Stillwater Mining Reports Third Quarter 2008 ResultsCompany-Wide Review of Operations Undertaken in Response to Changing Economic Conditions
BILLINGS, MT -- 11/10/2008 -- STILLWATER MINING COMPANY (NYSE: SWC) today reported a third quarter 2008 net loss of $0.3 million, or less than $0.01 per diluted share, on revenues of $248.7 million. This compares to a third quarter 2007 loss of $11.1 million, or $0.12 per diluted share, on revenues of $163.1 million. The 2008 third-quarter included $6.4 million of unusual expense for write-downs of product inventories and long-term investments, driven mostly by the recent decline in realizable prices for platinum-group metals (PGMs), the Company's primary products, and in prices for equities.
Net income for the first nine months of 2008 was $20.1 million, or $0.22 per diluted share. This compares to the first nine months of 2007, when the Company reported a net loss of $14.6 million, or $0.16 per share. The stronger 2008 results were driven by significantly higher realized prices for PGMs and by growth in the volume of recycled material processed.
Stillwater Mining Company mines palladium and platinum from two underground mines located in south-central Montana. These mines together produced 120,000 ounces of palladium and platinum during the third quarter of 2008, a decline of 6.7% from the 128,600 ounces produced in the third quarter last year. Production at the Company's Stillwater Mine decreased slightly to 83,800 ounces, compared to 85,400 ounces in third quarter 2007, while East Boulder Mine production dropped to 36,200 ounces from 43,200 ounces in last year's third quarter. Stillwater Mine's reduced production reflected lower combined ore grades in the active mining areas, while the lower East Boulder Mine production was affected primarily by higher than planned attrition and a consequent shortage of skilled manpower. More than offsetting the lower production, however, average sales realizations on mined palladium and platinum ounces increased to $652 per ounce in this year's third quarter, up from $499 per ounce in the same period last year.
The Company also operates a smelting and refining complex in Columbus, Montana. In addition to processing the Company's mine concentrates, these facilities recycle catalyst materials received from third parties. The Company processed recycling material containing a total of 126,100 PGM ounces through the smelter and refinery during the third quarter 2008, up 27.9% from 98,600 ounces recycled during the same period last year. Recycling activities contributed about $17.4 million to the Company's operating margin (before corporate overhead and financing charges) during the third quarter of 2008, compared to about $6.2 million in the third quarter of 2007. The improved performance is primarily attributable to higher realized prices for PGMs.
Regarding the Company's performance, Francis R. McAllister, Stillwater Chairman and CEO, commented; "While we are a bit disappointed to report a small loss in this year's third quarter, clearly our broader attention at this point is on the deteriorating economic situation worldwide and its effect on our industry. Prices for our primary metals, palladium and platinum, are off more than 60% from their highs earlier this year and recently declined to levels last seen in 2005. Consequently, we are now in the process of reviewing all operations, recognizing that at current prices we must make some adjustments to conserve cash. We expect to complete this Company-wide review in the near future and will provide more specific details at that time.
"The price decline in PGMs coincides with the general sharp fall in all commodity prices. It has been driven in part by reduced automotive demand, particularly in the U.S. and Western Europe, as well as through the unwinding of commodity positions in order to generate liquidity and to cover short positions. Moreover, in the case of palladium, Swiss inventory statistics for September 2008 indicate the Russian government exported about one million ounces of palladium during the month, apparently ending a 21-month hiatus from such major sales. A shortage of active buyers in the metal markets to help absorb the selling pressure has created something of a vacuum that has pulled PGM and most other commodity prices down to the current unrealistic levels, which in many cases are below their indicated marginal cost of production.
"Prices below marginal production costs cannot be sustained over the long term. However, not knowing how long current market conditions will last, we have little choice at this time but to realign the Company's operations in response to the changed environment and structure operations in line with lower PGM prices. At recent prices the Company is realizing an average of just under $500 per mined PGM ounce which is below our cost of production -- thus the need to realign operations and conserve cash.
"The Company's liquidity position is good, with approximately $129 million of cash and short-term investments at the end of the third quarter. If current PGM prices persist, we would expect additional cash to be freed up from recycling working capital over the next few months as lower metals prices reduce the cash requirement in recycling inventory. The Company does not currently have a revolving credit facility or other backup liquidity arrangement in place. While we have discussed such a facility with various potential lenders, it is unlikely that we will be able to secure any significant financing line with acceptable terms in the present economic climate."
Commenting on the Company's earnings prospects, McAllister added, "In view of the Company's significant depreciation and amortization costs, the Company is not profitable, in terms of reported earnings, at current PGM price levels. A breakeven profit level would require annual cash generation from operations on the order of $80 million, which is not achievable under present market conditions. Consequently, the Company is targeting operational adjustments toward maintaining neutral or marginally positive free cash flow in this market environment, pending a recovery to more realistic price levels.
"Of course, the current economic environment presents a number of risks for the Company. While we believe we can develop a plan to align our operations with current metals prices, we can't promise that the Company will be fully successful in devising and implementing such a plan. And even if the plan is successfully implemented, metals prices could continue to erode, putting further pressure on cash flows. In the present climate, credit issues also create risks. Several of the Company's key suppliers and customers, including Ford and General Motors, are struggling with credit issues. If conditions worsen, the outstanding advances to our suppliers, the contractual floor prices in our automotive contracts and the collectability of our accounts receivable could be placed in jeopardy. We are monitoring these risks closely."
