SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 1, 1998
STILLWATER MINING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INCORPORATED UNDER THE 0-25090 81-0480654
LAWS OF DELAWARE
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE (IRS EMPLOYEE
INCORPORATION) NUMBER) IDENTIFICATION NO.)
1200 SEVENTEENTH STREET, SUITE 900, DENVER, CO 80202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 352-2060
ITEM 5. OTHER EVENTS
STILLWATER MINING ANNOUNCES ACCELERATION OF EXPANSION & PLANS FOR FINANCING
On October 1, 1998, Stillwater Mining Company announced that the Board of
Directors had approved the acceleration of both the expansion of the
Stillwater Mine, Nye, Montana, and the development of the East Boulder
Project, Big Timber, Montana. The Company has secured a financing commitment
and developed an accelerated plan to reach an annual production rate of
approximately 1.2 million ounces of palladium and platinum during 2001. This
compares to the previously announced production rate of 1.3 million ounces by
2003 and to 1998 projected production of 450,000 to 470,000 ounces of
palladium and platinum.
Total capital to fund the expansion is expected to be approximately $385
million. Of this, the Stillwater Mine expansion is expected to be about $75
million, East Boulder is expected to be approximately $270 million and
approximately $40 million is designated for the expansion of the Company's
smelter and the base metals refinery located in Columbus, Montana. Included in
this capital investment is approximately $35 million to allow for future
expansion of the East Boulder facility beyond the current design rate of 2,000
tons per day.
The Company plans to finance the expansion with operating cash flow and
external financing. It has a commitment for a $175 million facility with The
Bank of Nova Scotia, Toronto, Canada, which will provide the Company with the
debt financing component.
The terms of the commitment with The Bank of Nova Scotia include a $50 million
revolver and a $125 million project financing. The project financing portion
of the facility will be drawn down over two years and amortized over the
subsequent five years, while the revolving credit facility matures in seven
years. The facility bears interest at LIBOR plus 1% to 1.75% depending on the
ratio of the Company's debt to operating cash flow. The debt will be secured
and will contain typical covenants and covenants regarding performance of the
long-term metals sales contracts. The commitment is subject to a number of
conditions, including definitive loan documentation and obtaining $50 million
of equity capital.
The Company's long-term sales contracts with end-users that were recently
announced give it an average floor price of about $225 per ounce of palladium
sold for approximately 90 to 100% of the ounces produced from 1999 to 2003.
The contracts were instrumental in establishing the debt financing
arrangements, as they provided the lenders with assurances regarding the
Company's future cash flow. The financing, in turn, allows the Company to
accelerate its expansion.
The expansion at the Stillwater Mine would increase the milling rate from
2,000 tons per day to over 3,000 tons per day, which is expected to produce
approximately 700,000 to 725,000 ounces of palladium and platinum annually at
full capacity. Cash operating costs are expected to remain in the range of
$140 to $160 per ounce. Included in the $75 million in capital for this
expansion is $20 million for a long-term tailings facility. Capital for the
Stillwater portion of the expansion is expected to be spent in 1998 through
2000.
The East Boulder Project will be a new mine, 13 miles west of the Stillwater
Mine, and it is expected to reach an annual production rate of between 450,000
to 500,000 ounces of palladium and platinum in 2001. Cash costs of production
are expected to be similar to the costs of the Stillwater Mine, between $140
and $160 per ounce. The new East Boulder Project is expected to operate at
2,000 tons per day, but will be engineered to permit expansion in the future.
Capital costs for the mine are $270 million, which consist of: $65 million for
underground facilities, including a crusher, conveyor system and shop
facilities; $55 million in underground development; $50 million for mobile and
mining equipment; $35 million for the milling facility and $55 million in
other ancillary facilities. Capital for this project is expected to be spread
over a four-year period beginning in 1998, with the largest portion spent in
the year 2000. The Company's success in pursuing its expansion goals at the
Stillwater Mine and East Boulder Project depends upon its ability to expand
production at the Stillwater Mine and commence production at the East Boulder
Project on a timely basis and within budgeted levels.
During 1998, Stillwater Mining has added 70 new miners to its work force and
is fully staffed to sustain a production rate of 2,000 tons per day at the
Stillwater Mine. To accomplish the production goals the Company has defined at
both the Stillwater Mine and the East Boulder Project, an additional 230
miners will be required by 2001. To satisfy these requirements, Stillwater
Mining has an internal training program for miners and expects to generate
approximately 15 new miners per month as a result of this program. The Company
is also aggressively recruiting from external sources and expects to engage
contract personnel, as they become available. Notwithstanding these efforts,
there can be no assurance that the Company will be able to obtain skilled
mining employees on a timely basis.
The Environmental Impact Statement for the expansion of the Stillwater Mine
and the new tailings facility is nearing completion. Although the Company
cannot be certain of the timing or result of the permitting decision, the
Company continues to anticipate a favorable decision with regard to this
permit in the fourth quarter of 1998.
The Company has been working with engineering and construction firms to assess
the capital requirements and timetables to complete these projects in a
shorter time frame. The combination of the sales contracts, financing package
and third party confirmation of the Company's engineering studies allows the
Company to proceed with its expansion at a time when the market needs more
palladium, especially for use in automotive emission control devices.
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Some statements
contained in this release are forward-looking and, therefore, involve
uncertainties or risks that could cause actual results to differ materially.
Such forward-looking statements include comments regarding increased
profitability, operating performance, expansion plans for the Stillwater Mine
and the East Boulder project, capital expenditures, future production, costs
of production, cash flow, development work, sources of capital, and platinum
and palladium prices and markets. Factors that could cause actual results to
differ materially include price volatility of platinum and palladium, economic
and political events affecting supply and demand for platinum and palladium,
availability of financing on acceptable terms when needed, performance under
the sales contracts, unexpected events during expansion, fluctuations in ore
grade, tons mined, crushed or milled, variations in smelter or refinery
operation and geological, technical, mining or processing problems. These and
other factors are discussed in more detail in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors" contained in
the Company's Annual Report on Form 10-K and its Registration Statement on
Form S-3, filed on July 1, 1998. Descriptions of events relating to the
palladium and platinum markets are not intended to be complete, and readers
are advised to obtain their own information and advice regarding commodities
markets. The Company disclaims any obligation to update forward-looking
statements.
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 HEREUNTO DULY AUTHORIZED.
STILLWATER MINING COMPANY
(Registrant)
Date: October 1, 1998 By: /s/ James A. Sabala
_____________________________________
Name: James A. Sabala
Title: Vice President and Chief
Financial Officer