the Company amortized all such capitalized development costs at its mines over all proven and probable reserves at each mine. Following the asset impairment write-down at the end of 2003, the Company revisited its assumptions and estimates for amortizing capitalized mine development costs. As a result, the Company determined it would change its method of accounting for development costs as follows:

• Unamortized costs of the shaft at the Stillwater Mine and the initial development at the East Boulder Mine will continue to be treated as life-of-mine infrastructure costs, to be amortized over total proven and probable reserves at each location; and

• All ongoing development costs of footwall laterals and ramps, including similar development costs incurred before 2004, are to be amortized over the ore reserves in the immediate and relevant vicinity of the development.

     The effect of this change in accounting method is included in the reported amounts for the comparative three- and nine-month periods ended September 30, 2004. The nine-month period ended September 30, 2004, includes a cumulative effect benefit of approximately $6.0 million relating to this change in accounting method.

Note 5 — Comprehensive Income

     Comprehensive income consists of earnings items and other gains and losses affecting stockholders’ equity that are excluded from current net income. As of September 30, 2005 and 2004, such items consist of unrealized gains and losses on derivative financial instruments related to commodity price hedging activities.

     The Company had commodity instruments relating to fixed forward metal sales and financially-settled forwards outstanding during the third quarter of 2005. The net unrealized loss on these instruments, $16.1 million at September 30, 2005, will be reflected in other comprehensive income until these instruments are settled. All commodity instruments outstanding at September 30, 2005, are expected to be settled within the next thirty-three months (see Note 9).

     The Company’s interest rate swaps, which were accounted for as hedging instruments, matured on March 4, 2004 (see Note 9).

     The following summary sets forth the changes in accumulated other comprehensive loss in stockholders’ equity:

(in thousands )	Interest		Commodity
As of September 30, 2005	Rate Swaps		Instruments			Total
Balance at December 31, 2004	$	—	$	(4,965	)	$	(4,965	)
Reclassification to earnings		—		4,375			4,375
Change in value		—		(15,512	)		(15,512	)
Balance at September 30, 2005	$	—	$	(16,102	)	$	(16,102	)

(in thousands )	Interest			Commodity
As of September 30, 2004	Rate Swaps			Instruments			Total
Balance at December 31, 2003	$	(269	)	$	(551	)	$	(820	)
Reclassification to earnings		269			(115	)		154
Change in value		—			(2,343	)		(2,343	)
Balance at September 30, 2004	$	—		$	(3,009	)	$	(3,009	)

9

Note 6 – Long-Term Debt

Credit Agreement

     On August 3, 2004, the Company entered into a $180 million credit facility with a syndicate of financial institutions. The credit facility consists of a $140 million six-year term loan facility maturing July 30, 2010, bearing interest at a variable rate plus a margin (London Interbank Offer Rate (LIBOR) plus 325 basis points, or 7.125% at September 30, 2005) and a $40 million five-year revolving credit facility bearing interest, when drawn, at a variable rate plus a margin (LIBOR plus 225 basis points, or 6.125% at September 30, 2005) expiring July 31, 2009. The revolving credit facility includes a letter of credit facility; undrawn letters of credit issued under this facility carry an annual fee of 2.375%. The remaining unused portion of the revolving credit facility bears an annual commitment fee of 0.75%. Amortization of the term loan facility commenced in August 2004.

     As of September 30, 2005, the Company has $116.6 million outstanding under the term loan facility and undrawn letters of credit issued as surety for reclamation obligations totaling $14.1 million. These letters of credit reduce amounts available under the revolving credit facility to $25.9 million at September 30, 2005.

     The credit facility requires as prepayments 50% of the Company’s annual excess cash flow, plus any proceeds from asset sales and the issuance of debt or equity securities, subject to specified exceptions. Such prepayments are to be applied first against the term loan facility balance, and once that is reduced to zero, against any outstanding revolving credit facility balance. The Company’s term loan facility allows the Company to choose between LIBOR loans of various maturities plus a spread of 3.25% or alternate base rate loans plus a spread of 2.25%. The alternate base rate is a rate determined by the administrative agent under the terms of the credit facility, and has generally been equal to the prevailing bank prime loan rate, which was 6.75% at September 30, 2005. The alternate base rate applies only to that portion of the term loan facility in any period for which the Company has not elected to use LIBOR contracts. Substantially all the property and assets of the Company are pledged as security for the credit facility.

     In accordance with the terms of the credit facility, the Company is required to remit 25% of the net proceeds from sales of palladium received in the Norilsk Nickel transaction to prepay the Company’s term loan facility. As of September 30, 2005, $13.5 million of the Company’s long-term debt has been classified as a current liability, including approximately $12.4 million expected to be prepaid during the next twelve months out of the net proceeds from palladium sales under this arrangement. The Company’s credit facility contains a provision that defers each prepayment related to the sales of palladium received in the Norilsk Nickel transaction until the accumulated amount due reaches a specified level. The accumulated amount at September 30, 2005, of approximately $3.3 million is included on the Company’s consolidated balance sheet as a current liability in the portion of long-term debt repayable upon liquidation of finished palladium in inventory.

     The following is a schedule of required principal payments to be made in quarterly installments on the amounts outstanding under the term loan facility at September 30, 2005, without regard to any prepayments required to be offered from sales of palladium received in the Norilsk Nickel transaction or out of excess cash flow:

	Term facility
Year ended	(in thousands )
2005 (October -December)	$	295
2006		1,181
2007		1,181
2008		1,181
2009		1,181
2010		111,612
Total	$	116,631

     Under the provisions of the credit facility, all unscheduled prepayments against the outstanding term loan balance (whether from sales of palladium received in the Norilsk Nickel transaction, out of excess cash flow, or voluntarily at Company discretion) are applied pro rata to reduce the amount of each future scheduled prepayment in the table above.

     The Company is in compliance with its covenants under the credit facility at September 30, 2005.

10

Note 7 – Earnings per Share

     Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with the provisions of SFAS No. 128,Earnings per Share, antidilutive securities are excluded in computing diluted earnings per share. No adjustments were made to reported net income in the computation of earnings per share for the three- and nine-month periods ended September 30, 2005 and 2004.

     All stock options (1,517,681 options) and all restricted stock (584,420 shares) were antidilutive for the three months and nine months ended September 30, 2005, because the Company reported a net loss for the respective periods and inclusion of any of these options and shares would have reduced the net loss per share.

     Outstanding options to purchase 1,736,727 shares of common stock were excluded from the computation of diluted earnings per share for the three-month period ended September 30, 2004, because the effect would have been antidilutive using the treasury stock method as the exercise price of the options was greater than the average market price of the common shares. All outstanding stock options were antidilutive for the three month period ended September 30, 2004, because the Company reported a net loss in the period. Similarly, outstanding options to purchase 1,671,381 shares of common stock were excluded from the computation of diluted earnings per share for the nine-month period ended September 30, 2004, because the effect would have been antidilutive using the treasury stock method since the exercise price of the options was greater than the average market price of the common shares. The effect of outstanding stock options on diluted weighted average shares outstanding was an increase of 65,346 shares for the nine-month period ended September 30, 2004.

     On May 3, 2005, 10,904 shares of restricted stock were granted to the non-management directors serving on the Company’s Board of Directors. These shares of restricted stock will vest on November 2, 2005. On May 3, 2005, 225,346 shares of restricted stock were granted to members of management. These shares of restricted stock are scheduled to vest on May 2, 2008. On April 29, 2004, the Company granted 6,816 shares of restricted stock to non-management directors; these shares vested on October 29, 2004. On May 7, 2004, the Company granted 348,170 shares of restricted stock to certain members of management; these shares will vest on May 7, 2007. All outstanding restricted stock was antidilutive for the three month period ended September 30, 2004, because the Company reported a net loss for the period. The effect of outstanding restricted stock on diluted weighted average shares outstanding was an increase of 190,648 shares for the nine-month period ended September 30, 2004. There is no effect for 2005 because the Company reported a net loss for the third quarter and first nine months of 2005 and inclusion of any of these shares would have reduced the net loss per share.

Note 8 – Long-Term Sales Contracts

Mine Production:

     The Company has entered into three long-term sales contracts with its customers that contain guaranteed floor and ceiling prices for metals delivered, expiring in 2006, 2007 and 2010. Under these long-term contracts, the Company has committed 80% to 100% of its mined palladium production and 70% to 80% of its mined platinum production annually through 2010. Metal sales are priced at a small volume discount to market, subject to floor and ceiling prices. The Company’s remaining production is not committed under these contracts.

     The following table summarizes the floor and ceiling price structures for the three Platinum Group Metals (“PGM”) long-term sales contracts related to mine production. The first two columns for each commodity represent the percent of total mine production that is subject to floor prices and the weighted average floor price per ounce.

     The second two columns for each commodity represent the percent of total mine production that is subject to ceiling prices and the weighted average ceiling price per ounce.

	PALLADIUM										PLATINUM
	Subject to					Subject to					Subject to					Subject to
	Floor Prices					Ceiling Prices					Floor Prices					Ceiling Prices
	% of Mine			Avg. Floor		% of Mine			Avg. Ceiling		% of Mine			Avg. Floor		% of Mine			Avg. Ceiling
Year	Production			Price		Production			Price		Production			Price		Production			Price
2005		100	%	$	355		31	%	$	702		80	%	$	425		16	%	$	856
2006		100	%	$	339		29	%	$	721		80	%	$	425		16	%	$	856
2007		100	%	$	344		17	%	$	975		70	%	$	425		14	%	$	850
2008		80	%	$	385		20	%	$	975		70	%	$	425		14	%	$	850
2009		80	%	$	380		20	%	$	975		70	%	$	425		14	%	$	850
2010		80	%	$	375		20	%	$	975		70	%	$	425		14	%	$	850

Palladium acquired in connection with the Norilsk Nickel transaction and other activities:

     The Company entered into three sales agreements during the first quarter of 2004 to sell the palladium received in the transaction with Norilsk Nickel. Under these agreements, the Company is selling approximately 36,500 ounces of palladium per month at a slight volume discount to market prices. At this sales rate, the palladium received in the Norilsk Nickel transaction will all have been sold by the end of the first quarter of 2006. Under one of these sales agreements, the Company also sells 3,250 ounces of platinum and 1,900 ounces of rhodium per month at a slight volume discount to market price. At its discretion, the Company may elect to purchase metal in the open market to meet these sales commitments rather than supplying the metal from inventory. During the three months and nine months ending September 30, 2005, the Company supplied approximately 4,200 and 20,000 ounces of rhodium and 3,800 and 9,400 ounces of platinum, respectively, of these commitments through open market purchases.

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Note 9 – Financial Instruments

     The Company from time to time uses various derivative financial instruments to manage the Company’s exposure to interest rates and market prices associated with changes in palladium, platinum and rhodium commodity prices. Because the Company hedges only with instruments that have a high correlation with the value of the underlying exposures, changes in the fair value of each derivative are expected to be offset by changes in the value of the corresponding hedged transaction.

Commodity Derivatives

     The Company enters into fixed forward and financially-settled forward contracts accounted for as cash-flow hedges that hedge price risk in the Company’s PGM recycling activity and mine production. In the fixed forward transactions, metals contained in the spent catalytic materials are normally sold forward at the time the material is received for processing and subsequently are delivered against the fixed forward contracts when the finished ounces are recovered. Financially-settled forwards are used as a mechanism to hedge against fluctuations in metal prices associated with future mine production. Under financially-settled forwards, at each settlement date the Company receives the difference between the forward price and the market price if the market price is below the forward price, and the Company pays the difference between the forward price and the market price if the market price is above the forward price. The Company’s financially-settled forwards are settled in cash at maturity.

     As of September 30, 2005, the Company was party to financially-settled forward agreements covering overall approximately 45% of its anticipated platinum sales from mine production from October 2005 through June 2008. These transactions are designed to hedge a total of 177,100 ounces of platinum sales from mine production for the next thirty-three months at an overall average price of approximately $848 per ounce. The unrealized loss on financially-settled forwards on mine production due to changes in metals prices at September 30, 2005, was approximately $14.8 million.

     As of September 30, 2005, the Company was party to fixed forward agreements, which settle at various periods through January 2006, on metals to be recovered through the Company’s PGM recycling activities. The unrealized loss on these instruments due to changes in metal prices at September 30, 2005, was $1.3 million.

