Exhibit 99.1
FOR IMMEDIATE RELEASE: August 8, 2006
CONTACT: John W. Pearson
406-373-8742
STILLWATER MINING REPORTS SECOND QUARTER RESULTS
BILLINGS, MONTANA - STILLWATER MINING COMPANY (NYSE:SWC) reported a net loss of
$2.3 million for the second quarter of 2006 or $0.03 per diluted share, on
revenue of $116.8 million, compared to a net loss of $0.6 million for the second
quarter of 2005 or $0.01 per diluted share, on revenue of $125.4 million. Last
year's second quarter included $2.3 million of income and $20.7 million of
revenue from sales of approximately 110,000 ounces of the palladium received in
the 2003 Norilsk Nickel transaction. The Company completed the liquidation of
the last of these palladium ounces during the first quarter of 2006.
PGM market prices were substantially higher in the current quarter than a year
ago, but the Company's per-ounce realizations were only marginally higher. The
Company's palladium sales benefit from floor prices in its sales contracts that
generally were above the current market price during the quarter. Under these
contracts, until the palladium market price exceeds these floors, the Company
realizes no additional benefit from palladium price increases. The Company's
realized price for platinum continues to be limited by past forward sales
commitments at prices below the current market. The platinum prices realized
under these forward sales commitments will increase in future quarters.
During the first and second quarters of this year, the Company began receiving
significantly higher volumes of spent catalytic materials for recycling.
Earnings from the recycling business during the first six months of 2006,
benefiting from increased volumes and higher PGM prices, already have nearly
equaled the Company's full-year earnings from recycling in 2005. In addition,
much of the benefit of higher second-quarter volumes will not be realized in
revenues and earnings until the second half of the year as the finished metals
are sold.
Mine PGM production for the first half of 2006 was approximately 12,000 ounces
ahead of production for the same period last year, reflecting productivity
improvements at East Boulder in particular. However, due to inventory timing,
ounces sold were lower and mining revenues declined slightly between the
periods.
SECOND QUARTER 2006 HIGHLIGHTS
o PGM prices continued to move higher during the first half of the quarter,
with palladium peaking in mid-May at $404 per ounce and ending the quarter
at $312 per ounce.
o The per-ounce realized price for palladium in the quarter was $378 and the
average market price was $345, compared to a realized price of $355 per
ounce and an average market price of $192 per ounce in the second quarter
2005. The per-ounce realized price for platinum in the quarter was $839 and
the average market price $1,189, compared to a realized price per ounce of
$832 and an average market price per ounce of $871 in the second quarter of
2005.
o Consolidated PGM mine production of 149,000 ounces is in line to meet mine
production guidance of 595,000 to 625,000 ounces for this year.
o Total cash cost of $322 per ounce is above the Company's guidance;
nevertheless the Company reaffirms its guidance of $300 to $315 per ounce
for this year. Combined average realized price per ounce of mine production
sold was $484 in the quarter.
o The Company's mine transformation efforts are on track with primary
development footage in the second quarter of 10,400 feet and captive cut
and fill tonnage of approximately 400 tons of ore per day combined from
both mines.
o Processing of recycled PGM materials increased to an average rate of 16.9
tons of spent catalyst per day, up more than 75% over 2005.
For the first half of 2006, the Company reported a net loss of $1.7 million, or
$0.02 per diluted share, on revenue of $256.8 million, compared to a net loss of
$1.8 million, or $0.02 per diluted share, on revenue of $253.8 million for the
first six months of 2005. The 2006 net loss includes the limited effect of
higher PGM prices offset by a decrease in palladium inventory sales due to
completion in early 2006 of the liquidation of the palladium ounces received in
the 2003 Norilsk Nickel transaction.
Announcing the Company's results, Stillwater Chairman and Chief Executive
Officer, Francis R. McAllister said, "Our focus continues to be on transforming
our mine operations by increasing the use of selective mining methods and
increasing the developed state of the mines. This will position the Company for
improved productivity, higher production and reduced unit costs in the future.
These efforts require higher capital expenditures for 2006 and part of 2007,
although we expect capital expenditures for 2006 to be somewhat less than the
$107 million projected."
Mr. McAllister continued, "The Company and its operations performed well during
the quarter and are essentially on plan for the year. Ore production at the
Stillwater Mine averaged 1,977 tons of ore per day during the second quarter and
1,967 tons per day during the first six months of 2006. At the East Boulder Mine
the rate of ore production averaged 1,592 and 1,641 tons of ore per day during
the second quarter and the first six months of 2006, respectively."