With regard to production guidance, Mr. McAllister continued: "Mine production in this year's third quarter was 120,000 ounces, down from 128,600 ounces produced in last year's third quarter. Our initial 2008 production guidance for the full year was in the range of 550,000 to 565,000 ounces, which would have been stronger than 2007 performance. However, in view of manpower shortages at both mines and ore grade issues at Stillwater Mine, in our second quarter reporting we reduced our production guidance for full-year 2008 to a range between 515,000 and 525,000 ounces. Given the adjustments we now are considering, total mine production will likely be still lower for 2008. Similarly, our second quarter updated guidance for full-year 2008 projected that total cash costs would fall in the range of $380 to $395 per ounce and capital expenditures of about $100 million. These amounts also are likely to change. We plan to provide updated production and cost guidance once our review of Company operations has been finalized.
"Regarding our long-term corporate strategic initiatives on mine transformation, marketing, diversification and exploration, at the moment we are singularly focused on the operational adjustments that must be made in response to this current market environment. Consequently, resources allocated to some of these strategic efforts are likely to be reduced as well.
"Overall," McAllister continued, "our current efforts are focused on stabilizing the Company's financial position in light of the sharp drop in PGM prices. While our review of how to do this is not yet complete, I am optimistic at this point that we will emerge with a workable plan."
Mr. McAllister also addressed the effects of the current environment on the Company's increasingly important recycling business. "The recent market turmoil will likely reduce the profitability of the Company's recycling business, as well. Not only will the lower prices reduce profit margins, but the volume of recycling material available to the Company as PGM prices fall appears to be declining, too. Amounts advanced to suppliers in the course of this business may be collected more slowly as volumes diminish, and in the worst case could become uncollectible. Moreover, to minimize price risk the Company hedges its recycling exposures with well established counterparties at the time recycling material is acquired from third parties. Credit available to the Company for these hedging requirements may be constrained if the current tight credit markets continue. Thus, in the current economic environment the Company anticipates that the year-to-date success enjoyed in the recycling business will be reduced, diminishing its ability to compensate for the impact of lower prices on mine operations."
Cash Flow and Liquidity
At September 30, 2008, the Company's available cash and cash equivalents (excluding $26.1 million of restricted cash) totaled $106.2 million, up $5.4 million from the beginning of the quarter and $44.8 million from December 31, 2007. If we include the Company's available-for-sale investments the Company's total available cash and investments at September 30, 2008 was $129.0 million, up $26.2 million from $102.8 million at the end of the second quarter. The increase in cash and investments during the third quarter reflects decreased investment in working capital during the quarter as PGM prices declined. Working capital associated with the recycling business, constituting marketable inventories and related advances, decreased to $138.2 million at the end of the third quarter of 2008 from $172.8 million at the end of the second quarter. Including these highly liquid inventories, the Company's underlying liquidity was $267.2 million at September 30, 2008, as compared to $275.6 million at the end of the second quarter 2008 and $172.7 million at the end of the 2007.
Net cash provided by operating activities (which includes changes in working capital) totaled $47.9 million in this year's third quarter, reflecting the $34.6 million reduction in recycling working capital during the quarter. By comparison, $31.0 million of cash was provided by operations in the third quarter of 2007. Capital expenditures were $21.7 million in the third quarter of 2008 and $63.3 million year to date. Capital spending in the third quarter of 2007 totaled $22.4 million and $62.8 million through the first nine months of 2007.
Outstanding debt at September 30, 2008, was $211.1 million. The Company's total debt includes $181.5 million outstanding in the form of debentures due in 2028, $29.4 million of Exempt Facility Revenue Bonds due in 2020 and $0.2 million of Special Industrial Education Impact Revenue Bonds due in 2009.
Third Quarter Results - Details
For the third quarter of 2008, the Company's mine production was 120,000 PGM ounces including 83,800 ounces from the Stillwater Mine and 36,200 ounces from East Boulder Mine. For the comparable quarter of 2007, the mines produced 128,600 ounces including 85,400 ounces at the Stillwater Mine and 43,200 ounces at East Boulder Mine. The Stillwater Mine shortfall was mostly attributable to lower ore grades in the specific mining stopes producing during the 2008 third quarter. The East Boulder Mine decrease was primarily caused by a shortage of miners at East Boulder Mine as employee attrition increased during 2008.
Sales out of mine production totaled 111,400 ounces in the third quarter of 2008 at an overall average realization of $652 per ounce, down from 127,500 ounces at $499 per ounce in the third quarter of 2007. Mine revenues increased to $72.6 million in the 2008 third quarter from $63.6 million in the same quarter of 2007. The increase in mine revenues reflects higher average realized prices in 2008, which more than offset the effect of lower sales volumes. The Company's average realization on palladium sales from mine production was $409 per ounce in the 2008 third quarter, compared to $383 per ounce for the same period in 2007. The Company's average net realization on platinum (after any losses on forward sales and the effect of contractual ceiling prices) was $1,569 per ounce in the third quarter of 2008 and $950 per ounce in the 2007 third quarter. Putting this in perspective, the London Metals Exchange afternoon posted prices per ounce for palladium and platinum were $199 and $1,004, respectively, on September 30, 2008, and $344 and $1,377, respectively, on September 30, 2007.