     Until these forward contracts mature, any net change in the value of the hedging instrument due to changes in metal prices is reflected in stockholders’ equity in accumulated other comprehensive income. A net unrealized loss of $16.1 million on these hedging instruments, existing at September 30, 2005, is reflected in accumulated other comprehensive income (See Note 5). When these instruments are settled, any remaining gain or loss on the cash flow hedges will be offset by losses or gains on the future metal sales and will be recognized at that time in operating income. All commodity instruments outstanding at September 30, 2005, are expected to be settled within the next thirty-three months.

     A summary of the Company’s derivative financial instruments as of September 30, 2005, is as follows:

Mine Production:

Financially Settled Forwards

	Platinum		Average
	Ounces		Price		Index
Fourth Quarter 2005		23,200	$	801	Monthly London PM Average
First Quarter 2006		24,900	$	820	Monthly London PM Average
Second Quarter 2006		25,500	$	823	Monthly London PM Average
Third Quarter 2006		26,500	$	838	Monthly London PM Average
Fourth Quarter 2006		21,000	$	862	Monthly London PM Average
First Quarter 2007		19,000	$	872	Monthly London PM Average
Second Quarter 2007		14,000	$	890	Monthly London PM Average
Third Quarter 2007		12,000	$	913	Monthly London PM Average
Fourth Quarter 2007		5,000	$	907	Monthly London PM Average
First Quarter 2008		3,000	$	893	Monthly London PM Average
Second Quarter 2008		3,000	$	909	Monthly London PM Average

PGM Recycling:
Fixed Forwards

	Platinum		Average		Palladium		Average		Rhodium		Average
	Ounces		Price		Ounces		Price		Ounces		Price
Fourth Quarter 2005		15,064	$	897		5,376	$	186		1,780	$	1,911
First Quarter 2006		3,285	$	920		—		—		—		—

Interest Rate Derivatives

     The Company entered into two identical interest rate swap agreements fixing the interest rate on $100.0 million of the Company’s debt, which were effective March 4, 2002, and matured on March 4, 2004. These interest rate swap agreements were accounted for as a cash flow hedge. During the nine months ended September 30, 2004, a hedging loss of $0.3 million was recognized in interest expense. The Company had no interest rate derivatives outstanding at September 30, 2005, or September 30, 2004.

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Note 10 – Income Taxes

     The Company computes income taxes using the asset and liability approach as defined in SFAS No. 109,Accounting for Income Taxes, which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of those assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. At September 30, 2005, the Company has net operating loss carryforwards (NOL’s), which expire in 2009 through 2024. The Company has reviewed its net deferred tax assets and has provided a valuation allowance to reflect the estimated amount of net deferred tax assets which the Company considers more likely than not will not be realized. Except for statutory minimum payments required under certain state tax laws, the Company has not recognized any income tax provision or benefit for the three- and nine -month periods ended September 30, 2005, and 2004, as any changes in the net deferred tax assets and liabilities have been offset by a corresponding change in the valuation allowance.

Note 11 – Segment Information

     The Company operates two reportable business segments: Mine Production and PGM Recycling. These segments are managed separately based on fundamental differences in their operations. The Mine Production segment consists of two business components: the Stillwater Mine and the East Boulder Mine. The Mine Production segment is engaged in the development, extraction, processing and refining of PGMs. The Company sells PGMs from mine production under long-term sales contracts, through derivative financial instruments and in open PGM markets. The Stillwater Mine and East Boulder Mine have been aggregated, as both have similar products, processes, customers, distribution methods and economic characteristics. The PGM Recycling segment is engaged in the recycling of spent catalytic materials to recover the PGMs contained in those materials. The Company allocates the costs of the smelter and base metals refinery to both the Mine Production segment and to the PGM Recycling segment for internal and segment reporting purposes because the Company’s smelting and refining facilities support the PGM extraction activities of both business segments.

     The All Other group primarily consists of total assets, revenues and costs associated with the palladium received in the Norilsk Nickel transaction, along with assets and costs of other corporate and support functions.

     The Company evaluates performance and allocates resources based on income or loss before income taxes and the cumulative effect of accounting changes.

     The following financial information relates to the Company’s segments:

(in thousands )	Mine			PGM		All
As of and for the three months ended September 30, 2005	Production			Recycling		Other			Total
Revenues	$	62,996		$	24,025	$	32,097		$	119,118
Depreciation and amortization	$	19,353		$	14	$	—		$	19,367
Interest income	$	—		$	325	$	950		$	1,275
Interest expense	$	—		$	—	$	3,041		$	3,041
Income (loss) before income taxes and cumulative effect of change in accounting	$	(5,706	)	$	1,784	$	(5,182	)	$	(9,104	)
Capital expenditures	$	26,565		$	—	$	—		$	26,565
Total assets	$	478,766		$	21,994	$	224,662		$	725,422

(in thousands )	Mine		PGM		All
As of and for the three months ended September 30, 2004	Production		Recycling		Other			Total
Revenues	$	88,034	$	23,824	$	32,707		$	144,565
Depreciation and amortization	$	13,635	$	12	$	—		$	13,647
Interest income	$	—	$	315	$	173		$	488
Interest expense	$	—	$	—	$	7,875		$	7,875
Income before income taxes and cumulative effect of change in accounting	$	8,993	$	2,065	$	(11,999	)	$	(941	)
Capital expenditures	$	20,855	$	50	$	—		$	20,905
Total assets	$	467,417	$	19,003	$	252,781		$	739,201

(in thousands )	Mine			PGM		All
As of and for the nine months ended September 30, 2005	Production			Recycling		Other			Total
Revenues	$	203,030		$	65,983	$	102,919		$	371,932
Depreciation and amortization	$	60,094		$	41	$	—		$	60,135
Interest income	$	—		$	818	$	2,650		$	3,468
Interest expense	$	—		$	—	$	8,719		$	8,719
Income (loss) before income taxes and cumulative effect of change in accounting	$	(1,960	)	$	4,888	$	(13,854	)	$	(10,926	)
Capital expenditures	$	66,758		$	29	$	—		$	66,787
Total assets	$	478,766		$	21,994	$	224,662		$	725,422

(in thousands )	Mine		PGM		All
As of and for the nine months ended September 30, 2004	Production		Recycling		Other			Total
Revenues	$	204,681	$	52,010	$	72,774		$	329,465
Depreciation and amortization	$	43,541	$	35	$	—		$	43,576
Interest income	$	—	$	774	$	385		$	1,159
Interest expense	$	—	$	—	$	15,137		$	15,137
Income (loss) before income taxes and cumulative effect of change in accounting	$	28,860	$	4,543	$	(12,980	)	$	20,423
Capital expenditures	$	55,722	$	75	$	—		$	55,797
Total assets	$	467,417	$	19,003	$	252,781		$	739,201

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Note 12 – Contingency

     Until recently, new federal regulations were scheduled to take effect on January 20, 2006, that would tighten the maximum permissible diesel particulate matter (DPM) exposure limit for underground miners from the current level of 308mg/m3 of elemental carbon to a new limit of 160mg/m3 of total carbon. Appropriate measurement methods and emission control technologies do not yet exist that would ensure operational compliance in the Company’s mining environment with this new standard. The Company, along with other companies in the mining industry, is aggressively exploring existing technologies to reduce DPM exposures to the lowest levels currently achievable and is actively working with the Mine Safety and Health Administration (MSHA), the National Institute for Occupational Safety and Health and mining industry workgroups to share best practices and consider compliance alternatives. Recognizing the feasibility issues with the new standard, on September 7, 2005, MSHA published in the Federal Register a proposed rule that would revise the effective date for implementing the 160mg/m3 of total carbon DPM final concentration limit, phasing it in progressively over an additional five years. To allow sufficient time for public comment on the proposed rule, on September 15, 2005, MSHA extended the January 20, 2006, implementation date in the existing rule to May 20, 2006. The Company does not expect to be in compliance with the 160mg/m3 of total carbon limit under the currently existing rule at May 20, 2006, and supports the five-year phase-in proposal to allow time for developing new compliance technology in this area. While the Company believes that the proposed 5-year phase-in rule is likely to be adopted in some form and that MSHA will defer enforcement of the new standard until this issue is clarified, at this time there is no formal assurance that after May 20, 2006, the Company will not be held in violation of the 160mg/m3 total carbon standard. MSHA has statutory authority to issue citations for non-compliance and, in situations where it determines that the health and safety of miners is at significant risk, to order cessation of mining operations until the risk is alleviated.

Item 2. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations

     The following commentary provides management’s perspective and analysis regarding the financial and operating performance of Stillwater Mining Company (the “Company”) for the three and nine month periods ended September 30, 2005. It consists of the following subsections:

• “Overview”– a brief summary of the primary financial position, the primary factors affecting the Company’s results.

• “Key Factors”– indicators of profitability and efficiency at the Company’s various operations individually and, where relevant, on a consolidated basis.

• “Results of Operations”– a discussion and analysis of the specific operating and financial results for the three and nine months ended September 30, 2005, as compared to the same periods in 2004.

• “Liquidity and Capital Resources”– a discussion of the Company’s cash flow and liquidity, investing and financing activities, and significant contractual obligations.

• “Critical Accounting Policies”– a review of accounting policies the Company considers critical because they involve assumptions that could have a material effect on the Company’s reported assets, liabilities, income or cash flow and that require difficult, subjective or complex judgments by management.

     These items should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in this quarterly report and in the Company’s 2004 Annual Report on Form 10-K.

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Overview

     Stillwater Mining Company mines, processes, refines and markets palladium, platinum and minor amounts of other metals from the J-M Reef, an extensive trend of Platinum Group Metal (PGM) mineralization located in Stillwater and Sweet Grass Counties in south central Montana. The Company operates two mines: Stillwater and East Boulder, within the J-M Reef, each with substantial underground operations and a surface mill and concentrator. Concentrates produced at the two mines are shipped to the Company’s smelter and base metals refinery at Columbus, Montana, where they are further processed into a PGM filter cake that is sent to third-party refiners for final processing. Substantially all finished platinum and palladium produced from mining is sold under contracts with three major automotive manufacturers for use in automotive catalytic converters. The Company also recycles spent catalyst material to recover PGMs through its processing facilities in Columbus, Montana.

     Two factors heavily influence the Company’s profitability: the volatility of PGM prices and the Company’s cost structure. Metal prices are dictated by market forces and so are beyond the direct control of the Company, although market effects can be mitigated through long-term sales agreements and at times through hedging activities. Although Stillwater is the only primary producer of PGMs in the United States, several international mining companies either produce PGMs as a byproduct of other refining or enjoy ores with a substantially higher proportion of the historically higher-priced platinum over palladium. The Company does not enjoy these advantages and has a higher cost structure than many of its competitors. The level of ore production generally affects the Company’s unit costs, and is driven by the consistency and quality of the ore mined, by the mining method used, and by overall operating efficiency. The Company spends substantial amounts of development capital each year in the mines to sustain ongoing production. In view of these challenges, minimizing unit operating costs in a safe and efficient manner continues to be the principal operating focus of the Company.

     The market price of palladium has remained at low levels since 2003, which has resulted in reduced revenues and profitability for the Company. The Company has benefited from its long-term sales contracts with auto manufacturers and from the sale of palladium received in the transaction with Norilsk Nickel, both of which are discussed below. The long term sales contracts include floor prices, which have allowed the Company to sell its palladium above the current market price (see Note 8 to the Company’s consolidated financial statements); sales of the palladium consideration received from Norilsk Nickel has also generated profits and cash flow for the Company. The Company foresees the end of these benefits with the conclusion of the sale of the Norilsk Nickel palladium in the first quarter of 2006 and with the expiration of the auto contracts by the end of 2010. Following these events, the Company expects that it will be fully exposed to market prices. While the Company hopes that the market price for palladium will increase, the future price of palladium is uncertain and beyond the Company’s control. The Company is concerned that if prices remain at or below current low levels, its future revenues, profitability and cash flow will increasingly suffer. The Company is reviewing its operating plan and expenditures with these concerns in mind.

     In 1998, the Company entered into long-term sales contracts with each of Ford, General Motors and Mitsubishi that commit most of the Company’s mined platinum and palladium production through 2010. While two of these contracts will expire before 2010, the terms of the third contract provide for it to absorb most of the production made available by the expiring agreements. During the third quarter of 2005, the major U.S. bond rating agencies downgraded the corporate ratings of General Motors Corporation and Ford Motor Company, two of the customers pursuant to the Company’s long-term sales contracts. As a result, the debt of these companies no longer qualifies as investment grade. The Company’s business is substantially dependent on its contracts with Ford and General Motors, particularly because the price under these contracts is significantly greater than the current market price of palladium. Under applicable law, these contracts may be void or voidable if General Motors or Ford becomes insolvent or files for bankruptcy. The loss of either of these contracts could require the Company to sell at prevailing market prices, which might expose it to lower metal prices as compared to the floor prices under the contracts. In addition, under the Company’s credit facility, a default by Ford or General Motors or the termination of these contracts could prohibit additional loans or require the immediate repayment of outstanding loans. Thus, termination of these contracts could have a material adverse impact on the Company.