2
"Recycling volumes have increased substantially during 2006, totaling 148,000
ounces of recoverable PGMs for the first six months of 2006, compared to 110,000
ounces of recoverable PGMs for the comparable period of 2005. During the second
quarter 2006, PGM recycling ounces fed into the smelter increased to 88,000
ounces compared to 60,000 ounces fed during first quarter 2006 and 51,200 ounces
fed in the second quarter of 2005. The effect of this second-quarter growth in
volume on the Company's reported earnings will not be fully reflected until the
second half of the year when processing of these ounces is completed and the
finished ounces are delivered to customers. The growth in catalyst volumes,
combined with the effect of higher PGM prices on the acquisition cost of
catalyst material during 2006, has resulted in a substantial increase in working
capital tied up in inventory associated with the Company's recycling activities.
Total working capital for recycling has grown to about $90 million at June 30,
2006, compared to approximately $23 million at June 30, 2005", stated Mr.
McAllister.
"We continue to see growing worldwide interest in palladium for use as a jewelry
metal, new palladium-based applications in consumer electronics and the
emergence of palladium's role in the latest diesel emission technology, all of
which should serve to strengthen the price of palladium.
In developing the market for palladium jewelry, the Company has been
instrumental in establishing the Palladium Alliance International (PAI), a
palladium industry group that will coordinate and focus promotional efforts;
campaign for regulatory recognition of palladium as a precious jewelry metal;
and provide an informational website that provides a technical forum and a list
of selected retailers who feature palladium jewelry. During the second quarter,
PAI attended key jewelry retail and manufacturing shows and promoted the use of
palladium as a pure jewelry metal with some success. While the PAI is still in
its infancy, as it grows its successes could expand palladium's role
internationally as a luxury jewelry metal", said Mr. McAllister.
"Turning to the metal markets, at the end of the second quarter of 2006, the
Company had secured platinum prices in the forward market by entering into
financially settled forward transactions covering 163,500 ounces, or about
approximately 53% of the Company's anticipated platinum mine production for the
period from July 2006 through June 2008 at an anticipated average price of about
$943 per ounce. The Company recorded hedging expense in the second quarter of
2006 totaling $9.2 million for fixed forward and financially-settled forward
contracts that settled below market price during the quarter compared to a
hedging expense of $1.3 million in the second quarter of 2005. These financially
settled forward transactions provide a measure of protection to the Company
against any significant decline in platinum prices," Mr. McAllister concluded.
3
OPERATING RESULTS
QUARTER ENDED JUNE 30
Production
Total PGM production for the second quarter of 2006 was 149,000 ounces, which
includes 115,000 ounces of palladium and 34,000 ounces of platinum at a total
cash cost, a non-GAAP measure of extraction efficiency, of $322 per ounce,
compared to the first quarter 2006 PGM production of 146,000 ounces at a total
cash cost of $313 per ounce - and 2005 second quarter PGM production of 139,000
ounces, also at a total cash cost of $322 per ounce. While PGM production and
realized prices were higher in the second quarter of 2006 than in the same
quarter last year, they were offset by higher labor and material costs and
higher severance taxes and royalties due to higher metal prices.
At the Stillwater Mine, PGM production in the second quarter of 2006 totaled
99,000 ounces at a total cash cost of $310 per ounce, mining at an average rate
of 1,955 tons of ore per day. This compares to 93,000 ounces at a total cash
cost of $312 in the first quarter of 2006 at an average rate of 1,956 tons of
ore per day and 99,000 ounces at a total cash cost of $309 per ounce at an
average rate of 1,951 tons of ore per day in the second quarter last year.
During the quarter, the Stillwater Mine experienced some short-term issues
related to grade and available mining areas and total cash cost was higher as a
result of higher material costs and higher severance and royalties compared to
the similar period in 2005.
The East Boulder Mine produced 50,000 ounces of PGMs at a total cash cost of
$347 per ounce from mining at an average rate of 1,574 tons of ore per day in
the first quarter of 2006. This compares to 53,000 ounces at a total cash cost
of $315 per ounce at an average rate of 1,692 tons of ore per day in the first
quarter of 2006 and 40,000 ounces at a total cash cost of $352 per ounce at an
average rate of 1,298 tons of ore per day in the second quarter last year. The
increase in production at the East Boulder Mine reflects the current available
mining areas and the improved developed state resulting in increased
productivity. Higher total cash cost is the result of higher material costs and
higher severance taxes and royalties as a result of the higher PGM prices
compared to the similar period in 2005.
Development
Primary development of underground footwall laterals and ramps totaled 10,400
feet, consisting of 6,800 feet at the Stillwater Mine and 3,600 feet at the East
Boulder Mine, in the second quarter of 2006, well on track to achieve the
Company's 2006 goal of 40,000 feet. Similarly, diamond drill footage in the
second quarter of 2006 totaled 160,000 feet, representing 110,000 feet at the
Stillwater Mine and 50,000 feet at the East Boulder Mine, in line with the goal
of 600,000 feet for the year.