During the third quarter of 2008, the Company processed 126,100 ounces of PGMs from recycled catalytic materials. By comparison, in the third quarter of 2007 the Company processed 98,600 ounces of recycled material. The Company processes material purchased from third parties and toll material that is processed on behalf of others for a fee. The Company delivered for sale a total of 84,300 ounces of platinum, palladium and rhodium from recycled inventories during the third quarter 2008 at an overall average price of $2,008 per ounce; for the third quarter of 2007, the Company sold 70,300 recycled ounces at an average realization of $1,332 per ounce.
Revenues for the third quarter of 2008 were $248.7 million, up 52.5% from $163.1 million received in the third quarter of 2007. Proceeds from sales of mined PGMs totaled $72.6 million in the 2008 third quarter, up from $63.6 million in the same quarter of 2007, reflecting the benefit of somewhat higher average sales realizations in 2008 and the expiration of the last of the platinum hedges at June 30, 2008. Recycling revenues increased to $169.8 million from $94.1 million in last year's third quarter. Resales of purchased metal generated $6.3 million and $5.4 million in revenue during the 2008 and 2007 third quarters, respectively.
Costs of metals sold (before depreciation and amortization expense) increased to $218.7 million in the 2008 third quarter from $147.3 million in the third quarter of 2007. Mining costs included in costs of metals sold increased to $60.1 million in the 2008 third quarter from $54.1 million in the 2007 third quarter. Recycling costs, which primarily reflect the cost of acquiring spent catalytic materials for processing, totaled $152.4 million in the third quarter of 2008, up sharply from $87.9 million in the third quarter of 2007. Most of the increased cost is attributable to the higher value of the contained metals in the material purchased for recycling. Third quarter costs also included $3.4 million in 2008 and $3.7 million in 2007 of lower-of-cost-or-market adjustments to inventories, and the purchase for resale of 15,400 ounces of palladium at a cost of $6.3 million in 2008, and 15,400 palladium ounces at a cost of $5.3 million in 2007.
Depreciation and amortization expense decreased slightly to $19.0 million in the 2008 third quarter from $20.1 million in the same period of 2007. The decrease is mostly attributable to lower mine production in 2008.
General and administrative ("G&A") costs, including marketing and exploration expenses, increased to $12.9 million in the third quarter of 2008 from $6.8 million in the same period of 2007. Included in the 2008 third quarter was a $3.0 million write-down of the Company's long-term equity holdings in two exploration companies. The timing of exploration and marketing expenditures accounted for most of the remaining increase.
The reported net loss of $0.3 million for the third quarter of 2008 included, by business segment, a net loss of $6.4 million from mining operations and net income of $19.5 million from recycling activities, less corporate costs including $12.9 million of G&A expense, $1.0 million of unallocated net interest expense, and a recoupment of accrued income tax of about $0.4 million.
For the third quarter of 2007, the reported net loss of $11.1 million included a loss from mining operations of $10.5 million, and income from recycling activities of $7.9 million. These earnings items were offset by $6.8 million of G&A expense and $1.7 million pertaining to unallocated interest expense.
First Nine Months' Results - Details
In the first nine months of 2008, the Company's mining operations produced 375,200 PGM ounces including 257,200 ounces from the Stillwater Mine and 118,000 ounces from East Boulder Mine.
For the comparable period in 2007, total mine production of 405,800 ounces included Stillwater Mine production of 267,900 ounces and East Boulder Mine production of 137,900 ounces. The slightly lower production at the Stillwater Mine mostly reflected lower realized ore grades associated with the specific areas being mined in 2008. The decrease in East Boulder Mine production was a result of increased attrition and a resulting shortage of skilled miners.
Sales of palladium and platinum from mine production totaled 381,600 ounces in the first nine months of 2008 at an overall average realization of $675 per ounce, down from 418,700 ounces at $504 per ounce in the same period of 2007. The Company's average realization on palladium sales from mine production was $424 per ounce in the 2008 first nine months, compared to $382 per ounce for the same period in 2007. The comparable average realization on platinum, net of losses on forward sales and contractual ceiling prices on 14% of mine production, was $1,553 per ounce for the first nine months of 2008 and $937 per ounce in the 2007 first nine months.
During the first nine months of 2008, the Company processed 319,100 ounces of PGMs from recycled catalytic materials, including both purchased catalyst and toll material processed on behalf of others for a fee. By comparison, in the first nine months of 2007 the Company processed 278,600 ounces of recycled material. Of the purchased catalyst processed, the Company sold a total of 204,700 ounces of platinum, palladium and rhodium during the third quarter 2008 at an overall average price of $1,773 per ounce; for the third quarter of 2007, the Company sold about 192,000 recycled ounces at an average realization of $1,284 per ounce.
Revenues for the first nine months of 2008 totaled $640.6 million, up 36.2% from $470.5 million in the first nine months of 2007. Proceeds from sales of mined PGMs totaled $257.6 million in the 2008 first nine months, up from $210.9 million in the same period of 2007. Recycling revenues grew to $364.4 million from $248.0 million in last year's first nine months. The increase in mine production revenues reflects higher average realized prices in 2008, which more than offset the effect of lower sales volumes. Resales of purchased metal generated $18.6 million and $11.6 million in revenue during the 2008 and 2007 periods, respectively.