     In February 2004, the Company entered into three sales agreements to sell the 877,169 ounces of finished palladium that it received in June 2003 as partial payment for a purchase of Company shares by Norilsk Nickel. These palladium sales are taking place ratably over a two-year period that will conclude in the first quarter of 2006. As of September 30, 2005, the Company had sold in total approximately 704,000 of the ounces received from Norilsk Nickel. During the three- and nine-month periods ended September 30, 2005, the Company recognized $20.2 million and $61.3 million, respectively, in revenues from the sale of approximately 110,000 and 329,000 ounces, respectively, of this palladium. For the comparable three- and nine-month periods in 2004, the Company realized revenues from sales of this palladium totaling $23.4 million and $63.5 million, respectively.

15

     The Company reported a net loss of $9.1 million or $(0.10) per diluted share for the third quarter of 2005, compared to a net loss of $0.9 million or $(.01) per diluted share for the third quarter of 2004. The increased loss in the 2005 third quarter was primarily driven by reduced production during the quarter at the Stillwater Mine, mostly the result of seasonally reduced manpower availability during July 2005 and August 2005 and to a lesser extent to the limited availability of certain work areas. The Company’s operations depend significantly on the availability of qualified miners and the Company must compete for individuals skilled in the operation and development of mining properties. The number of such persons is limited, and significant competition exists to obtain their skills. The reduced manpower availability resulted in lower production during July 2005 and August 2005, and therefore increased cost per ounce, leading to an inventory writedown of $1.4 million in the third quarter. Availability of manpower had improved by the end of the quarter. The 2005 third quarter also included somewhat higher depreciation and depletion expense, reflecting additional capital placed in service during 2005. The third quarter of 2004 included the effects of a ten-day work stoppage at the Stillwater Mine, $5.2 million in costs related to a refinancing, and the $2.1 million write-off of a tunnel boring machine; however, these costs were largely offset by higher realizations on sales of palladium received in the Norilsk Nickel transaction and by much higher sales volumes as the Company worked down the ore inventories stockpiled during the second-quarter 2004 smelter refurbishment.

     The Company reported a net loss of $10.9 million, or $(0.12) per diluted share in the first nine months of 2005, compared to net income of $26.5 million, or $0.29 per diluted share in the first nine months 2004. The year-to-date 2005 net loss reflects higher non-cash depreciation and amortization expense primarily due to capital development placed in service during 2005. Results for the nine-month period ended September 30, 2004, include the benefit of approximately $6.0 million related to the cumulative effect of the change in accounting method with regard to depreciation and amortization (see Note 4 to the Company’s consolidated financial statements). Other factors influencing net income for the nine-month periods include slightly lower production from the Stillwater Mine in 2005, and during 2004 the effects of a ten-day work stoppage, $5.2 million of costs related to a refinancing, and a $2.1 million write-off of a tunnel boring machine. The effect in 2005 of lower palladium prices on sales of metal received in the Norilsk Nickel transaction, as compared to 2004, has been largely offset in the first nine months by higher total volume sold. The Company generated positive cash flow during the first nine months of 2005 and had cash and cash equivalents of $108.1 million at September 30, 2005, up from $96.1 million at year end 2004. If highly liquid short-term investments available for sale at December 31, 2004, are included, the Company’s liquidity increased by $28.1 million during the first nine months of 2005 to $137.3 million of liquidity at September 30, 2005, from $109.2 million as of December 31, 2004.

     The Company’s primary activities during 2005 and 2004 consist of mine production, recycling of PGM catalysts, and the sale of palladium received in the 2003 Norilsk Nickel transaction.

Mine Production

     The Company’s production of palladium and platinum is driven by ore tons mined, grade of the ore and metallurgical recovery. The Company reports net mine production as ounces contained in the mill concentrate, adjusted for processing losses expected to be incurred in smelting and refining. The Company considers an ounce of metal “produced” at the time it is shipped from the mine site. Depreciation and amortization costs are inventoried at each stage of production.

     The Company has adopted a series of operational initiatives designed to improve the Company’s operations, to enable it to operate more effectively as the expiration of its long-term sales contracts in 2010 approaches. The following initiatives are designed to reduce unit production costs and increase total mine production:

• Improve the safety performance of the Company’s operations by implementing a formal safety program with detailed task analysis and inter-site audits, providing strong management emphasis. This program began in 2001, and the Company has seen improvement in its safety during the past eighteen months. The Company’s year-to-date incident rate has declined to 3.4, compared to 5.0 in 2004, continuing an improving trend from previous years.

• Increase the developed state of the Company’s mines through accelerated investment in underground infrastructure, targeting three to four years of proven reserves at each location, to allow for adequate mine planning in advance of production. The Company has undertaken an aggressive capital program during 2005, which will extend into 2006, in support of this objective. Current infrastructure efforts include expanded rail and addition of a sand plant in the upper west area of the Stillwater Mine, and expanding tailings capacity and adding new ventilation raises at East Boulder.

• Utilize more selective mining methods to reduce the total volume of waste rock mined during secondary development and ore extraction. Apply alternate technologies and mining methods to best suit each mining area. This initiative is designed to reduce the total volume of material processed and increase the effective ore grade. During 2005, the Company has acquired several Alimak units to facilitate this change and has begun accelerating training programs to increase the number of qualified miners available and to broaden mining skills.

• Based upon realization of the above initiatives and to enable operations to realize improved economies of scale, increase production rates toward permitted capacity at each location. Design and permit capacity limits will accommodate increasing production from the current level to about 2,750 tons per day at the Stillwater Mine and from 1,300 tons per day to 2,000 tons per day at the East Boulder Mine.

16

     Ore production at the Stillwater Mine averaged 1,740 and 1,957 tons of ore per day during the third quarter and the first nine months of 2005, respectively, a 13% decrease and 2% decrease from the 1,995 tons of ore per day averaged during 2004, reflecting a focus in 2005 on improving the developed state of the Stillwater Mine rather than on expanded production. As noted above, production at the Stillwater Mine also suffered from seasonally reduced manpower availability during the third quarter of 2005.

     At the East Boulder Mine, development of the new ventilation raises has progressed more slowly than planned, with the first raise likely to be completed during the fourth quarter of 2005 and the second raise during the second half of 2006. In the meantime, the Company is utilizing the delay to expand the developed state of the mine and to implement more selective mining methods at East Boulder. The rate of ore production at the East Boulder Mine averaged 1,310 and 1,302 tons of ore per day during the third quarter and the first nine months of 2005, respectively, a decrease of 1% and 2% from the 1,326 tons of ore per day averaged during 2004. In 2005, some of the productive capacity of the mine has been diverted into mine development efforts that are expected to improve productivity and reduce unit costs over the longer term.

     The grade of the Company’s ore reserves, measured in combined platinum and palladium ounces per ton, is a composite average of samples in all ore reserve areas. As is common in underground mines, the grade of ore mined and the recovery rate realized varies from area to area. In particular, mill head grade varies significantly between the Stillwater and East Boulder mines, as well as within different areas of each mine. For the three month and nine month periods ended September 30, 2005, the average mill head grade for all tons processed from the Stillwater Mine was 0.50 and 0.53 PGM ounces per ton of ore, respectively, each a 7% decrease, from the same periods in 2004. For the three month and nine month periods ended September 30, 2005, the average mill head grade for all tons processed from the East Boulder Mine was 0.42 and 0.39 PGM ounces per ton of ore, respectively, a 4% decrease and 0% change, respectively, from the grade for the same periods in 2004.

     During the three- and nine-month periods ended September 30, 2005, the Company’s mining operations produced a total of 127,682 and 410,763 ounces of PGM, respectively, slightly below the 2005 plan in each period. For the full year 2005, the Company expects total mine production of between 550,000 and 570,000 PGM ounces.

     As a result of the need to improve the developed state of the mines, the Company has increased development spending in 2005 at both mines. For the third quarter of 2005, primary development totaled 9,605 feet at the Stillwater Mine and 4,128 feet at the East Boulder Mine. These numbers represent 38% and 11% increases from the average quarterly feet of advance in 2004, respectively. Management believes this investment in mine development during 2005 will result in more efficient and productive mining operations over the longer term. Capital spending requirements are expected to decline following completion of the expanded 2005-2006 development program.

     The Company shut down its smelting and refining facilities in Columbus, Montana for approximately five weeks during the second quarter of 2004 for rebricking of the smelter furnace and other refurbishment. Production at the mines was not interrupted during the shutdown, but mill concentrates were stockpiled until the Columbus facilities came back on line. As a result, final processing of a substantial portion of second-quarter 2004 mine output was shifted into the third and fourth quarters of 2004, affecting 2004 quarterly financial and operating results.

     A new three-year labor agreement covering represented employees at the Company’s East Boulder facility has been ratified by the union membership. The new agreement took effect on July 10, 2005, extends until July 1, 2008, and provides for 3% wage increases in each year of the agreement. The corresponding labor agreement covering the Company’s represented employees at the Stillwater Mine and the Columbus metal processing facilities expired on June 30, 2004. In July of 2004, following a ten-day labor action, a new three-year contract was ratified. That agreement also provides for 3% annual wage increases and is scheduled to expire on July 1, 2007.

     Under MSHA regulations originally issued in 2001 and recently amended, the DPM exposure limit for underground miners is scheduled to decrease from the current 308mg/m3 of elemental carbon to a new limit of 160mg/m3 of total carbon, effective May 20, 2006 (see Note 12 to the Company’s consolidated financial statements). Despite significant efforts by the mining industry working cooperatively with MSHA and other organizations, it does not appear that this new DPM limit is achievable operationally with today’s technology. On September 7, 2005, MSHA published a proposed rule that would revise the effective date for implementing the 160mg/m3 of total carbon DPM final concentration limit, phasing it in progressively over an additional five years. This proposed rule is currently in the public comment period. The Company supports the proposed five-year phase in. As general emissions controls are imposed in the U.S. on all diesel engines effective at the beginning of 2007, the Company believes it is likely that cost-effective new DPM control technologies will emerge that will make the lower DPM limits achievable in underground mines.

17

PGM Recycling

     The Company recycles and processes PGMs contained in spent catalytic converter materials through its metallurgical complex. A sampling facility for the recycled materials is used to crush and sample spent catalysts prior to their being blended for smelting in the electric furnace. The spent catalytic material is sourced by third parties, primarily from automobile repair shops and automobile yards that disassemble old cars for the recycling of their parts.

     The Company has been processing small spot shipments of spent catalysts since 1997. In October 2003, the Company entered into a metal sourcing agreement with a major supplier under which the Company contractually purchases spent catalytic materials for recycling. The Company amended this agreement in June 2005 to facilitate an increase in the volume of material available for recycling. While the commercial terms of this agreement are confidential, in the event of a change in business circumstances, the Company can terminate the agreement upon ninety days’ notice. In addition to volumes under this supply agreement, the Company from time to time accepts certain other shipments of catalytic material for processing, both for its own account and on a tolling basis.

     PGM recycling allows the Company to utilize surplus capacity in its processing and refining facilities. During the three- and nine-month periods ended September 30, 2005, the Company processed spent catalytic materials at a rate of about 7.4 and 8.8 tons per day, respectively. Revenues from PGM recycling were $24.0 million and $66.0 million for the three- and nine-month periods ended September 30, 2005, respectively, compared to $23.8 million and $52.0 million in the corresponding periods of 2004.

Ore Reserves

     The Company updates its proven and probable ore reserves annually, following the guidelines for ore reserve determination contained in the SEC’s Industry Guide No. 7. Ore reserves are modeled from a long-term mine plan and are based on the twelve-quarter rolling average market price for each final product, adjusted for specific contractual arrangements and other externalities. Ore may be classified as proven or probable and reported as reserves in the Company’s financial statements and other public filings only if extraction and sale results in positive cumulative, undiscounted cash flow.