4
Selective Mining
Tonnage from the Company's captive cut and fill mining program increased to 400
tons per day during the second quarter of 2006, on track to achieve the
Company's goal of 550 tons per day by year-end.
The Company's realized prices per ounce for mine production in the second
quarter of 2006 were $378 for palladium, and $839 for platinum, compared to $355
and $832, respectively, in the second quarter of 2005. The Company's combined
average realized price per ounce of mine production sold for the second quarter
of 2006 was $484. The combined average market price per ounce for the second
quarter of 2006 was $539 compared to $359 last year. The Company's combined
realized price per ounce was partially constrained by ceiling prices on a
portion of the Company's platinum sales and by lower than market realizations on
platinum forward sales.
During the second quarter of 2006, the cost of metals sold from mine production
was $50.0 million, compared to $51.3 million for the second quarter of 2005. The
decrease was mostly due to a 5% decrease in ounces sold between the periods.
Second quarter 2006 sales include 34,000 ounces of PGMs from recycling
activities, and no ounces of palladium inventory received in the 2003 Norilsk
Nickel transaction, since the Company finished selling all of the palladium
received in the 2003 Norilsk Nickel transaction in March 2006. Corresponding
sales for the second quarter of 2005 were 26,000 ounces of PGMs from recycling
activities and 110,000 ounces of the palladium received in the Norilsk Nickel
transaction.
SIX MONTHS ENDED JUNE 30
Production
Total PGM production for the first half of 2006 was 295,000 ounces, which
includes 228,000 ounces of palladium and 67,000 ounces of platinum at a total
cash cost, a non-GAAP measure of extraction efficiency, of $318 per ounce,
compared to PGM production of 283,000 ounces also at a total cash cost of $318
per ounce for the similar period in 2005. This increase in production reflects
stronger performance at the East Boulder Mine, partially offset by short-term
production challenges at the Stillwater Mine.
5
At the Stillwater Mine, PGM production in the first half of 2006 totaled 192,000
ounces at a total cash cost of $311 per ounce. This compares to 204,000 ounces
at a total cash cost of $303 in the first half of 2005. For the same periods,
the East Boulder Mine produced 103,000 ounces of PGMs at a total cash cost of
$331 per ounce from mining, compared to 79,000 ounces at a total cash cost of
$356 per ounce, respectively.
Development
For the first half of 2006, primary development of underground footwall laterals
and ramps totaled 23,800 feet, well on track to achieve the Company's 2006 goal
of 40,000 feet. Similarly, diamond drill footage for the first half of 2006
totaled 358,000 feet, in line with the goal of 600,000 feet for the year.
The Company's realized prices per ounce for mine production in the first half of
2006 were $370 for palladium, and $826 for platinum, compared to $355 and $827,
respectively, in the first half of 2005. The Company's combined average realized
price per ounce of mine production sold for the first half of 2006 was $471. The
combined average market price per ounce for the first half of 2006 was $486
compared to $350 last year. The Company's combined realized price per ounce was
partially constrained by ceiling prices on a portion of the Company's platinum
sales and by lower than market realizations on platinum forward sales.
During the first half of 2006, the cost of metals sold from mine production was
$94.4 million, compared to $97.0 million for the first half of 2005. The
decrease primarily reflects the lower sales volumes from mine production sold
between the periods.
First half 2006 sales include 72,000 ounces of PGMs from recycling activities,
and 63,000 ounces of palladium out of the inventory received in the 2003 Norilsk
Nickel transaction. Corresponding sales for the first half of 2005 were 61,000
ounces of PGMs from recycling activities and 219,000 ounces of the palladium
received in the Norilsk Nickel transaction. The Company sold the last of the
palladium ounces received in the 2003 Norilsk Nickel transaction in March 2006.
FINANCES
Quarter Ended June 30
Revenues decreased 7% to $116.8 million for the second quarter of 2006 compared
with $125.4 million for the second quarter of 2005. The $8.6 million decrease is
a result of the end of sales of palladium received in the 2003 Norilsk Nickel
transaction and a $1.7 million decrease in sales revenue from mine production,
offset by an increase in sales revenues from recycling activities. Sales of
34,000 ounces from recycling activities provided $39.6 million of added revenue
in the second quarter, compared to $16.8 million in the same period of 2005 due
to higher volumes and much higher realized PGM prices.
6
For the second quarter of 2006, net cash used by operating activities was $27.7
million, compared to $34.9 million of net cash provided by operating activities
for the comparable period of 2005. The reduction in cash provided from operating
activities between the second quarter of 2006 and the second quarter of 2005 is
primarily the result of the completion in the first quarter of 2006 of sales of
the palladium received in the Norilsk Nickel transaction.