Costs of metals sold (before depreciation and amortization expense) increased to $529.1 million in the 2008 first nine months from $400.6 million in the first nine months of 2007. Mining costs included in costs of metals sold increased to $174.6 million in the 2008 first nine months from $157.1 million in the 2007 period. Recycling costs, largely comprised of the cost to purchase spent catalytic materials for processing, totaled $336.0 million in the first nine months of 2008, up from $231.9 million in the first nine months of 2007. Most of the increase is attributable to the higher cost per ton to acquire recycling material as the value of the contained metals has increased. For the first nine months of the year, lower of cost or market adjustments totaled $3.4 million in 2008 and $5.2 million in 2007. The 2008 first nine months costs also included $18.5 million to buy 42,800 ounces of palladium for resale; first nine months 2007 costs included about $11.5 million for the purchase of 33,400 ounces of palladium for resale.
Depreciation and amortization expense was nearly flat at $61.5 million in the 2008 first nine months compared to $62.2 million in the same period of 2007. The slight decrease is attributable to lower sales volumes in 2008, partially offset by higher 2008 amortization rates.
General and administrative costs (G&A), including marketing and exploration expenses, totaled $30.9 million for the first nine months of 2008 and $23.1 million in the 2007 first nine months. Included in the first nine months of 2008 was a $3.0 million third-quarter write-down of the Company's long-term equity holdings in two exploration companies. The remaining increase resulted from higher professional fees and compensation costs, including amortization of deferred stock awards granted during the first six months of 2008, as well as higher exploration and marketing outlays. The Company has continued its marketing program in 2008, spending $4.9 million for market development purposes in the first nine months of 2008 compared to $4.0 million for the comparable period in 2007.
The Company's reported net income of $20.1 million for the first nine months of 2008 included, by business segment, $21.5 million of income from mining operations and $34.1 million of income from recycling activities, less corporate costs including $30.9 million of G&A expense and $4.9 million of unallocated net interest expense.
For the first nine months of 2007, the reported net loss of $14.6 million included a loss from mining operations of $8.1 million, income from recycling activities of $21.0 million. Also contributing to the net loss were $23.1 million of G&A expense, $4.6 million of unallocated interest expense, and $0.2 million of income on resales of purchased palladium.
Stillwater Mining Company has deferred its 2008 third quarter results conference call until its review of current operations is completed and approved by the Board of Directors. Management will provide information regarding the time and access procedures for this call in a separate press release.
Stillwater Mining Company is the only U.S. producer of palladium and platinum and is the largest primary producer of platinum group metals outside of South Africa and the Russian Federation. The Company's shares are traded on the New York Stock Exchange under the symbol SWC. Information on Stillwater Mining can be found at its Website: www.stillwatermining.com.
Some statements contained in this news release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, therefore, involve uncertainties or risks that could cause actual results to differ materially. These statements may contain words such as "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 and realignment of operations, costs, grade, production and recovery rates, permitting, labor matters, financing needs and the terms of future credit facilities, capital expenditures, increases in processing capacity, cost reduction measures, safety, timing for engineering studies, and environmental permitting and compliance, litigation, labor matters 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" in the Company's 2007 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.
Financial Statements and Key Factors Tables follow.
Stillwater Mining Company
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues
Mine production $ 72,567 $ 63,613 $ 257,598 $ 210,877
PGM recycling 169,801 94,075 364,432 247,977
Other 6,342 5,399 18,557 11,646
--------- --------- --------- ---------
Total revenues 248,710 163,087 640,587 470,500
Costs and expenses
Costs of metals sold
Mine production 60,071 54,088 174,625 157,117
PGM recycling 152,383 87,886 335,957 231,932
Other 6,284 5,299 18,469 11,504
--------- --------- --------- ---------
Total costs of metals
sold 218,738 147,273 529,051 400,553
Depreciation and amortization
Mine production 18,952 20,114 61,346 62,134
PGM recycling 48 32 144 84
--------- --------- --------- ---------
Total depreciation and
amortization 19,000 20,146 61,490 62,218
--------- --------- --------- ---------
Total costs of
revenues 237,738 167,419 590,541 462,771
Exploration 1,890 500 2,390 562
Marketing 1,209 783 4,944 3,996
General and administrative 6,735 5,565 20,561 18,528
Loss on long-term investments 3,029 - 3,029 -
(Gain)/loss on disposal of
property, plant and
equipment (22) 26 130 (184)