     In the Company’s 2004 Annual Report on Form 10-K, the Company included a chart illustrating the sensitivity of the Company’s proven and probable reserves to the combined long-term average price for palladium and platinum. As shown in the chart, based on information available at December 31, 2004, at a combined long-term average price below approximately $342 per ounce, the ore reserves begin to be constrained by economics and a reduction in reported ore reserves may become necessary. At December 31, 2004, the twelve-quarter trailing average price for palladium and platinum that is used in the Company’s reserve determinations was $357 per ounce. As of September 30, 2005, the Company’s combined twelve-quarter rolling average price had declined to about $346 per ounce, still above the threshold for economic constraint but reflecting a downward drift in palladium prices during the first nine months of the year. If combined PGM prices were to continue to decline and the 2004 economic model remains unchanged, the Company believes that an economic adjustment to ore reserves might be required as early as the end of 2005.

     At December 31, 2003, when the Company last incurred a reserve writedown, it also triggered an impairment analysis under SFAS 144,Accounting for the Impairment or Disposal of Long-Lived Assets, that resulted in a substantial adjustment to the Company’s assets. Because of the significant time and expense involved in the process, the Company normally updates its ore reserves annually at year-end. Consequently, at this time the Company is unable to predict whether or not any economic adjustment to ore reserves at December 31, 2005, will be required, nor if it were to be required, whether it would result in any further adjustment to the carrying value of the Company’s assets.

Other Matters

     As of September 30, 2005, the Company has secured platinum prices in the forward market by entering into financially-settled forward transactions covering approximately 45% of the Company’s anticipated platinum mine production for delivery during the period from October 2005 through June 2008. The Company believes that the current wide spread between palladium and platinum prices may narrow if consumers, driven by unusually high platinum prices, switch from using platinum to palladium for existing and new applications. The Company notes that the price of platinum could weaken if this switching occurs and so has entered into derivative contracts on a portion of future sales. At September 30, 2005, the Company has open financially-settled forward contracts covering a total of 177,100 ounces of platinum at an overall average price of about $848 per ounce. The hedges are expected to modestly reduce the overall future volatility of the Company’s earnings and cash flow. Under these hedging arrangements, in return for protection against downward movements in the platinum price, the Company gives up the benefit of increases in the platinum price on the hedged ounces. The Company realized losses on financially-settled forward sales of its mined platinum during the three and nine months ended September 30, 2005 of $2.0 million and $4.4 million, respectively.

     Effective May 3, 2005, the Company’s Board of Directors implemented the Stillwater Mining Company Non-Employee Directors’ Deferral Plan, which allows non-employee members of the Board of Directors to defer all or any portion of their director compensation, in accordance with the provisions of Section 409A of the Internal Revenue Code and associated Treasury regulations. The plan permits the deferral of cash or stock compensation and provides a 20% match for any cash compensation deferred into the Company’s common stock. At September 30, 2005, two members of the Board of Directors have elected to defer a portion of their cash compensation under the plan and six have elected to defer restricted stock compensation (see Note 3 to the Company’s consolidated financial statements).

     The Company’s mining properties are subject to certain royalty agreements, under which the Company pays a net smelter royalty to the royalty holders based on the value of metals produced. Late in the third quarter, the Company and one of its royalty owners entered into discussions regarding updating the method of computing royalties. These discussions are ongoing. The Company does not expect the outcome of these discussions to result in any material effect on its financial performance.

18

Stillwater Mining Company
Key Factors
(Unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2005		2004		2005		2004
OPERATING AND COST DATA FOR MINE PRODUCTION
Consolidated :
Ounces produced (000)
Palladium		99		93		317		321
Platinum		29		28		94		95
Total		128		121		411		416
Tons milled (000)		281		271		889		887
Mill head grade (ounce per ton)		0.49		0.49		0.50		0.51
Sub-grade tons milled (000)(1)		22		16		59		42
Sub-grade tons mill head grade (ounce per ton)		0.15		0.18		0.16		0.22
Total tons milled (000)(1)		303		287		948		929
Combined mill head grade (ounce per ton)		0.47		0.47		0.48		0.50
Total mill recovery (%)		91		90		91		91
Total operating costs (000) (Non-GAAP)(2)	$	35,635	$	35,386	$	112,450	$	104,788
Total cash costs (000) (Non-GAAP)(2)	$	42,016	$	42,731	$	132,015	$	123,778
Total production costs (000) (Non-GAAP)(2)	$	61,520	$	56,460	$	192,490	$	167,596
Total operating costs per ounce (Non-GAAP)(3)	$	279	$	293	$	274	$	252
Total cash costs per ounce (Non-GAAP)(3)	$	329	$	354	$	321	$	297
Total production costs per ounce (Non-GAAP)(3)	$	482	$	468	$	469	$	403
Total operating costs per ton milled (Non-GAAP)(3)	$	118	$	123	$	119	$	113
Total cash costs per ton milled (Non-GAAP)(3)	$	139	$	149	$	139	$	133
Total production costs per ton milled (Non-GAAP)(3)	$	203	$	197	$	203	$	180
Stillwater Mine :
Ounces produced (000)
Palladium		64		61		221		225
Platinum		19		19		67		68
Total		83		80		288		293
Tons milled (000)		160		145		534		526
Mill head grade (ounce per ton)		0.55		0.58		0.57		0.59
Sub-grade tons milled (000)(1)		22		16		59		42
Sub-grade tons mill head grade (ounce per ton)		0.15		0.18		0.16		0.22
Total tons milled (000)(1)		182		161		593		568
Combined mill head grade (ounce per ton)		0.50		0.54		0.53		0.57
Total mill recovery (%)		92		92		92		92
Total operating costs (000) (Non-GAAP)(2)	$	22,871	$	22,263	$	75,715	$	69,574
Total cash costs (000) (Non-GAAP)(2)	$	27,107	$	27,064	$	88,978	$	82,182
Total production costs (000) (Non-GAAP)(2)	$	39,230	$	34,694	$	128,397	$	108,159
Total operating costs per ounce (Non-GAAP)(3)	$	274	$	281	$	263	$	237
Total cash costs per ounce (Non-GAAP)(3)	$	325	$	341	$	310	$	280
Total production costs per ounce (Non-GAAP)(3)	$	470	$	437	$	447	$	369
Total operating costs per ton milled (Non-GAAP)(3)	$	126	$	138	$	128	$	123
Total cash costs per ton milled (Non-GAAP)(3)	$	149	$	168	$	150	$	145
Total production costs per ton milled (Non-GAAP)(3)	$	215	$	216	$	217	$	190

19

Stillwater Mining Company
Key Factors (continued)
(Unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2005		2004		2005		2004
OPERATING AND COST DATA FOR MINE PRODUCTION (Continued)
East Boulder Mine :
Ounces produced (000)
Palladium		35		32		96		96
Platinum		10		9		27		27
Total		45		41		123		123
Tons milled (000)		121		126		355		361
Mill head grade (ounce per ton)		0.42		0.38		0.39		0.39
Sub-grade tons milled (000)(1)		—		—		—		—
Sub-grade tons mill head grade (ounce per ton)		—		—		—		—
Total tons milled (000)(1)		121		126		355		361
Combined mill head grade (ounce per ton)		0.42		0.38		0.39		0.39
Total mill recovery (%)		89		87		89		88
Total operating costs (000) (Non-GAAP)(2)	$	12,765	$	13,123	$	36,735	$	35,214
Total cash costs (000) (Non-GAAP) (2)	$	14,910	$	15,667	$	43,036	$	41,596
Total production costs (000) (Non-GAAP)(2)	$	22,290	$	21,766	$	64,093	$	59,437
Total operating costs per ounce (Non-GAAP)(3)	$	289	$	317	$	298	$	287
Total cash costs per ounce (Non-GAAP)(3)	$	337	$	378	$	349	$	339
Total production costs per ounce (Non-GAAP)(3)	$	504	$	525	$	520	$	484
Total operating costs per(3) ton milled (Non -GAAP)	$	106	$	104	$	103	$	98
Total cash costs per ton milled (Non-GAAP) (3)	$	124	$	125	$	121	$	115
Total production costs per ton milled (Non-GAAP)(3)	$	185	$	173	$	180	$	165

(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 depreciation and amortization. Income taxes, corporate general and administrative expenses, asset impairment writedowns, 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. These measures of cost are not defined under U.S. Generally Accepted Accounting Principles (GAAP). Please see “Reconciliation of Non-GAAP Measures to Cost of Revenues” below for additional detail.
(3)	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. Please see “Reconciliation of Non-GAAP Measures to Cost of Revenues” below and the accompanying discussion.

20

Stillwater Mining Company
Key Factors (continued)
(Unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2005		2004		2005		2004
SALES AND PRICE DATA
Ounces sold (000)
Mine Production:
Palladium		102		140		332		329
Platinum		33		44		103		96
Total		135		184		435		425
Other PGM activities:
Palladium		121		121		362		292
Platinum		22		24		61		51
Rhodium		7		10		29		14
Total		150		155		452		357
Total ounces sold		285		339		887		782
Average realized price per ounce(4)
Mine Production:
Palladium	$	355	$	372	$	355	$	376
Platinum	$	820	$	819	$	824	$	842
Combined	$	468	$	478	$	467	$	482
Other PGM activities:
Palladium	$	184	$	216	$	187	$	238
Platinum	$	878	$	839	$	864	$	809
Rhodium	$	1,924	$	1,013	$	1,624	$	944
Average market price per ounce(4)
Palladium	$	187	$	216	$	189	$	237
Platinum	$	896	$	835	$	877	$	845
Combined	$	358	$	363	$	353	$	375

(4) The Company’s average realized price represents revenues, including the effect of contractual floor and ceiling prices, hedging gains and losses realized on commodity instruments, and contract discounts, all divided by total ounces sold. Prior period amounts have been adjusted to conform to the current period presentation. The average market price represents the average monthly London PM Fix for palladium, platinum and combined prices and Johnson Matthey quotation for rhodium prices for the actual months of the period.

21

Reconciliation of Non-GAAP Measures to Cost 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 of 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 cost of revenues (a GAAP measure included in the Company’s Consolidated 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 cost of revenues, they cannot meaningfully be used to develop measures of earnings or profitability. A reconciliation of these measures to cost 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 Cost of Revenues: For the Company on a consolidated basis, this measure is equal to consolidated cost of revenues, as reported in the Consolidated Statement of Operations and Comprehensive Income (Loss). For the Stillwater Mine, East Boulder Mine, and other PGM activities, the Company segregates the expenses within cost of revenues that are directly associated with each of these activities and then allocates the remaining facility costs included in consolidated cost of revenues in proportion to the monthly volumes from each activity. The resulting total cost of revenues measures for Stillwater Mine, East Boulder Mine and other PGM activities are equal in total to consolidated cost of revenues as reported in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss).

     Total Production Costs (Non-GAAP): Calculated as total cost of revenues (for each mine or consolidated) adjusted to exclude gains or losses on asset dispositions, costs and profit from PGM recycling activities, and timing differences resulting from changes in product inventories. This non-GAAP measure provides a comparative measure of the total costs incurred in association with production and processing activities in a period, and may be compared to prior periods or between the Company’s mines.

     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.

22

     Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated by excluding the depreciation and amortization and asset retirement costs from Total Production Costs (Non-GAAP) for each mine or consolidated. The Company uses this measure as a comparative indication of the cash costs related to production and processing in any period.

     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.

     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.