Capital expenditures totaled $22.2 million in the second quarter of 2006,
including $17.4 million incurred in connection with capitalized mine development
activities, compared to a total of $22.8 million in the same period of 2005,
which included $18.6 million capitalized mine development. During the second
quarter of 2006 capital expenditures at the Stillwater Mine were $12.2 million
of which $9.8 million was capitalized mine development and at the East Boulder
Mine capital expenditures were $9.5 million of which $7.6 million was
capitalized mine development.
SIX MONTHS ENDED JUNE 30
Revenues for the first half of 2006 increased to $256.8 million, compared with
$253.8 million for the same period 2005, as higher PGM prices and volumes for
recycling activities more than offset the decrease in sales of palladium
received in the 2003 Norilsk Nickel transaction due to the Company completing
its sales program in early 2006. Sales of 72,000 ounces from recycling
activities provided $74.3 million of added revenue in the second half, compared
to $42.0 million in the same period of 2005 due to higher volumes and much
higher realized PGM prices.
For the first half of 2006, net cash provided by operating activities was $9.2
million, compared to $80.3 million of net cash provided by operating activities
for the comparable period of 2005. The reduction in cash provided from operating
activities between the first half of 2006 and the first half of 2005 is
primarily the result of the completion in the first quarter of 2006 of sales of
the palladium received in the Norilsk Nickel transaction.
Capital expenditures totaled $45.4 million in the first half of 2006, including
$37.8 million incurred in connection with capitalized mine development
activities, compared to a total of $40.2 million in the same period of 2005,
which included $35.2 million capitalized mine development. During the first half
of 2006 capital expenditures at the Stillwater Mine were $26.1 million of which
$22.6 million was capitalized mine development and at the East Boulder Mine
capital expenditures were $18.3 million of which $15.2 million was capitalized
mine development.
7
During the second quarter of 2006, the Company made $0.5 million in principal
payments on the Company's debt and capital lease obligations. As of June 30,
2006, $1.0 million of the Company's outstanding long-term debt was classified as
a current liability.
At June 30, 2006, the Company has $99.9 million outstanding under its term loan
facility bearing interest at approximately 7.625%. The amount available under
the Company's revolving credit facility is $25.9 million at June 30, 2006,
carrying an annual commitment fee of 0.75%. During the first quarter of 2006,
the Company amended its primary credit facility to reduce the effective interest
rate spread by 100 basis points, which will save approximately $1 million per
year in interest expense.
Subsequent to the end of the second quarter of 2006, the Company entered into an
interest rate swap, as required under the terms of its credit agreement,
effectively fixing the interest rate on $50 million of its long-term debt
through December of 2007. As a result, the effective interest rate on this
portion of the Company's debt will be about 7.628%.
The Company had cash and cash equivalents of $36.0 million at June 30, 2006. If
the Company's highly liquid short-term investments available for sale are
included, the Company had $90.6 million of liquidity at June 30, 2006, compared
to $135.9 million as of December 31, 2005, a $45.3 million decrease. Essentially
all of this 2006 year-to-date decrease reflects cash consumed in building
inventory and other working capital associated with the Company's recycling
activities. The increased working capital requirement in recycling activities
was driven both by higher volumes received for processing and by higher
acquisition costs as underlying PGM prices have increased.
METALS MARKET
During the second quarter of 2006, the market price of palladium averaged $345
per ounce, trading as high as $404 per ounce and as low as $282 per ounce,
ending the quarter at $312 per ounce. Platinum traded in a range from $1,331 per
ounce to $1,070 per ounce and averaged $1,189 per ounce for the quarter ending
it at $1,226 per ounce. The combined average market price per ounce of palladium
and platinum for the second quarter of 2006 was $539 compared to $359 for the
second quarter of 2005.
8
PGM prices continued to increase during the quarter until mid-May, when
investors anticipating continuing interest rate hikes started selling their
commodity positions, weakening prices. PGM prices still reflect both underlying
supply and demand fundamentals and a certain amount of speculative interest in
the metals. The palladium markets continue to see demand growth in particular in
the jewelry sector in China and elsewhere as North American jewelers are taking
an active interest in using the metal for new lines of jewelry.
Stillwater Mining Company will host its 2006 second quarter results conference
call at 11:30 a.m. Eastern Time on August 8, 2006. The conference call dial-in
numbers are 800-288-8968 (U.S.) and 612-332-0107 (International). The conference
call will be simultaneously webcast on the Internet via the Company's Website at
www.stillwatermining.com. To access the conference call on the Company's Website
go to the Investor Relations Section under Presentations and click on the link
to the Conference Call. A replay of the conference call will be archived on the
Company's Website or can be accessed by a telephone replay, which is scheduled
to begin on August 8, 2006 at 3:00 p.m. Eastern Time, dial-in numbers (800)
475-6701 (U.S.) and (320) 365-3844 (International), access code 838859, through
August 15, 2006, ending at 11:59 p.m. Eastern Time.