--------- --------- --------- ---------
Total costs and
expenses 250,579 174,293 621,595 485,673
Operating income (loss) (1,869) (11,206) 18,992 (15,173)
Other income (expense)
Other - 127 145 109
Interest income 2,895 2,957 8,906 8,943
Interest expense (1,735) (2,931) (7,993) (8,507)
--------- --------- --------- ---------
Income (loss) before income tax
benefit (provision) (709) (11,053) 20,050 (14,628)
Income tax benefit (provision) 374 - - -
--------- --------- --------- ---------
Net income (loss) $ (335) $ (11,053) $ 20,050 $ (14,628)
--------- --------- --------- ---------
Other comprehensive (loss)
income, net of tax (72) 3,550 5,920 3,821
--------- --------- --------- ---------
Comprehensive income (loss) $ (407) $ (7,503) $ 25,970 $ (10,807)
========= ========= ========= =========
Weighted average common shares
outstanding
Basic 93,134 92,203 92,872 91,908
Diluted 93,134 92,203 93,183 91,908
Basic income (loss) per share
--------- --------- --------- ---------
Net income (loss) $ (0.00) $ (0.12) $ 0.22 $ (0.16)
========= ========= ========= =========
Diluted income (loss) per share
--------- --------- --------- ---------
Net income (loss) $ (0.00) $ (0.12) $ 0.22 $ (0.16)
========= ========= ========= =========
Stillwater Mining Company
Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
September 30, December 31,
2008 2007
------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 106,224 $ 61,436
Restricted cash 26,055 5,885
Investments, at fair market value 22,810 27,603
Inventories 163,795 118,663
Advances on inventory purchases 40,823 28,396
Trade receivables 6,543 12,144
Deferred income taxes 2,862 4,597
Other current assets 9,917 6,092
------------- -------------
Total current assets $ 379,029 $ 264,816
------------- -------------
Property, plant and equipment (net of
$359,225 and $301,212 accumulated
depreciation and amortization) 467,109 465,054
Other noncurrent assets 12,908 12,537
------------- -------------
Total assets $ 859,046 $ 742,407
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,871 $ 17,937
Accrued payroll and benefits 24,642 20,944
Property, production and franchise taxes
payable 9,341 10,528
Current portion of long-term debt 195 1,209
Fair value of derivative instruments - 6,424
Unearned income 471 788
Other current liabilities 13,192 11,144
------------- -------------
Total current liabilities 64,712 68,974
Long-term debt 210,940 126,841
Deferred income taxes 2,862 4,597
Accrued workers compensation 8,357 9,982
Asset retirement obligation 11,163 10,506
Other noncurrent liabilities 6,536 4,103
------------- -------------
Total liabilities $ 304,570 $ 225,003
------------- -------------
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;
93,205,034 and 92,405,111 shares issued
and outstanding 932 924
Paid-in capital 637,719 626,625
Accumulated deficit (84,070) (104,120)
Accumulated other comprehensive loss (105) (6,025)
------------- -------------
Total stockholders' equity 554,476 517,404
------------- -------------
Total liabilities and stockholders'
equity $ 859,046 $ 742,407
============= =============
Stillwater Mining Company
Statements of Cash Flows
(Unaudited)
(in thousands)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Cash flows from operating
activities
Net income (loss) $ (335) $ (11,053) $ 20,050 $ (14,628)
Adjustments to reconcile net
income (loss) to net cash
(used in) provided by
operating activities:
Depreciation and amortization 19,000 20,146 61,490 62,218
Lower of cost or market
inventory adjustment 3,370 3,734 3,370 5,164
Loss on long-term investments 3,029 - 3,029 -
(Gain)/loss on disposal of
property, plant and
equipment (22) 26 130 (184)
Asset retirement obligation 224 185 657 545
Stock issued under employee
benefit plans 1,399 974 4,340 3,903
Amortization of debt issuance
costs 264 208 2,950 618
Share based compensation 1,388 1,231 3,771 3,745
Changes in operating assets and
liabilities:
Inventories 16,810 12,378 (49,408) (8,279)
Advances on inventory
purchases 12,975 2,245 (12,427) (4,056)
Trade receivables 7,517 832 4,264 4,586
Employee compensation and
benefits 610 1,138 3,699 1,465
Accounts payable (7,088) 1,733 (1,066) (7,900)
Property, production and
franchise taxes payable (330) 342 1,246 888
Workers compensation (809) (241) (1,625) 313
Unearned income (376) (233) (317) (8)
Estimated final payments for
inventory purchases (4,092) (1,706) 4,356 452
Forward hedges (1,968) 211 (2,812) 480
Restricted cash - - - (600)
Other (3,664) (1,169) (2,165) (2,465)
--------- --------- --------- ---------
Net cash provided by operating
activities 47,902 30,981 43,532 46,257
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (21,681) (22,435) (63,284) (62,844)
Purchases of long-term
investments (601) (1,019) (948) (1,687)
Proceeds from disposal of
property, plant and
equipment 100 47 315 375
Purchases of investments (22,743) (7,914) (34,135) (56,054)
Proceeds from maturities of
investments 1,987 10,756 38,508 54,934
--------- --------- --------- ---------
Net cash used in investing
activities (42,938) (20,565) (59,544) (65,276)
--------- --------- --------- ---------
Cash flows from financing
activities
Payments on long-term debt
and capital lease
obligations - (266) (98,422) (2,230)
Payments for debt issuance
costs (26) - (5,098) -
Proceeds from issuance of
convertible debentures - - 181,500 -
Restricted cash 525 - (20,170) -