23

Reconciliation of Non-GAAP Measures to Cost of Revenues

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands,)	2005			2004		2005			2004
Consolidated:
Reconciliation to consolidated cost of revenues:
Total operating costs (Non-GAAP)	$	35,635		$	35,386	$	112,450		$	104,788
Royalties, taxes and other		6,381			7,345		19,565			18,990
Total cash costs (Non-GAAP)	$	42,016		$	42,731	$	132,015		$	123,778
Asset retirement costs		151			94		381			277
Depreciation and amortization		19,353			13,635		60,094			43,541
Total production costs (Non-GAAP)	$	61,520		$	56,460	$	192,490		$	167,596
Change in product inventory		35,466			48,829		103,221			58,420
Costs of PGM recycling		22,552			22,062		61,872			48,206
PGM recycling depreciation		14			12		41			35
Add: Profit from PGM recycling		1,785			2,065		4,888			4,542
(Gain) or loss on sale of assets and other costs		79			—		91			—
Total consolidated cost of revenues	$	121,416		$	129,428	$	362,603		$	278,799
Stillwater Mine:
Reconciliation to cost of revenues:
Total operating costs (Non-GAAP)	$	22,871		$	22,263	$	75,715		$	69,574
Royalties, taxes and other		4,236			4,801		13,263			12,608
Total cash costs (Non-GAAP)	$	27,107		$	27,064	$	88,978		$	82,182
Asset retirement costs		109			77		258			227
Depreciation and amortization		12,014			7,553		39,161			25,750
Total production costs (Non-GAAP)	$	39,230		$	34,694	$	128,397		$	108,159
Change in product inventory		6,799			11,735		9,808			2,435
Add: Profit from PGM recycling		1,147			1,351		3,391			3,149
(Gain) or loss on sale of assets and other costs		74			—		63			—
Total cost of revenues	$	47,250		$	47,780	$	141,659		$	113,743
East Boulder Mine:
Reconciliation to cost of revenues:
Total operating costs (Non-GAAP)	$	12,765		$	13,123	$	36,735		$	35,214
Royalties, taxes and other		2,145			2,544		6,301			6,382
Total cash costs (Non-GAAP)	$	14,910		$	15,667	$	43,036		$	41,596
Asset retirement costs		42			17		123			50
Depreciation and amortization		7,338			6,082		20,934			17,791
Total product ion costs (Non-GAAP)	$	22,290		$	21,766	$	64,093		$	59,437
Change in product inventory		(1,588	)		8,781		(2,469	)		1,248
Add: Profit from PGM recycling		638			714		1,497			1,393
(Gain) or loss on sale of assets and other costs		5			—		28			—
Total cost of revenues	$	21,345		$	31,261	$	63,149		$	62,078
Other PGM activities:
Reconciliation to cost of revenues:
Change in product inventory	$	30,255		$	28,313	$	95,882		$	54,737
PGM recycling depreciation		14			12		41			35
Costs of PGM recycling		22,552			22,062		61,872			48,206
Total cost of revenues	$	52,821		$	50,387	$	157,795		$	102,978

24

Results of Operations

     The Company reported a net loss of $9.1 million for the third quarter of 2005 compared to net loss of $0.9 million for the third quarter of 2004, an $8.2 million decrease. The increased loss in the 2005 third quarter was primarily driven by reduced production during the quarter at the Stillwater Mine, mostly the result of seasonally reduced manpower availability during July and August and to a lesser extent to the limited availability of certain work areas. The Company’s operations depend significantly on the availability of qualified miners and the Company must compete for individuals skilled in the operation and development of mining properties. The number of such persons is limited, and significant competition exists to obtain their skills. The reduced manpower availability resulted in lower production during July 2005 and August 2005, and therefore increased cost per ounce in the third quarter. During the third quarter of 2005, the Company reduced the aggregate inventory carrying value of certain of its in-process and finished goods inventories by $1.4 million to reflect costs in excess of market value (see Note 2). Poor production at the Stillwater Mine during July and August this year drove up cost per ounce in inventory to a level exceeding the Company’s expected average realization on these ounces. The Company attributes the poor production in July and August to seasonally reduced manpower availability, coupled with limited availability of certain mining areas and current strong emphasis on mine development. Management regards these third quarter issues as an anomaly, since resolved, that should not impair future mine performance.

     The 2005 third quarter also included a $5.7 million increase in depreciation and depletion expense, reflecting additional capital placed in service during 2005. The third quarter of 2004 included the effects of a ten-day work stoppage at the Stillwater Mine, $5.2 million in costs related to a refinancing, and the $2.1 million write-off of a tunnel boring machine; however, these costs were largely offset by higher realizations on sales of palladium received in the Norilsk Nickel transaction and by much higher sales volumes as the Company worked down the ore inventories stockpiled during the second-quarter 2004 smelter refurbishment.

     The Company reported a net loss of $10.9 million for the first nine months of 2005 compared to net income of $26.5 million for the same period in 2004, a $37.4 million decrease. The year-to-date 2005 net loss reflects a $16.6 million increase in non-cash depreciation and amortization expense associated with the new capital development placed in service during 2005. Results for the nine-month period ended September 30, 2004, include the benefit of the approximately $6.0 million cumulative effect of a change in the Company’s method of accounting for depreciation and amortization (see Note 4 to the Company’s consolidated financial statements). Other factors influencing net income for the nine-month periods include slightly lower production from the Stillwater Mine in 2005, and during 2004 the effects of a ten-day work stoppage, $5.2 million of costs related to a refinancing, and the $2.1 million write-off of a tunnel boring machine.

25

     Three-month period ended September 30, 2005, compared to the three-month period ended September 30, 2004

     Revenues. Revenues were $119.1 million for the third quarter of 2005 compared to $144.6 million for the same period of 2004. The following table highlights the key factors contributing to the quarter-to-quarter decrease in revenues:

	Revenues, PGM ounces sold and PGM prices
	Three months ended
	September 30,							Percentage
(in thousands)	2005		2004		Increase			Change
Revenues	$	119,118	$	144,565	$	(25,447	)		18	%
Mine Production Ounces Sold:
Palladium		102		140		(38	)		(27	%)
Platinum		33		44		(11	)		(25	%)
Total		135		184		(49	)		(27	%)
Other PGM Ounces Sold:
Palladium		121		121		—			0	%
Platinum		22		24		(2	)		(8	%)
Rhodium		7		10		(3	)		30	%
Total		150		155		(5	)		3	%
Total Ounces Sold		285		339		(54	)		16	%
Average realized price per ounce
Mine Production:
Palladium	$	355	$	372	$	(17	)		(5	%)
Platinum	$	820	$	819	$	1			0	%
Combined	$	468	$	478	$	(10	)		(2	%)
Other PGM Sales:
Palladium	$	184	$	216	$	(32	)		(15	%)
Platinum	$	878	$	839	$	39			5	%
Rhodium	$	1,924	$	1,013	$	911			90	%
Average market price per ounce
Palladium	$	187	$	216	$	(29	)		(13	%)
Platinum	$	896	$	835	$	61			7	%
Combined	$	358	$	363	$	(5	)		(1	%)

     Revenues from mine production were $63.0 million in the third quarter of 2005 and $88.0 million for the same period in 2004, a 28% decrease. This decrease in mine production revenues primarily reflects a decrease in the total ounces of metal sold of 134,700 ounces in the third quarter of 2005 compared to 184,300 ounces in the same period of 2004. Sales for the third quarter of 2004 included additional ounces produced from the ore stockpiled during the Company’s second-quarter 2004 refurbishment of the smelter and base metals refinery. The combined average realized PGM price per ounce was $468 in the third quarter of 2005, compared to $478 in the same period of 2004, a 2% decrease.

     Revenues from PGM recycling were $24.0 million in the third quarter of 2005, compared to $23.8 million for the same period in 2004. The total ounces of recycled PGMs sold declined from 35,500 ounces in the third quarter of 2004 to 32,600 ounces in the same period of 2005, again reflecting additional ounces processed following completion of the smelter shutdown during the second quarter of 2004. This decrease during 2005 in the quantity of recycled PGMs sold was largely offset, however, by higher market prices for platinum and rhodium in the third quarter of 2005 as compared to the same period of 2004.

     In addition to the sales of recycled ounces shown in the chart above, the Company also processes significant volumes of recycled materials on a tolling basis, processing materials owned by others for a fee. For the three months ended September 30, 2005, the Company processed approximately 24,600 ounces of PGMs, up from approximately 7,000 ounces in the comparable quarter of 2004.

26

     During the first quarter of 2004, the Company entered into three sales agreements providing for the Company to sell the palladium ounces received in the Norilsk Nickel transaction ratably over a two-year period. Under these agreements, the Company is selling approximately 36,500 ounces of this palladium per month, at a slight volume discount to market prices. Revenues from these three sales agreements totaled $32.1 million for the third quarter of 2005, compared to $32.7 million for the same period of 2004. Sales of approximately 110,000 ounces of palladium received in the Norilsk Nickel transaction in each of the respective periods generated $20.2 million in revenues during the third quarter of 2005, at an average realized palladium price of approximately $184 per ounce, and $23.4 million in revenues during the third quarter of 2004, at an average realized palladium price of $213 per ounce. Under one of the sales agreements, the Company also has agreed to sell 3,250 ounces of platinum and 1,900 ounces of rhodium per month, either purchased on the open market or produced from the Company’s mining operations. The Company recognized revenue (included above) of $11.9 million on approximately 3,800 ounces of platinum and 4,200 ounces of rhodium that were purchased in the open market and re-sold under this sales agreement for the three months ended September 30, 2005; for the same period of 2004, the Company recorded revenue of $9.3 million on approximately 2,200 ounces of platinum and 7,300 ounces of rhodium purchased and resold under these agreements.

     The Company has approximately 172,970 ounces of palladium received in the Norilsk Nickel transaction remaining in inventory at September 30, 2005.

     Cost of metals sold. Cost of metals sold was $102.1 million for the third quarter of 2005, compared to $115.8 million for the same period of 2004, a 12% decrease. The decrease in cost largely reflects the 16% decrease in total ounces sold as a result of the additional ounces processed and sold during the third quarter of 2004 associated with ore stockpiled during the second quarter 2004 refurbishment of the Company’s smelter and base metals refinery. Partially offsetting the effect of these lower volumes in 2005, however, prices for key raw materials – particularly fuel and steel – have increased substantially since the third quarter of 2004. Higher 2005 prices for open-market platinum and rhodium purchases are also reflected in cost of metals sold, as is the $1.4 million cost of an inventory adjustment, reflecting a metals market value lower than cost in inventory at September 30, 2005.

     The cost of metals sold from mine production was $49.2 million for the third quarter of 2005, compared to $65.4 million for the same period of 2004, a 25% decrease. This decrease is driven by the 27% decrease in mined ounces sold between the two quarters, again as a result of the smelter rebricking in the second quarter of 2004.

     The cost of metals sold from PGM recycling activities was $22.6 million in the third quarter of 2005, compared to $22.1 million in the third quarter of 2004. The increase was primarily due to higher 2005 metal values for contained platinum and rhodium driving up the cost of acquiring spent catalytic materials for processing.

     The cost of metals sold from sales of palladium received in the Norilsk Nickel transaction and other sales activities was $30.3 million in the third quarter of 2005, compared to $28.3 million for the same period of 2004. The total cost of palladium sold from just those ounces received in the Norilsk Nickel transaction was $18.6 million in the third quarter of 2005 compared to $18.7 million in the third quarter of 2004. The average cost in inventory for these ounces is $169 per ounce. As discussed under “Revenues” above, the Company entered into a sales agreement in 2004 that requires it to purchase rhodium and, at times, platinum from third parties in order to fulfill delivery commitments. The cost of metals purchased and subsequently resold to fulfill these contractual requirements, excluding sales of palladium received in the Norilsk Nickel transaction, was $11.7 million in the third quarter of 2005 and $9.6 million in the third quarter of 2004.

     Production. During the third quarter of 2005, the Company’s mining operations produced approximately 127,700 ounces of PGMs, including approximately 98,800 and 28,900 ounces of palladium and platinum, respectively. This compares with approximately 120,700 ounces of PGMs produced during the third quarter of 2004, including approximately 93,200 and 27,500 ounces of palladium and platinum, respectively, a 6% quarter-on-quarter increase in total PGM production from the mines. The overall production increase is driven by several factors. The Stillwater Mine produced approximately 83,500 ounces of PGMs in the third quarter of 2005, compared with approximately 79,300 ounces of PGMs for the same period of 2004, a 5% increase. As discussed above, third-quarter 2005 production was hampered at the mine by reduced manpower availability in July and August 2005. Availability of manpower had improved by the end of the quarter. The 2004 third quarter included a ten-day strike at the Stillwater Mine and metals processing facilities. The East Boulder Mine produced approximately 44,200 ounces of PGMs in the third quarter of 2005, compared with approximately 41,400 ounces of PGMs for the same period of 2004, a 7% increase.

     Depreciation and amortization. Depreciation and amortization expense was $19.4 million for the third quarter of 2005, compared to $13.6 million for the same period of 2004, a 43% increase. The increase was primarily due to the additional depletion expense for capital development placed into service during 2005. The 6% increase in mine production noted above also increased depletion expense.

     Other expenses. General and administrative expenses in the third quarter of 2005 were $4.9 million, compared to $6.7 million during the same period of 2004. The higher costs in the third quarter of 2004 were primarily attributable to $2.4 million in non-recurring costs specifically associated with a ten-day strike at the Stillwater Mine and metals processing facilities during July of 2004.