Stillwater Mining Company is the only U.S. producer of palladium and platinum
and is the largest primary producer of platinum group metals outside of South
Africa and Russia. 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,
costs, grade, production and recovery rates, permitting, 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, 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 2005 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.
Key Factors Tables and Financial Statements follow.
9
STILLWATER MINING COMPANY
KEY FACTORS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
OPERATING AND COST DATA FOR MINE PRODUCTION
CONSOLIDATED:
- -------------
Ounces produced (000)
Palladium 115 107 228 218
Platinum 34 32 67 65
------------ ------------ ------------ ------------
Total 149 139 295 283
============ ============ ============ ============
Tons milled (000) 323 296 649 609
Mill head grade (ounce per ton) 0.51 0.50 0.50 0.50
Sub-grade tons milled (000) (1) 14 24 29 37
Sub-grade tons mill head grade (ounce per ton) 0.12 0.16 0.13 0.17
Total tons milled (000) (1) 337 320 678 646
Combined mill head grade (ounce per ton) 0.49 0.48 0.48 0.49
Total mill recovery (%) 91 91 91 91
Total operating costs (000) (Non-GAAP) (2) $ 40,061 $ 38,022 $ 78,545 $ 76,814
Total cash costs (000) (Non-GAAP) (2) $ 47,889 $ 44,561 $ 93,709 $ 89,998
Total production costs (000) (Non-GAAP) (2) $ 68,356 $ 64,604 $ 135,135 $ 130,969
Total operating costs per ounce (Non-GAAP) (3) $ 269 $ 274 $ 266 $ 271
Total cash costs per ounce (Non-GAAP) (3) $ 322 $ 322 $ 318 $ 318
Total production costs per ounce (Non-GAAP) (3) $ 460 $ 466 $ 458 $ 463
Total operating costs per ton milled (Non-GAAP) (3) $ 119 $ 119 $ 116 $ 119
Total cash costs per ton milled (Non-GAAP) (3) $ 142 $ 139 $ 138 $ 139
Total production costs per ton milled (Non-GAAP) (3) $ 203 $ 202 $ 199 $ 203
STILLWATER MINE:
- ----------------
Ounces produced (000)
Palladium 76 76 148 156
Platinum 23 23 44 48
------------ ------------ ------------ ------------
Total 99 99 192 204
============ ============ ============ ============
Tons milled (000) 180 178 356 374
Mill head grade (ounce per ton) 0.59 0.59 0.58 0.58
Sub-grade tons milled (000) (1) 14 24 29 37
Sub-grade tons mill head grade (ounce per ton) 0.12 0.16 0.13 0.17
Total tons milled (000) (1) 194 202 385 411
Combined mill head grade (ounce per ton) 0.56 0.53 0.55 0.54
Total mill recovery (%) 92 92 92 92
Total operating costs (000) (Non-GAAP) (2) $ 25,641 $ 26,073 $ 50,022 $ 52,844
Total cash costs (000) (Non-GAAP) (2) $ 30,739 $ 30,591 $ 59,836 $ 61,871
Total production costs (000) (Non-GAAP) (2) $ 42,477 $ 43,794 $ 83,572 $ 89,166
Total operating costs per ounce (Non-GAAP) (3) $ 259 $ 264 $ 261 $ 259
Total cash costs per ounce (Non-GAAP) (3) $ 310 $ 309 $ 311 $ 303
Total production costs per ounce (Non-GAAP) (3) $ 428 $ 443 $ 434 $ 437
Total operating costs per ton milled (Non-GAAP) (3) $ 132 $ 129 $ 130 $ 129
Total cash costs per ton milled (Non-GAAP) (3) $ 159 $ 152 $ 155 $ 151
Total production costs per ton milled (Non-GAAP) (3) $ 219 $ 217 $ 217 $ 217
10
STILLWATER MINING COMPANY
KEY FACTORS (continued)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
OPERATING AND COST DATA FOR MINE PRODUCTION
(CONTINUED)
EAST BOULDER MINE:
- ------------------
Ounces produced (000)
Palladium 39 31 80 62
Platinum 11 9 23 17
------------ ------------ ------------ ------------
Total 50 40 103 79
============ ============ ============ ============
Tons milled (000) 143 118 293 235
Mill head grade (ounce per ton) 0.40 0.38 0.40 0.38
Sub-grade tons milled (000) (1) - - - -
Sub-grade tons mill head grade (ounce per ton) - - - -
Total tons milled (000) (1) 143 118 293 235
Combined mill head grade (ounce per ton) 0.40 0.38 0.40 0.38
Total mill recovery (%) 89 89 90 89
Total operating costs (000) (Non-GAAP) (2) $ 14,420 $ 11,949 $ 28,524 $ 23,970
Total cash costs (000) (Non-GAAP) (2) $ 17,150 $ 13,970 $ 33,874 $ 28,127
Total production costs (000) (Non-GAAP) (2) $ 25,879 $ 20,810 $ 51,563 $ 41,803
Total operating costs per ounce (Non-GAAP) (3) $ 288 $ 301 $ 277 $ 303
Total cash costs per ounce (Non-GAAP) (3) $ 347 $ 352 $ 331 $ 356
Total production costs per ounce (Non-GAAP)(3) $ 524 $ 524 $ 503 $ 529
Total operating costs per ton milled (Non-GAAP) (3) $ 101 $ 101 $ 97 $ 102
Total cash costs per ton milled (Non-GAAP) (3) $ 120 $ 119 $ 116 $ 120
Total production costs per ton milled (Non-GAAP) (3) $ 181 $ 177 $ 176 $ 178
(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, Norilsk Nickel transaction expenses 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 Costs of Revenues" 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 Costs of Revenues" and the accompanying discussion.