Issuance of common stock - 8 2,990 247
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities 499 (258) 60,800 (1,983)
--------- --------- --------- ---------
Cash and cash equivalents
Net increase (decrease) 5,463 10,158 44,788 (21,002)
Balance at beginning of
period 100,761 57,200 61,436 88,360
--------- --------- --------- ---------
Balance at end of period $ 106,224 $ 67,358 $ 106,224 $ 67,358
========= ========= ========= =========
Stillwater Mining Company
Key Factors
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
OPERATING AND COST DATA FOR MINE
PRODUCTION
Consolidated:
Ounces produced (000)
Palladium 93 99 289 312
Platinum 27 29 86 94
--------- --------- --------- ---------
Total 120 128 375 406
========= ========= ========= =========
Tons milled (000) 265 277 788 891
Mill head grade (ounce per ton) 0.49 0.51 0.50 0.50
Sub-grade tons milled (000) (1) 36 16 121 53
Sub-grade tons mill head grade
(ounce per ton) 0.17 0.12 0.17 0.12
Total tons milled (000) (1) 301 293 909 944
Combined mill head grade (ounce per
ton) 0.45 0.49 0.46 0.48
Total mill recovery (%) 89 91 90 91
Total operating costs per ounce
(Non-GAAP) (2) $ 296 $ 272 $ 304 $ 258
Total cash costs per ounce
(Non-GAAP) (2) $ 349 $ 346 $ 377 $ 324
Total production costs per ounce
(Non-GAAP) (2) $ 519 $ 506 $ 539 $ 478
Total operating costs per ton
milled (Non-GAAP) (2) $ 118 $ 120 $ 125 $ 111
Total cash costs per ton milled
(Non-GAAP) (2) $ 139 $ 152 $ 156 $ 139
Total production costs per ton
milled (Non-GAAP) (2) $ 207 $ 222 $ 223 $ 206
Stillwater Mine:
Ounces produced (000)
Palladium 65 65 197 205
Platinum 19 20 60 63
--------- --------- --------- ---------
Total 84 85 257 268
========= ========= ========= =========
Tons milled (000) 172 145 498 481
Mill head grade (ounce per ton) 0.53 0.64 0.55 0.60
Sub-grade tons milled (000) (1) 22 16 67 53
Sub-grade tons mill head grade
(ounce per ton) 0.15 0.12 0.15 0.12
Total tons milled (000) (1) 194 161 565 534
Combined mill head grade (ounce per
ton) 0.49 0.58 0.51 0.55
Total mill recovery (%) 89 92 90 92
Total operating costs per ounce
(Non-GAAP) (2) $ 280 $ 229 $ 281 $ 228
Total cash costs per ounce
(Non-GAAP) (2) $ 331 $ 299 $ 351 $ 293
Total production costs per ounce
(Non-GAAP) (2) $ 475 $ 431 $ 488 $ 424
Total operating costs per ton
milled (Non-GAAP) (2) $ 121 $ 121 $ 128 $ 114
Total cash costs per ton milled
(Non-GAAP) (2) $ 143 $ 159 $ 160 $ 147
Total production costs per ton
milled (Non-GAAP) (2) $ 205 $ 229 $ 222 $ 213
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2008 2007 2008 2007
--------- -------- -------- --------
OPERATING AND COST DATA FOR MINE
PRODUCTION
(Continued)
East Boulder Mine:
Ounces produced (000)
Palladium 28 34 92 107
Platinum 8 9 26 31
--------- -------- -------- --------
Total 36 43 118 138
========= ======== ======== ========
Tons milled (000) 93 132 290 410
Mill head grade (ounce per ton) 0.41 0.37 0.42 0.38
Sub-grade tons milled (000) (1) 14 - 54 -
Sub-grade tons mill head grade (ounce
per ton) 0.20 - 0.18 -
Total tons milled (000) (1) 107 132 344 410
Combined mill head grade (ounce per
ton) 0.38 0.37 0.39 0.38
Total mill recovery (%) 89 90 90 90
Total operating costs per ounce
(Non-GAAP) (2) $ 332 $ 359 $ 352 $ 317
Total cash costs per ounce (Non-GAAP)
(2) $ 392 $ 438 $ 432 $ 384
Total production costs per ounce
(Non-GAAP) (2) $ 622 $ 653 $ 653 $ 584
Total operating costs per ton milled
(Non-GAAP) (2) $ 112 $ 118 $ 121 $ 107
Total cash costs per ton milled
(Non-GAAP) (2) $ 132 $ 144 $ 148 $ 129
Total production costs per ton milled
(Non-GAAP) (2) $ 210 $ 214 $ 224 $ 196
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months Nine months
ended ended
(in thousands, where noted) September 30, September 30,
--------------- ---------------
SALES AND PRICE DATA 2008 2007 2008 2007
------- ------- ------- -------
Ounces sold (000)
Mine production:
Palladium (oz.) 88 102 297 327
Platinum (oz.) 23 26 85 92
------- ------- ------- -------
Total 111 128 382 419
Other PGM activities: (5)
Palladium (oz.) 50 44 129 113
Platinum (oz.) 42 35 100 94
Rhodium (oz.) 8 6 18 18
------- ------- ------- -------
Total 100 85 247 225
------- ------- ------- -------
By-products from mining: (6)
Rhodium (oz.) - 1 2 3
Gold (oz.) 2 2 7 8
Silver (oz.) 2 2 7 6
Copper (lb.) 213 216 727 684
Nickel (lb.) 187 303 709 870
Average realized price per ounce (3)
Mine production:
Palladium ($/oz.) $ 409 $ 383 $ 424 $ 382
Platinum ($/oz.) $ 1,569 $ 950 $ 1,553 $ 937
Combined ($/oz.) (4) $ 652 $ 499 $ 675 $ 504
Other PGM activities: (5)
Palladium ($/oz.) $ 423 $ 361 $ 425 $ 351
Platinum ($/oz.) $ 2,018 $ 1,292 $ 1,776 $ 1,228
Rhodium ($/oz.) $ 9,097 $ 5,913 $ 8,168 $ 5,641
By-products from mining: (6)
Rhodium ($/oz.) $ 4,596 $ 6,142 $ 8,263 $ 6,069
Gold ($/oz.) $ 852 $ 699 $ 899 $ 671
Silver ($/oz.) $ 13 $ 13 $ 16 $ 13
Copper ($/lb.) $ 3.25 $ 4.21 $ 3.34 $ 3.31
Nickel ($/lb.) $ 8.84 $ 14.25 $ 11.23 $ 17.98
Average market price per ounce (4)
Palladium ($/oz.) $ 332 $ 348 $ 405 $ 355
Platinum ($/oz.) $ 1,546 $ 1,291 $ 1,810 $ 1,256
Combined ($/oz.) (4) $ 586 $ 541 $ 717 $ 551
(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. Operating costs per ton, operating costs per
ounce, cash costs per ton, cash costs per ounce, production costs per
ton and production costs per ounce are non-GAAP measurements that
management uses to monitor and evaluate the efficiency of its mining