     Interest expense of $3.0 million in the third quarter of 2005 decreased approximately $4.9 million from $7.9 million in the same period of 2004. The much higher expense in the third quarter of 2004 reflects the $5.2 million write-off of unamortized financing charges and certain other costs associated with a refinancing transaction.

     Other comprehensive income. For the third quarter of 2005, other comprehensive income includes a change in the fair value of derivatives of $11.2 million offset by a reclassification to earnings of $2.0 million, for commodity hedging instruments. For the same period of 2004, other comprehensive income included a change in value of $5.2 million for commodity instruments.

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     Nine-month period ended September 30, 2005, compared to the nine-month period ended September 30, 2004

     Revenues. Revenues were $371.9 million for the first nine months of 2005 compared to $329.5 million for the same period of 2004. The following table shows the key factors contributing to the increase in revenues:

	Revenues, PGM ounces sold and PGM prices
	Nine months ended
	September 30,							Percentage
(in thousands)	2005		2004		Increase			Change
Revenues	$	371,932	$	329,465	$	42,467			13	%
Mine Production Ounces Sold:
Palladium		332		329		3			1	%
Platinum		103		96		7			7	%
Total		435		425		10			2	%
Other PGM Ounces Sold:
Palladium		362		292		70			24	%
Platinum		61		51		10			20	%
Rhodium		29		14		15			107	%
Total		452		357		95			27	%
Total Ounces Sold		887		782		105			13	%
Average realized price per ounce
Mine Production:
Palladium	$	355	$	376	$	(21	)		(6	%)
Platinum	$	824	$	842	$	(18	)		(2	%)
Combined	$	467	$	482	$	(15	)		(3	%)
Other PGM Sales:
Palladium	$	187	$	238	$	(51	)		(21	%)
Platinum	$	864	$	809	$	55			7	%
Rhodium	$	1,624	$	944	$	680			72	%
Average market price per ounce
Palladium	$	189	$	237	$	(48	)		(20	%)
Platinum	$	877	$	845	$	32			4	%
Combined	$	353	$	375	$	(22	)		(6	%)

     Revenues from mine production were $203.0 million in the first nine months of 2005, compared to $204.7 million for the same period in 2004, a 1% decrease. The quantity of mined metals sold increased slightly to 435,100 ounces in the first nine months of 2005 from 424,800 ounces in the same period of 2004, mostly attributable to lost production during the July 2004 work stoppage. However, offsetting the increase in ounces sold, the Company’s combined average realized PGM price per ounce declined to $467 for the first nine months of 2005, compared to $482 for the same period of 2004, a 3% drop.

     Revenues from PGM recycling were $66.0 million for the first nine months of 2005, compared to $52.0 million for the same period in 2004. This increase in revenues from PGM recycling was due both to an increase in the quantity of recycled PGMs sold of 94,000 ounces in the first nine months of 2005, compared to 82,100 ounces in the same period of 2004, and to substantially higher market prices for platinum and rhodium in 2005. The lower ounces in 2004, again, resulted in part from the ten-day strike during July 2004.

     In addition to the sales of recycled PGM ounces shown in the table above, the Company also processes significant volumes of recycled materials on a tolling basis, smelting and refining materials owned by others for a fee. These tolled ounces are not reflected above because the Company does not take title to these ounces but the associate fees are included in revenue. For the nine months ended September 30, 2005, the Company processed approximately 66,600 ounces of PGMs, up from approximately 18,000 ounces in the comparable period of 2004.

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     During the first quarter of 2004, the Company entered into three sales agreements providing for the Company to sell the 877,169 palladium ounces received in the Norilsk Nickel transaction ratably over a two-year period. Under these agreements, the Company is selling approximately 36,500 ounces of palladium per month, at a slight volume discount to market prices. Revenues from these three sales agreements were $102.9 million for the first nine months of 2005, compared to $72.8 million for the same period of 2004. Sales of approximately 328,800 ounces of palladium received in the Norilsk Nickel transaction generated $61.3 million in revenues during the first nine months of 2005, compared to $63.5 million in revenues on approximately 265,900 ounces of palladium sold during the same period of 2004. The average realized price on these palladium sales was approximately $186 per ounce for the first nine months of 2005, compared to $239 per ounce for the same period in 2004. Under one of the sales agreements, the Company also has agreed to sell 3,250 ounces of platinum and 1,900 ounces of rhodium per month, either purchased on the open market or produced from the Company’s mining operations. The Company recognized revenue of $41.6 million (included above) on approximately 9,400 ounces of platinum and 20,100 ounces of rhodium that were purchased in the open market and re-sold during the first nine months of 2005; during the comparable period of 2004, the Company realized $9.3 million in revenue on sales of approximately 2,200 ounces of platinum and 7,300 ounces of rhodium.

     Cost of metals sold. Cost of metals sold was $302.5 million for the first nine months of 2005, compared to $235.2 million for the same period of 2004, a 29% increase. Approximately $41.1 million of the increase is related to sales of the palladium received in the Norilsk Nickel transaction and associated purchases of platinum and rhodium, as discussed in more detail below. Another $13.7 million relates to increased volumes and higher acquisition cost for recycled PGM materials. The remainder is largely attributable to higher labor and materials costs at the Company’s operating mines and to the $1.4 million cost of the inventory adjustment to reflect a market value of metals lower than cost in inventory at September 30, 2005.

     The cost of metals sold from mine production was $144.7 million for the first nine months of 2005, compared to $132.3 million for the same period of 2004, a 10% increase. The increase was primarily due to the 2% increase in ounces sold in the first nine months of 2005, coupled with increased payroll and burden costs and higher prices for key raw materials, particularly steel and fuel.

     The cost of metals sold from PGM recycling activities was $61.9 million in the first nine months of 2005, compared to $48.2 million in the same period of 2004. The increased cost reflects the increase from 82,100 ounces of recycled PGM metals processed and sold during the first nine months of 2004 to 94,000 ounces in the first nine months of 2005, but also the increase in the acquisition cost for catalytic converter materials as the metal values contained in them have risen with the price of platinum and rhodium in 2005.

     The cost of metals sold under the sales contracts associated with the palladium received in the Norilsk Nickel transaction was $95.9 million in the first nine months of 2005, compared to $54.7 million for the same period of 2004. The total cost of sales for palladium ounces received in the Norilsk Nickel transaction was $55.8 million in the first nine months of 2005 (on about 328,800 ounces sold), compared to $45.1 million in the same period of 2004 (on about 265,900 ounces sold, as sales in 2004 did not begin until mid-February), both at an average cost in inventory of $169 per ounce. As discussed under “Revenues” above, the Company entered into a sales agreement early in 2004 that requires it to purchase rhodium and, at times, platinum from third parties in order to fulfill delivery commitments. The cost of metals purchased and resold, excluding sales of the palladium received in the Norilsk Nickel transaction, was $40.1 million for the first nine months of 2005 and $9.6 million for the first nine months of 2004.

     Production. During the first nine months of 2005, the Company’s mining operations produced approximately 410,800 ounces of PGMs, including approximately 316,900 ounces of palladium and 93,900 ounces and platinum. This compares with approximately 416,100 ounces of PGMs in the first nine months of 2004, including approximately 321,100 ounces of palladium and 95,000 ounces of platinum, respectively, a 1% period-on-period decrease in total PGM production. This slight overall production decrease, while not especially significant, generally reflects the allocation of production resources in 2005 toward further improving the developed state of the mines.

     The Stillwater Mine produced approximately 287,500 ounces of PGMs in the first nine months of 2005, compared with approximately 293,200 ounces of PGMs in the same period of 2004, a 2% decrease. The East Boulder Mine produced approximately 123,300 ounces of PGMs in the first nine months of 2005, and 122,900 ounces for the comparable period in 2004.

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     Depreciation and amortization. Depreciation and amortization was $60.1 million for the first nine months of 2005, compared to $43.6 million for the same period of 2004, a 38% increase. The increase was primarily due to the additional depletion expense for capital development placed into service during 2005.

     Other expenses. General and administrative expenses in the first nine months of 2005 were $14.8 million, compared to $14.3 million during the same period of 2004. The increase is primarily due to increased contractual services and compensation costs,

     Interest expense of $8.7 million in the first nine months of 2005 decreased approximately $6.4 million from $15.1 million in the same period of 2004. As noted above, the Company wrote off $5.2 million in unamortized financing costs and certain other costs in relation to a refinancing transaction in August of 2004. The remainder of the difference is savings from the lower interest rates in 2005 as a result of the 2004 refinancing.

     Other comprehensive income. For the first nine months of 2005, other comprehensive income includes a change in the fair value of derivatives of $15.5 million offset by a reclassification to earnings of $4.4 million, for commodity hedging instruments. For the same period of 2004, other comprehensive income included a change in value of $2.6 million for commodity instruments and a reclassification adjustment to interest expense of $0.4 million.

Liquidity and Capital Resources

     The Company’s net working capital at September 30, 2005, was $206.1 million compared to $236.4 million at December 31, 2004. The ratio of current assets to current liabilities was 3.9 at September 30, 2005 down from 4.5 at December 31, 2004. The net decrease in working capital resulted primarily from a net decrease in operating assets and liabilities of $55.5 million mostly resulting from sales of palladium out of inventory, partially offset by an increase in the Company’s cash and cash equivalents.

     In managing its cash, the Company from time to time utilizes certain short-term investments that management deems to be available for sale. These investments include auction-rate securities that contain short-term repricing features and, therefore, are highly liquid, as well as investments in high-grade commercial paper with a maturity greater than 90 days. At September 30, 2005, the Company held $29.2 million of such securities. The Company reclassified its financial statements in 2004 to conform to current-period presentation.

     In February of 2006 the Company will complete its contractual sales of the 877,169 ounces of palladium received in the 2003 Norilsk Nickel transaction. During 2004 and 2005 these sales have contributed significant liquidity to the Company. The Company expects to continue to utilize a portion of these cash proceeds in improving the developed state of its mining operations during 2006.

     For the quarter ended September 30, 2005,net cash provided by operating activitieswas $29.9 million, compared to $60.5 million for the comparable period of 2004. The following table shows the components of this $30.6 million difference between the two quarters in cash provided by operations:

	Three months ended
	September 30
in thousands	2005			2004
Cash collected from customers	$	116,391		$	143,835
Cash paid to suppliers, employees and other		(84,717	)		(75,931	)
Interest received		1,275			488
Interest paid		(3,041	)		(7,875	)
Net cash provided by operating activities	$	29,908		$	60,517

30

     Net cash used in investing activitieswas $55.8 million during the third quarter of 2005 compared to $31.5 million in the same period in 2004. The Company’s investing activities are capital expenditures for property, plant, equipment, and purchases and sales of investments. Capital expenditures in the third quarter of 2005 were $26.6 million, compared to $20.9 million in the third quarter of 2004.

     Net cash used in financing activitieswas $7.4 million for the third quarter of 2005, compared to cash provided of $8.3 million for the same period in 2004. The cash used in the third quarter of 2005 was primarily related to payments on long-term debt and capital lease obligations, including term loan prepayments associated with the proceeds from sales of palladium received in the Norilsk Nickel transaction.

     Cash and cash equivalents decreased by $33.3 million during the third quarter of 2005, compared to an increase of $37.3 million in the third quarter of 2004. Most of the decrease in cash in the third quarter of 2005 reflects investment of $29.2 million of cash into liquid investments during the quarter, along with $7.4 million of debt repayments. A significant share of second-quarter 2004 ore production was retained in inventory until the refurbishment of the processing facilities was completed and processing capacity became available; much of that inventory was liquidated during the third quarter of 2004 releasing significant cash.

     Excluded from cash and cash equivalents are highly liquid short-term investments of $29.2 million at September 30, 2005, and $25.2 million at September 30, 2004. If these short-term investments are included in determining liquidity, the Company’s available cash and investments was $137.3 million at September 30, 2005, and $101.7 million at September 30, 2004.

     For the nine months ended September 30, 2005,net cash provided by operating activitieswas $110.2 million, compared to $100.3 million for the comparable period of 2004. The following table compares the detail of this $9.9 million difference in cash provided by operations between the two nine-month periods:

	Nine months ended
	September 30,
in thousands	2005			2004
Cash collected from customers	$	364,386		$	314,721
Cash paid to suppliers, employees and other		(248,955	)		(200,471	)
Interest received		3,468			1,159
Interest paid		(8,719	)		(15,137	)
Net cash provided by operating activities	$	110,180		$	100,272

     Net cash used in investing activitieswas $82.9 million during the first nine months of 2005 compared to $69.2 million in the same period in 2004. The Company’s investing activities are capital expenditures for property, plant, equipment, and purchases and sales of investments. Capital expenditures for the first nine months of 2005 were $66.8 million, compared to $55.8 million for the first nine months of 2004.