11
Stillwater Mining Company
KEY FACTORS (continued)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
SALES AND PRICE DATA
OUNCES SOLD (000)
Mine Production:
Palladium 118 121 225 229
Platinum 35 40 64 71
------------ ------------ ------------ ------------
Total 153 161 289 300
Other PGM activities:
Palladium 21 121 107 241
Platinum 18 14 41 39
Rhodium 4 9 14 22
------------ ------------ ------------ ------------
Total 43 144 162 302
------------ ------------ ------------ ------------
Total ounces sold 196 305 451 602
============ ============ ============ ============
AVERAGE REALIZED PRICE PER OUNCE (4)
Mine Production:
Palladium $ 378 $ 355 $ 370 $ 355
Platinum $ 839 $ 832 $ 826 $ 827
Combined $ 484 $ 472 $ 471 $ 466
OTHER PGM ACTIVITIES:
Palladium $ 329 $ 189 $ 287 $ 188
Platinum $ 1,060 $ 865 $ 1,018 $ 857
Rhodium $ 4,019 $ 1,588 $ 3,413 $ 1,523
AVERAGE MARKET PRICE PER OUNCE (4)
Palladium $ 345 $ 192 $ 318 $ 190
Platinum $ 1,189 $ 871 $ 1,111 $ 867
Combined $ 539 $ 359 $ 486 $ 350
(4) The company's average realized price represents revenues (include the
effect of contractual floor and ceiling prices) and hedging gains and losses
realized on commodity instruments, but excluding contract discounts, all divided
by total ounces sold. The average market price represents the average monthly
London PM Fix for palladium, platinum and combined prices and Johnson Matthey
for rhodium prices for the actual months of the period.
12
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 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 costs of revenues (a GAAP measure
included in the Company's Statement of Operations and Comprehensive 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 earnings or 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 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 cost 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 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 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. 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.
13
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. 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. 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.
14
RECONCILIATION OF NON-GAAP MEASURES TO COSTS OF REVENUES
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
(in thousands) 2006 2005 2006 2005
- ---------------------------------------------------- ----------- ----------- ----------- -----------
CONSOLIDATED:
- -------------
RECONCILIATION TO CONSOLIDATED COSTS OF REVENUES:
Total operating costs (Non-GAAP) $ 40,061 $ 38,022 $ 78,545 $ 76,815
Royalties, taxes and other 7,828 6,539 15,164 13,183
----------- ----------- ----------- -----------
Total cash costs (Non-GAAP) $ 47,889 $ 44,561 $ 93,709 $ 89,998
Asset retirement costs 161 148 318 230
Depreciation and amortization 21,351 21,821 41,261 39,277
Depreciation and amortization (in inventory) (1,045) (1,926) (153) 1,464
----------- ----------- ----------- -----------
Total production costs (Non-GAAP) $ 68,356 $ 64,604 $ 135,135 $ 130,969
Change in product inventories 2,738 37,720 32,681 68,992
Costs of recycling activities 37,969 15,857 69,937 39,322
Recycling activities - depreciation 25 14 50 27
Add: Profit from recycling activities 3,384 1,203 6,710 3,103
Loss or (gain) on sale of assets and other costs 50 (19) 235 12
----------- ----------- ----------- -----------
Total consolidated costs of revenues $ 112,522 $ 119,379 $ 244,748 $ 242,425
=========== =========== =========== ===========
STILLWATER MINE:
- ----------------
RECONCILIATION TO COSTS OF REVENUES:
Total operating costs (Non-GAAP) $ 25,641 $ 26,073 $ 50,022 $ 52,845
Royalties, taxes and other 5,098 4,518 9,814 9,026
----------- ----------- ----------- -----------
Total cash costs (Non-GAAP) $ 30,739 $ 30,591 $ 59,836 $ 61,871
Asset retirement costs 116 107 230 149
Depreciation and amortization 11,996 15,392 24,192 26,287
Depreciation and amortization (in inventory) (374) (2,296) (686) 859
----------- ----------- ----------- -----------
Total production costs (Non-GAAP) $ 42,477 $ 43,794 $ 83,572 $ 89,166
Change in product inventories (1,402) 8,210 (4,486) 3,048