operations. These measures of cost are not defined under U.S.
Generally Accepted Accounting Principles (GAAP). Please see
"Reconciliation of Non-GAAP Measures to Costs of Revenues" and the
accompanying discussion for additional detail.
(3) The Company’s average realized price represents revenues, which
include the effect of contract floor and ceiling prices, hedging
gains and losses realized on commodity instruments and contract
discounts, divided by ounces sold. The average market price
represents the average London PM Fix for the actual months of the
period.
(4) The Company reports a combined average realized and market price of
palladium and platinum at the same ratio as ounces that are produced
from the base metal refinery.
(5) Ounces sold and average realized price per ounce from other PGM
activities relate to ounces produced from processing of catalyst
materials, ounces purchased in the open market for resale.
(6) By-product metals sold reflect contained metal. Realized prices
reflect net values (discounted due to product form and transportation
and marketing charges) per unit received.
Reconciliation of Non-GAAP measures to costs of revenues
The Company utilizes certain non-GAAP measures as indicators in assessing the performance of its mining and processing operations during any period. Because of the processing time required to complete the extraction of finished PGM products, there are typically lags from one to three months between ore production and sale of the finished product. Sales in any period include some portion of material mined and processed from prior periods as the revenue recognition process is completed. Consequently, while costs of revenues (a GAAP measure included in the Company's Statement of Operations and Comprehensive Income/(Loss)) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP measures to assess the costs associated with its producing and processing activities in a particular period and to compare those costs between periods.
While the Company believes that these non-GAAP measures may also be of value to outside readers, both as general indicators of the Company's mining efficiency from period to period and as insight into how the Company internally measures its operating performance, these non-GAAP measures are not standardized across the mining industry and in most cases will not be directly comparable to similar measures that may be provided by other companies. These non-GAAP measures are only useful as indicators of relative operational performance in any period, and because they do not take into account the inventory timing differences that are included in costs of revenues, they cannot meaningfully be used to develop measures of profitability. A reconciliation of these measures to costs of revenues for each period shown is provided as part of the following tables, and a description of each non-GAAP measure is provided below.
Total Costs of Revenues: For the Company on a consolidated basis, this measure is equal to consolidated costs of revenues, as reported in the Statement of Operations and Comprehensive Income/(Loss). For the Stillwater Mine, East Boulder Mine, and other PGM activities, the Company segregates the expenses within costs of revenues that are directly associated with each of these activities and then allocates the remaining facility costs included in consolidated costs of revenues in proportion to the monthly volumes from each activity. The resulting total costs of revenues measures for Stillwater Mine, East Boulder Mine and other PGM activities are equal in total to consolidated costs of revenues as reported in the Company's Statement of Operations and Comprehensive Income/(Loss).
Total Production Costs (Non-GAAP): Calculated as total costs of revenues (for each mine or consolidated) adjusted to exclude gains or losses on asset dispositions, costs and profit from secondary recycling, and changes in product inventories. This non-GAAP measure provides an indication of the total costs incurred in association with production and processing in a period, before taking into account the timing differences resulting from inventory changes and before any effect of asset dispositions or secondary recycling activities. The Company uses it as a comparative measure of the level of total production and processing activities in a period, and may be compared to prior periods or between the Company's mines. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.
When divided by the total tons milled in the respective period, Total Production Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the cost per ton milled in that period. Because of variability of ore grade in the Company's mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Production Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Production Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.
When divided by the total recoverable PGM ounces from production in the respective period, Total Production Cost per Ounce (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the cost per ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because extracting PGM material is ultimately the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Production Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Production Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.
Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated (for each mine or consolidated) as total costs of revenues adjusted to exclude gains or losses on asset dispositions, costs and profit from recycling activities, depreciation and amortization and asset retirement costs and changes in product inventories. The Company uses this measure as a comparative indication of the cash costs related to production and processing in any period. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.
When divided by the total tons milled in the respective period, Total Cash Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of cash costs incurred per ton milled in that period. Because of variability of ore grade in the Company's mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Cash Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Cash Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.
When divided by the total recoverable PGM ounces from production in the respective period, Total Cash Cost per Ounce (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Cash Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Cash Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.
Total Operating Costs (Non-GAAP): This non-GAAP measure is derived from Total Cash Costs (Non-GAAP) for each mine or consolidated by excluding royalty, tax and insurance expenses from Total Cash Costs (Non-GAAP). Royalties, taxes and insurance costs are contractual or governmental obligations outside of the control of the Company's mining operations, and in the case of royalties and most taxes, are driven more by the level of sales realizations rather than by operating efficiency. Consequently, Total Operating Costs (Non-GAAP) is a useful indicator of the level of production and processing costs incurred in a period that are under the control of mining operations. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.
When divided by the total tons milled in the respective period, Total Operating Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of controllable cash costs incurred per ton milled in that period. Because of variability of ore grade in the Company's mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Operating Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Operating Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.
When divided by the total recoverable PGM ounces from production in the respective period, Total Operating Cost per Ounce (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of controllable cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Operating Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Operating Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.
Reconciliation of Non-GAAP Measures to Costs of Revenues
Three months ended Nine months ended
September 30, September 30,
(in thousands) 2008 2007 2008 2007
--------- --------- --------- ---------
Consolidated:
Reconciliation to consolidated
costs of revenues:
Total operating costs
(Non-GAAP) $ 35,487 $ 35,010 $ 113,869 $ 104,817
Royalties, taxes and other 6,385 9,419 27,444 26,725
--------- --------- --------- ---------
Total cash costs (Non-GAAP) $ 41,872 $ 44,429 $ 141,313 $ 131,542
Asset retirement costs 224 185 657 545
Depreciation and
amortization 18,952 20,115 61,346 62,134
Depreciation and
Amortization (in inventory) 1,212 277 (906) (93)
--------- --------- --------- ---------
Total production costs
(Non-GAAP) $ 62,260 $ 65,006 $ 202,410 194,128
Change in product
inventories 3,528 6,638 17,926 15,607
Costs of recycling
activities 152,383 87,886 335,957 231,932
Recycling activities -
depreciation 48 32 144 84
Add: Profit from recycling
activities 19,519 7,857 34,104 21,020
--------- --------- --------- ---------
Total consolidated costs of
revenues $ 237,738 $ 167,419 $ 590,541 $ 462,771
========= ========= ========= =========
Stillwater Mine:
Reconciliation to costs of
revenues:
Total operating costs
(Non-GAAP) $ 23,488 $ 19,520 $ 72,309 $ 61,140
Royalties, taxes and other 4,211 6,007 18,040 17,457
--------- --------- --------- ---------
Total cash costs (Non-GAAP) $ 27,699 $ 25,527 $ 90,349 $ 78,597
Asset retirement costs 163 129 479 380
Depreciation and
amortization 10,942 10,778 34,742 35,341
Depreciation and
amortization (in inventory) 958 357 (177) (719)
--------- --------- --------- ---------
Total production costs
(Non-GAAP) $ 39,762 $ 36,791 $ 125,393 $ 113,599
Change in product
inventories (3,964) (667) 237 2,714
Add: Profit from recycling
activities 13,541 5,149 23,394 13,722
--------- --------- --------- ---------
Total costs of revenues $ 49,339 $ 41,273 $ 149,024 $ 130,035
========= ========= ========= =========
East Boulder Mine:
Reconciliation to costs of
revenues:
Total operating costs
(Non-GAAP) $ 12,000 $ 15,490 $ 41,560 $ 43,677
Royalties, taxes and other 2,174 3,412 9,404 9,268
--------- --------- --------- ---------
Total cash costs (Non-GAAP) $ 14,174 $ 18,902 $ 50,964 $ 52,945
Asset retirement costs 61 56 178 165
Depreciation and
amortization 8,010 9,337 26,605 26,793
Depreciation and
amortization (in inventory) 254 (80) (730) 626
--------- --------- --------- ---------
Total production costs
(Non-GAAP) $ 22,499 $ 28,215 $ 77,017 $ 80,529
Change in product
inventories 1,207 2,006 (780) 1,389
Add: Profit from
recycling activities 5,978 2,708 10,710 7,298
--------- --------- --------- ---------
Total costs of revenues $ 29,684 $ 32,929 $ 86,947 $ 89,216
========= ========= ========= =========
Other PGM activities: (1)
Reconciliation to costs of
revenues:
Change in product
inventories $ 6,284 $ 5,299 $ 18,469 $ 11,504
Recycling activities -
depreciation 48 32 144 84
Costs of recycling
activities 152,383 87,886 335,957 231,932
--------- --------- --------- ---------
Total costs of revenues $ 158,715 $ 93,217 $ 354,570 $ 243,520
========= ========= ========= =========
(1) Other PGM activities include recycling and other.
CONTACT:
Dawn McCurtain
(406) 373-8787