     Net cash used in financing activitieswas $15.3 million during the first nine months of 2005, compared to cash provided of $9.7 million for the same period in 2004. The cash used for financing activities in the first nine months of 2005 primarily reflects prepayments of long-term debt. The cash provided by financing activities during the first nine months of 2004 includes net proceeds from the refinancing and from the issuance of shares.

     Cash and cash equivalents increased by $12.0 million during the first nine months of 2005, compared to an increase of $40.1 million for the first nine months of 2004. While cash generated from operations is actually higher in 2005 than in 2004, increased uses of cash in 2005 include $11.0 million more in capital expenditures, a $25.0 million difference in cash related to financing activities, and $16.1 million of cash diverted into short-term investments.

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Credit Facility

     On August 3, 2004, the Company entered into a $180 million credit facility with a syndicate of financial institutions. The credit facility consists of a $140 million six-year term loan facility maturing July 30, 2010, bearing interest at a variable rate plus a margin (London Interbank Offer Rate (LIBOR) plus 325 basis points, or 7.125% at September 30, 2005) and a $40 million five-year revolving credit facility bearing interest, when drawn, at a variable rate plus a margin (LIBOR plus 225 basis points, or 6.125% at September 30, 2005) expiring July 31, 2009. The margin on the revolving credit facility adjusts quarterly according to a leverage ratio defined in the credit agreement. The revolving credit facility includes a letter of credit facility; undrawn letters of credit issued under this facility carry an annual fee of 2.375%. The remaining unused portion of the revolving credit facility bears an annual commitment fee of 0.75%. Amortization of the term loan facility commenced in August 2004.

     As of September 30, 2005, the Company has $116.6 million outstanding under the term loan facility. At September 30, 2005, the Company has undrawn outstanding letters of credit against the revolving loan facility totaling $14.1 million as surety in support of its reclamation obligations. These letters of credit reduce amounts available under the revolving credit facility to $25.9 million at September 30, 2005.

     The credit facility requires as prepayments 50% of the Company’s annual excess cash flow, plus any proceeds from asset sales and the issuance of debt or equity securities, subject to specified exceptions. Such prepayments are to be applied first against the term loan facility balance, and once that is reduced to zero, against any outstanding revolving credit facility balance. The Company’s term loan facility allows the Company to choose between LIBOR loans of various maturities plus a spread of 3.25% or alternate base rate loans plus a spread of 2.25%. The alternate base rate is a rate determined by the administrative agent under the terms of the credit facility, and has generally been equal to the prevailing bank prime loan rate, which was 6.75% at September 30, 2005. The alternate base rate applies only to that portion of the term loan facility in any period for which the Company has not elected to use LIBOR contracts. Substantially all the property and assets of the Company are pledged as security for the credit facility.

     In accordance with the terms of the credit facility, the Company is required to remit 25% of the net proceeds from sales of palladium received in the Norilsk Nickel transaction to prepay its term loan facility. The Company’s credit facility contains a provision that defers each prepayment related to the sales of palladium received in the Norilsk Nickel transaction until the accumulated amount due reaches a specified level. The accumulated amount at September 30, 2005, of approximately $3.3 million is included on the Company’s consolidated balance sheet as a current liability in the portion of long-term debt repayable upon liquidation of finished palladium in inventory.

     As of September 30, 2005, $13.5 million of the long-term debt has been classified as a current liability, including approximately $12.4 million expected to be prepaid based on palladium sales under this arrangement during the next twelve months.

Contractual Obligations

     The Company is obligated to make future payments under various contracts such as debt and capital lease agreements. The following table represents significant contractual cash obligations and other commercial commitments as of September 30, 2005:

in thousands	2005(1)		2006		2007		2008		2009		Thereafter		Total
Term loan facility	$	295	$	1,181	$	1,181	$	1,181	$	1,181	$	111,612	$	116,631
Capital lease obligations , net of interest		133		483		464		458		547		15		2,100
Special Industrial Education Impact Revenue Bonds		80		165		178		190		97		—		710
Exempt Facility Revenue Bonds, net of discount				—		—		—		—		29,365		29,365
Operating leases		285		554		456		429		160		803		2,687
Other noncurrent liabilities				12,302		—		—		—		7,173		19,475
Total	$	793	$	14,685	$	2,279	$	2,258	$	1,985	$	148,968	$	170,968

(1) Amounts represent cash obligations for October — December 2005.

     Debt obligations referred to in the table are presented as due for repayment under the terms of the loan agreements, and before any prepayments from the proceeds of the sale of palladium acquired in the Norilsk Nickel transaction or out of excess cash flows. Under the provisions of the term loan facility, the Company is required to offer 25% of the net proceeds of the sale of palladium received in the Norilsk Nickel transaction to prepay borrowings under its credit facility. The Company’s credit facility contains a provision that defers each prepayment related to these sales of palladium received in the Norilsk Nickel transaction until the accumulated amount due reaches a specified level. As of September 30, 2005, the Company had approximately $1.2 million of scheduled prepayments during the next twelve months and $3.3 million accrued for prepayments related to sales of palladium from the Norilsk Nickel transaction. The credit facility also requires that 50% of the Company’s annual excess cash flow (as defined in the credit facility) be applied as prepayments of the credit facility. Amounts included in other noncurrent liabilities that are anticipated to be paid in 2006 include workers’ compensation costs, property taxes, and severance taxes. Noncurrent liabilities that are anticipated to be paid after 2009 are undiscounted asset retirement obligation costs. Assuming no early extinguishments of debt and no changes in interest rates from their levels at September 30, 2005, the estimated total interest payments will be approximately $2.8 million, $10.9 million, $10.8 million, $10.7 million, $10.5 million and $29.9 million for 2005 (October — December), 2006, 2007, 2008, 2009 and the years thereafter, respectively.

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Critical Accounting Policies

     Listed below are the accounting policies that the Company believes are critical to its financial statements due to the degree of uncertainty regarding estimates or assumptions involved and the magnitude of the liability, revenue, or expense being reported.

Ore Reserve Estimates

     Certain accounting policies of the Company depend on its estimate of proven and probable ore reserves including depreciation and amortization of capitalized mine development expenditures, income tax valuation allowances, post-closure reclamation costs and asset impairment. The Company updates its proven and probable ore reserves annually, following the guidelines for ore reserve determination contained in the SEC’s Industry Guide No. 7.

Mine Development Expenditures — Capitalization and Amortization

     Mining operations are inherently capital intensive, generally requiring substantial capital investment for the initial and concurrent development and infrastructure of the mine. Many of these expenditures are necessarily incurred well in advance of actual extraction of ore. Underground mining operations such as those conducted by the Company require driving tunnels and sinking shafts that provide access to the underground orebody and construction and development of infrastructure, including utilities and ventilation systems, rail and other forms of transportation, shop facilities, material handling areas and hoisting systems. Ore mining and removal operations require significant underground facilities used to conduct mining operations and to transport the ore out of the mine to processing facilities located above ground.

     Contemporaneously with mining, additional development is undertaken to provide access to ongoing extensions of the orebody, allowing more ore to be produced. In addition to the development costs that have been previously incurred, these ongoing development expenditures are necessary to access and support all future mining activities.

     Mine development expenditures incurred to date to increase existing production, develop new orebodies or develop mineral property substantially in advance of production are capitalized. Mine development expenditures consist of vertical shafts, multiple surface adits and underground infrastructure development including footwall laterals, ramps, rail and transportation, utilities and ventilation systems, shop facilities, material handling areas, ore handling facilities, dewatering and pumping facilities. Many such facilities are required not only for current operations, but also for all future planned operations.

     Expenditures incurred to sustain existing production and access specific ore reserve blocks or stopes provide benefit to ore reserve production over limited periods of time (secondary development) and are charged to operations as incurred. These costs include ramp and stope access excavations from primary haulage levels (footwall laterals), stope material rehandling/laydown excavations, stope ore and waste pass excavations and chute installations, stope ventilation raise excavations and stope utility and pipe raise excavations.

33

     The Company calculates amortization of capitalized mine development costs by the application of an amortization rate to current production. The amortization rate is based upon un-amortized capitalized mine development costs, and the related ore reserves. Capital expenditures are added to the un-amortized capitalized mine development costs as the related assets are placed into service. In the calculation of the amortization rate, changes in ore reserves are accounted for as a prospective change in estimate. Ore reserves and the further benefit of capitalized mine development costs are based on significant management assumptions. Any changes in these assumptions, such as a change in the mine plan or a change in estimated proven and probable ore reserves, could have a material effect on the expected period of benefit resulting in a potentially significant change in the amortization rate and/or the valuations of related assets. The Company’s proven ore reserves are generally expected to be extracted utilizing its existing mine development infrastructure. Additional capital expenditures will be required to access the Company’s estimated probable ore reserves. These anticipated capital expenditures are not included in the current calculation of depreciation and amortization.

     The Company’s mine development costs include the initial costs incurred to gain primary access to the ore reserves, plus the ongoing development costs of footwall laterals and ramps driven parallel to the reef that are used to access and provide support for the mining stopes in the reef.

     Prior to 2004, the Company amortized all such capitalized development costs at its mines over all proven and probable reserves at each mine. Following the asset impairment write-down at the end of 2003, the Company revisited its assumptions and estimates for amortizing capitalized mine development costs. Thereafter, the Company determined it would change its method of accounting for mine development costs as follows:

• Unamortized costs of the shaft at the Stillwater Mine and the initial development at the East Boulder Mine will continue to be treated as life-of-mine infrastructure costs, to be amortized over total proven and probable reserves at each location, and

• All ongoing development costs of footwall laterals and ramps, including similar development costs incurred before 2004, will be amortized over the ore reserves in the immediate and relevant vicinity of the development.

     This change in accounting method required the Company to measure the effect of the change at January 1, 2004, as if the new method of amortization had been used in all prior years. The credit for the cumulative effect of the change for all years prior to 2004 of $ 6.0 million is shown as the “Cumulative Effect of Accounting Change” in the Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2004.

     The calculation of the amortization rate, and therefore the annual amortization charge to operations, could be materially affected to the extent that actual production in the future is different from current forecasts of production based on proven and probable ore reserves. This would generally occur to the extent that there were significant changes in any of the factors or assumptions used in determining ore reserves. These factors could include: (1) an expansion of proven and probable ore reserves through development activities, (2) differences between estimated and actual costs of mining due to differences in grade or metal recovery rates, and (3) differences between actual commodity prices and commodity price assumptions used in the estimation of ore reserves.

Derivative Instruments

     From time to time, the Company enters into derivative financial instruments, including fixed forwards and financially-settled forwards to manage the effect of changes in the prices of palladium and platinum on the Company’s revenue. The Company accounts for its derivatives in accordance with SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities (together with subsequent accounting guidance for derivative instruments and hedging activities in SFAS No. 138 and No. 149), which requires that derivatives be reported on the balance sheet at fair value, and, if the derivative is not designated as a hedging instrument, changes in fair value must be recognized in earnings in the period of change. If the derivative is designated as a hedge, and to the extent such hedge is determined to be highly effective, changes in fair value are either (a) offset by the change in fair value of the hedged asset or liability (if applicable) or (b) reported as a component of other comprehensive income in the period of change, and subsequently recognized in the determination of net income in the period the offsetting hedged transaction occurs. The Company primarily uses derivatives to hedge metal prices and interest rates. As of September 30, 2005, the net unrealized loss on outstanding derivatives associated with commodity instruments is valued at $16.1 million, and is reported as a component of accumulated other comprehensive income. Because these hedges are highly effective, the Company expects any ultimate gains or losses on the hedging instruments will be largely offset by changes in the value of the corresponding hedged transaction.

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Income Taxes

     Income taxes are determined using the asset and liability approach in accordance with the provisions of SFAS No. 109,Accounting for Income Taxes. This method gives consideration to the future tax consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on currently enacted tax rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

     In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Each quarter, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. A valuation allowance has been provided at September 30, 2005, for the portion of the Company’s net deferred tax assets, which, more likely than not, will not be realized (see Note 10 to the Company’s consolidated financial statements). Based on the Company’s current financial projections, and in view of the level of tax depreciation and depletion deductions available, it appears unlikely that the Company will owe any income taxes for the foreseeable future. However, if average realized PGM prices were to increase substantially in the future, the Company could owe income taxes prospectively on the resulting higher than projected taxable income.