Add: Profit from recycling activities 2,265 861 4,376 2,244
Loss or (gain) on sale of assets and other costs 13 (19) 171 (10)
----------- ----------- ----------- -----------
Total costs of revenues $ 43,353 $ 52,846 $ 83,633 $ 94,448
=========== =========== =========== ===========
EAST BOULDER MINE:
- ------------------
RECONCILIATION TO COSTS OF REVENUES:
Total operating costs (Non-GAAP) $ 14,420 $ 11,949 $ 28,524 $ 23,970
Royalties, taxes and other 2,730 2,021 5,350 4,157
----------- ----------- ----------- -----------
Total cash costs (Non-GAAP) $ 17,150 $ 13,970 $ 33,874 $ 28,127
Asset retirement costs 45 41 88 81
Depreciation and amortization 9,355 6,429 17,068 12,990
Depreciation and amortization (in inventory) (671) 370 533 605
----------- ----------- ----------- -----------
Total production costs (Non-GAAP) $ 25,879 $ 20,810 $ 51,563 $ 41,803
Change in product inventories 978 (872) (1,897) (844)
Add: Profit from recycling activities 1,119 342 2,334 859
Loss or (gain) on sale of assets and other costs - - 28 22
----------- ----------- ----------- -----------
Total costs of revenues $ 27,976 $ 20,280 $ 52,028 $ 41,840
=========== =========== =========== ===========
OTHER PGM ACTIVITIES: (1)
- ---------------------
RECONCILIATION TO COSTS OF REVENUES:
Change in product inventories $ 3,162 $ 30,382 $ 39,064 $ 66,788
Recycling activities - depreciation 25 14 50 27
Costs of recycling activities 37,969 15,857 69,937 39,322
Loss or (gain) on sale of assets and other costs 37 - 36 -
----------- ----------- ----------- -----------
Total costs of revenues $ 41,193 $ 46,253 $ 109,087 $ 106,137
=========== =========== =========== ===========
(1) Other PGM activities include recycling and sales of palladium received in
the Norilsk Nickel transaction and other
15
STILLWATER MINING COMPANY
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
REVENUES
Mine production $ 74,099 $ 75,845 $ 136,373 $ 140,034
PGM recycling 39,579 16,849 74,254 41,958
Sales of palladium received in the Norilsk
Nickel transaction and other 3,148 32,716 46,158 71,795
------------ ------------ ------------ ------------
Total revenues 116,826 125,410 256,785 253,787
COSTS AND EXPENSES
Cost of metals sold
Mine production 50,015 51,305 94,436 96,980
PGM recycling 37,969 15,857 69,937 39,322
Sales of palladium received in Norilsk
Nickel transaction and other 3,162 30,382 39,064 66,819
------------ ------------ ------------ ------------
Total costs of metals sold 91,146 97,544 203,437 203,121
Depreciation and amortization
Mine production 21,351 21,821 41,261 39,277
PGM recycling 25 14 50 27
------------ ------------ ------------ ------------
Total depreciation and amortization 21,376 21,835 41,311 39,304
------------ ------------ ------------ ------------
Total costs of revenues 112,522 119,379 244,748 242,425
Exploration 332 - 332 -
Marketing 682 142 890 352
General and administrative 5,961 4,806 12,058 9,347
------------ ------------ ------------ ------------
Total costs and expenses 119,497 124,327 258,028 252,124
Operating (loss) income (2,671) 1,083 (1,243) 1,663
OTHER INCOME (EXPENSE)
Interest income 3,069 1,178 5,053 2,192
Interest expense (2,735) (2,876) (5,540) (5,678)
------------ ------------ ------------ ------------
Loss before income tax provision (2,337) (615) (1,730) (1,823)
Income tax provision - - (10) (3)
------------ ------------ ------------ ------------
Net loss $ (2,337) $ (615) $ (1,740) $ (1,826)
------------ ------------ ------------ ------------
Other comprehensive loss, net of tax (13,042) (2,218) (29,592) (1,957)
------------ ------------ ------------ ------------
Comprehensive loss $ (15,379) $ (2,833) $ (31,332) $ (3,783)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 91,207 90,608 91,135 90,550
Diluted 91,207 90,608 91,135 90,550
BASIC LOSS PER SHARE
------------ ------------ ------------ ------------
Net loss $ (0.03) $ (0.01) $ (0.02) $ (0.02)
============ ============ ============ ============
DILUTED LOSS PER SHARE
------------ ------------ ------------ ------------
Net loss $ (0.03) $ (0.01) $ (0.02) $ (0.02)
============ ============ ============ ============
16
STILLWATER MINING COMPANY
BALANCE SHEET
(Unaudited)