Post-closure Reclamation Costs

     In accordance with SFAS No. 143, Accountingfor Asset Retirement Obligations, the Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation ultimately is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss at the time of settlement.

     Accounting for reclamation obligations requires management to make estimates for each mining operation of the future costs the Company will incur to complete final reclamation work required to comply with existing laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. Additionally, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work required to be performed by the Company. Any such increases in future costs could materially impact the amounts charged to operations for reclamation and remediation.

Asset Impairment

     As required by SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amounts of its assets may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. Future cash flows include estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contracts prices, price trends and related factors), production levels and capital and reclamation expenditures, all based on life-of-mine plans and projections. If the assets are impaired, a calculation of fair market value is performed, and if fair market value is lower than the carrying value of the assets, the assets’ carrying value is reduced to their fair market value.

     The Company evaluated key factors in its business at December 31, 2004, to determine if there were any events or changes in circumstances that would indicated that the carrying value of the Company’s assets would not be recoverable. No factors were identified that, as of December 31, 2004, indicated that an impairment existed. Consequently, the Company concluded that there was no asset impairment as of December 31, 2004. Because of the significant time and expense involved in the process, the Company normally updates its ore reserves only annually at year-end. As part of this process, however, the Company also identifies critical prices and other elements that could materially affect the reserve computation. As part of the Company’s quarterly review of key factors, it examines any change in prices or other elements that might indicate impairment. A review of each key factor as of September 30, 2005, also did not indicate any asset impairment.

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FORWARD LOOKING STATEMENTS; FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

     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 “ 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 our 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 expansion plans, costs, grade, production and recovery rates, permitting, labor matters, financing needs, the terms of future credit facilities and capital expenditures, increases in processing capacity, cost reduction measures, safety, timing for engineering studies, and environmental permitting and compliance, litigation and the palladium and platinum market. Additional information regarding factors which could cause results to differ materially from management’s expectations is found in the section entitled “Risk Factors” above in the Company’s 2004 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.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

     The Company is exposed to market risk, including the effects of adverse changes in metal prices and interest rates as discussed below.

Commodity Price Risk

     The Company produces and sells palladium, platinum and associated byproduct metals directly to its customers and also through third parties. As a result, financial performance can be materially affected when prices for these commodities fluctuate. In order to manage commodity price risk and to reduce the impact of fluctuation in prices, the Company enters into long-term contracts and from time to time uses various derivative financial instruments. Because the Company hedges only with instruments that have a high correlation with the value of the hedged transactions, changes in the fair value of the derivatives are expected to be offset by changes in the value of the hedged transaction.

     The Company has entered into long-term sales contracts with General Motors Corporation, Ford Motor Company and Mitsubishi Corporation. The contracts together cover significant portions of the Company’s mined PGM production through December 2010 and stipulate floor and ceiling prices for some of the covered production. In the first quarter of 2004 the Company also entered into three new sales contracts under which palladium volumes equal to the 877,169 ounces of palladium received in the Norilsk Nickel stock purchase transaction will be sold over a period of two years, primarily for use in automobile catalytic converters. Under these agreements, the Company is expected to sell approximately 36,500 ounces of palladium per month, ending in the first quarter of 2006, at a slight volume discount to the market price at the time of delivery. Under one of these agreements, the Company also will sell 3,250 ounces of platinum and 1,900 ounces of rhodium per month also at a slight discount to market prices. The Company from time to time may need to purchase platinum and rhodium in the open market to fulfill this monthly delivery obligation.

     During the third quarter of 2005, the major U.S. bond rating agencies downgraded the corporate ratings of General Motors Corporation and Ford Motor Company, two of the customers pursuant to the Company’s long-term sales contracts. [As a result, the debt of these companies no longer qualifies as investment grade]. The Company’s business is substantially dependent on its contracts with Ford and General Motors, particularly because the price under these contracts is significantly greater than the market price of palladium. Under applicable law, these

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contracts may be void or voidable if General Motors or Ford becomes insolvent or files for bankruptcy. The loss of either of these contracts could require the Company to sell at prevailing market prices, which might expose it to lower metal prices as compared to the floor prices under the contracts. In such an event, the Company’s operating plans could be threatened. In addition, under the Company’s credit facility, a default or modification of these contracts could prohibit additional loans or require the immediate repayment of outstanding loans. Thus, termination of these contracts could have a material adverse impact on the Company’s operations and viability.

     The Company enters into fixed forwards and financially-settled forwards that are accounted for as cash-flow hedges to hedge the price risk in its PGM recycling and mine production activities. In the fixed forward transactions, normally metals contained in the spent catalytic materials are sold forward at the time the materials are received and are delivered against the fixed forward contracts when the finished ounces are recovered. Financially-settled forwards may be used as a mechanism to hedge against fluctuations in metal prices associated with future production. Under financially-settled forwards, at each settlement date the Company receives the difference between the forward price and the market price if the market price is below the forward price, and the Company pays the difference between the forward price and the market price if the market price is above the forward price. The Company’s financially-settled forwards are settled in cash at maturity.

     As of September 30, 2005, the Company was party to financially-settled forward agreements covering approximately 45% of its anticipated platinum sales from mine production for the period from October 2005 through June 2008. These transactions are designed to hedge a total of 177,100 ounces of platinum sales from mine production for the next thirty-three months at an overall average price of approximately $848 per ounce.

     The Company enters into fixed forwards and financially-settled forwards relating to PGM recycling of catalyst materials. These transactions are accounted for as cash-flow hedges. These sales of metals derived from processing spent catalytic materials are sold forward at the time of receipt and delivered against the cash flow hedges when the ounces are recovered. All of these open transactions will settle at various periods through October 2005 (see Note 9 to the Company’s consolidated financial statements). The unrealized loss on these instruments related to PGM recycling due to changes in metal prices at September 30, 2005, was $7.2 million. The corresponding unrealized loss on these instruments was $3.0 million at September 30, 2004.

     Until these contracts mature, any net change in the value of the hedging instrument due to changes in metal prices is reflected in stockholders’ equity in accumulated other comprehensive income. A net unrealized loss of $16.1 million on these hedging instruments ($14.8 million unrealized loss related to financially-settled forwards for mine production and a $1.3 million unrealized gain related to fixed forwards for PGM recycling), existing at September 30, 2005, is reflected in accumulated other comprehensive income (see Note 4 to the Company’s consolidated financial statements). Because these hedges are highly efficient, when these instruments are settled any remaining gain or loss on the cash flow hedges will be offset by losses or gains on the future metal sales and will be recognized at that time in operating income. All commodity instruments outstanding at September 30, 2005, are expected to be settled within the next thirty-three months.

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     A summary of the Company’s derivative financial instruments as of September 30, 2005, is as follows:

Mine Production:
Financially Settled Forwards

	Platinum		Average
	Ounces		Price		Index
Fourth Quarter 2005		23,200	$	801	Monthly London PM Average
First Quarter 2006		24,900	$	820	Monthly London PM Average
Second Quarter 2006		25,500	$	823	Monthly London PM Average
Third Quarter 2006		26,500	$	838	Monthly London PM Average
Fourth Quarter 2006		21,000	$	862	Monthly London PM Average
First Quarter 2007		19,000	$	872	Monthly London PM Average
Second Quarter 2007		14,000	$	890	Monthly London PM Average
Third Quarter 2007		12,000	$	913	Monthly London PM Average
Fourth Quarter 2007		5,000	$	907	Monthly London PM Average
First Quarter 2008		3,000	$	893	Monthly London PM Average
Second Quarter 2008		3,000	$	909	Monthly London PM Average

PGM Recycling:
Fixed Forwards

	Platinum		Average		Palladium	Average		Rhodium		Average
	Ounces		Price		Ounces	Price		Ounces		Price
Fourth Quarter 2005		15,064	$	897	5,376	$	186		1,780	$	1,911
First Quarter 2006		3,285	$	920	—		—		—		—

Interest Rate Risk

     During the first quarter of 2002, the Company entered into two identical interest rate swap agreements. These swaps fixed the interest rate on $100.0 million of the Company’s debt. The interest rate swap agreements were effective March 4, 2002, and matured on March 4, 2004. The Company has not replaced or renewed the interest rate swap agreements and consequently is exposed to the full effect on earnings and cash flow of fluctuations in interest rates.

     As of September 30, 2005, the Company had $116.6 million outstanding under the term loan facility, bearing interest based on a variable rate plus a margin (LIBOR plus 325 basis points, or 7.125% at September 30, 2005). The Company’s credit facility allows the Company to choose between loans based on LIBOR plus a spread of 3.25% or alternative base rate loans plus a spread of 2.25%. The alternative base rate is a rate determined by the administrative agent under the new credit facility, and has generally been equal to the prevailing bank prime loan rate, which was 6.75% at September 30, 2005. The final maturity of the term loan facility is July 30, 2010.

     As of September 30, 2005, the Company had a $40 million revolving credit facility. This revolving credit facility includes a letter of credit facility. The Company has outstanding undrawn letters of credit issued against this facility in the amount of $14.1 million, which reduces the amounts available under the revolving credit facility to $25.9 million at September 30, 2005. The letters of credit carry an annual fee of 2.375% at September 30, 2005. The remaining unused portion of the revolving credit facility carries an annual commitment fee of 0.75%.

     If the annual effective interest rate of the variable rate debt increases (or decreases) by 1%, the effect on interest expense would be an increase (or a decrease) of approximately $1.2 million annually. However, concurrent changes in interest income on the Company’s cash and cash equivalents could offset a portion of this change.

Item 4. Controls and Procedures

     (a) Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

     (b) Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.Legal Proceedings

     The Company is involved in various claims and legal actions arising in the ordinary course of business, including employee injury claims. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity and the likelihood that a loss contingency will occur in connection with these claims is remote.

Stockholder Litigation

     In 2002, nine lawsuits were filed against the Company and certain senior officers in United States District Court, Southern District of New York, purportedly on behalf of a class of all persons who purchased or otherwise acquired common stock of the Company from April 20, 2001 through and including April 1, 2002. They assert claims against the Company and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Plaintiffs challenge the accuracy of certain public disclosures made by the Company regarding its financial performance and, in particular, its accounting for probable ore reserves. In July 2002, the court consolidated these actions, and in May 2003, the case was transferred to federal district court in Montana. In May 2004, defendants filed a motion to dismiss plaintiffs’ second amended complaint, and in June 2004, plaintiffs filed their opposition and defendants filed their reply. Defendants have reached an agreement in principle with plaintiffs to settle the federal class action subject to documentation and court approval. Under the proposed agreement, any settlement amount will be paid by the Company’s insurance carrier and will not involve any out-of-pocket payment by the Company or the individual defendants. In light of the proposed settlement, the hearing on defendants’ motion to dismiss has been taken off calendar, without prejudice to their right to reinstate the motion in the event the parties are not successful in negotiating the terms of the final settlement papers.

     On June 20, 2002, a stockholder derivative lawsuit was filed against the Company (as a nominal defendant) and certain of its current and former directors in state court in Delaware. It arises out of allegations similar to those in the class action and seeks damages allegedly on behalf of the stockholders of Stillwater for breach of fiduciary duties by the named directors. No relief is sought against the Company, which is named as a nominal defendant.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

     None

Item 3.Defaults Upon Senior Securities

     None

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

     None

Item 5.Other Information

     None

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Item 6.Exhibits

EXHIBITS
Number	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification — Chief Executive Officer, dated November 4, 2005.
31.2	Rule 13a-14(a)/15d-14(a) Certification — Vice President and Chief Financial Officer, dated November 4, 2005.
32.1	Section 1350 Certification, dated November 4, 2005.
32.2	Section 1350 Certification, dated November 4, 2005.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

STILLWATER MINING COMPANY
(Registrant)

Date: November 4, 2005	By:	/s/ Francis R. McAllisterFRANCIS R. McALLISTER
		Chairman and Chief Executive Officer
		(Principal Executive Officer)
Date: November 4, 2005	By:	/s/ Gregory A. WingGREGORY A. WING
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

EXHIBITS
Number	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification — Chief Executive Officer, dated November 4, 2005.
31.2	Rule 13a-14(a)/15d-14(a) Certification — Vice President and Chief Financial Officer, dated November 4, 2005.
32.1	Section 1350 Certification, dated November 4, 2005.
32.2	Section 1350 Certification, dated November 4, 2005.