(in thousands, except share and per share data)
June 30, December 31,
2006 2005
-------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 35,957 $ 80,260
Restricted cash 2,685 2,685
Investments, at fair market value 54,668 55,668
Inventories 128,992 86,634
Accounts receivable 12,494 27,287
Deferred income taxes 3,060 5,313
Prepaid deposits 24,668 6,950
Other current assets 4,926 4,114
-------------- --------------
Total current assets $ 267,450 $ 268,911
-------------- --------------
Property, plant and equipment (net of $180,251 and $141,396
accumulated depreciation and amortization) 448,735 445,199
Other noncurrent assets 10,423 7,347
-------------- --------------
Total assets $ 726,608 $ 721,457
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 16,185 $ 14,407
Accrued payroll and benefits 18,625 17,801
Property, production and franchise taxes payable 10,396 9,542
Current portion of long-term debt and capital lease obligations 1,646 1,776
Portion of debt repayable upon liquidation of finished palladium
in inventory - 7,324
Fair value of derivative instruments 34,978 13,284
Other current liabilities 11,498 4,953
-------------- --------------
Total current liabilities $ 93,328 $ 69,087
-------------- --------------
Long-term debt and capital lease obligations 129,846 132,307
Fair value of derivative instruments 12,447 4,318
Deferred income taxes 3,060 5,313
Accrued workers compensation 9,480 5,854
Asset retirement obligation 7,646 7,328
Other noncurrent liabilities 4,004 3,706
-------------- --------------
Total liabilities $ 259,811 $ 227,913
-------------- --------------
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;
91,247,742 and 90,992,045 shares issued and outstanding 912 910
Paid-in capital 612,411 607,828
Accumulated deficit (99,532) (97,792)
Accumulated other comprehensive loss (46,994) (17,402)
-------------- --------------
Total stockholders' equity $ 466,797 $ 493,544
-------------- --------------
Total liabilities and stockholders' equity $ 726,608 $ 721,457
============== ==============
See notes to consolidated financial statements
17
STILLWATER MINING COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
2006 2005 2006 2005
-------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,337) $ (615) (1,740) $ (1,826)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities
Depreciation and amortization 21,376 21,835 41,311 39,304
Lower of cost or market inventory adjustment 42 - 1,140 -
Loss on disposal of property, plant and equipment 50 - 235 -
Stock issued under employee benefit plans 941 1,191 2,254 2,318
Amortization of debt issuance costs 198 159 383 319
Share based compensation 933 666 1,527 1,055
Changes in operating assets and liabilities
Inventories (39,572) 19,680 (43,652) 44,482
Accounts receivable (60) (3,819) 14,793 (4,819)
Accounts payable 2,669 9 1,778 (492)
Other (11,946) (4,167) (8,781) (73)
-------------- -------------- -------------- --------------
Net cash (used in) provided by operating activities (27,706) 34,939 9,248 80,268
-------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (22,232) (22,755) (45,356) (40,222)
Proceeds from disposal of property, plant and equipment 207 - 263 -
Purchases of investments (19,859) (6,440) (68,019) (22,671)
Proceeds from maturities of investments 38,532 24,670 69,250 35,821
-------------- -------------- -------------- --------------
Net cash used in investing activities (3,352) (4,525) (43,862) (27,072)
-------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt and capital lease obligations (461) (7,488) (9,915) (7,941)
Payments for debt issuance costs - - (579) -
Issuance of common stock, net of stock issue costs 601 1 805 9
-------------- -------------- -------------- --------------
Net cash provided by (used in) financing activities 140 (7,487) (9,689) (7,932)
-------------- -------------- -------------- --------------
CASH AND CASH EQUIVALENTS
Net increase (decrease) (30,918) 22,927 (44,303) 45,264
Balance at beginning of period 66,875 118,389 80,260 96,052
-------------- -------------- -------------- --------------
Balance at end of period $ 35,957 $ 141,316 $ 35,957 $ 141,316
============== ============== ============== ==============
###
18