core sector communique

Stillwater Mining Reports Earnings of $40.7 Million for the Third Quarter BILLINGS, MT--(Marketwire - October 28, 2011) - STILLWATER MINING COMPANY (NYSE: SWC) (TSX: SWC.U) Third-quarter 2011 net income of $40.7 million or $0.37 per diluted share; up substantially from 2010 third-quarter earnings of $5.9 million or $0.06 per diluted share Strong prices for palladium and platinum during the third quarter Mined palladium and platinum production of 130,000 ounces was ahead of plan Recycling ounces processed increased more than 70% over the third quarter of 2010 to 133,500 ounces of palladium, platinum and rhodium Company to review timing and scale of project spending in light of recent financial markets Stillwater Mining Company today reported net income for the 2011 third quarter of $40.7 million or $0.37 per diluted share, on revenues of $253.7 million. This compares to third quarter 2010 net income of $5.9 million, or $0.06 per diluted share, on revenues of $142.9 million. For the first nine months of 2011, Stillwater reported record net income of $119.6 million, or $1.10 per fully diluted share, on revenues of $646.3 million, more than three-and-a-half times higher than net income of $33.8 million, or $0.34 per diluted share, on revenues of $411.2 million, in the same period in 2010. The Company mines palladium and platinum from two underground mines located in south-central Montana. The mines produced a total of 130,000 ounces of palladium and platinum during the third quarter of 2011, a 6.2% increase from the 122,400 ounces produced during the third quarter of 2010. Production at the Company's Stillwater Mine increased to 96,800 ounces in the third quarter of 2011, compared to 89,600 ounces in the same quarter of 2010. Production at the Company's East Boulder Mine was 33,200 ounces in the third quarter of 2011, slightly more than the 32,800 ounces in the same quarter of 2010. Improved ore grades in the lower off-shaft area, good mining productivities and the contribution of higher grades in the east area of the Stillwater Mine drove the higher production for the 2011 third quarter. Reflecting on the Company's third-quarter results, Francis R. McAllister, Stillwater Chairman and CEO, commented, "I am pleased to be able to report a stellar quarter of earnings. The Company's outstanding third quarter performance adds to the record earnings results we reported for the first two quarters of this year. Our teams continue to perform well across the board and I appreciate their outstanding efforts. "We are extremely pleased with mine production results for the third quarter and the first nine months of the year, which exceeded our expectations. As we discussed last quarter, after achieving very strong production during the first half of the year, we planned to shift some resources out of ore production and into mine development in order to sustain the developed state of the two mines. We made those adjustments during the third quarter as planned and intend to continue them during the fourth quarter of this year. After reviewing year-to-date mine production and our plans for the fourth quarter, we decided to maintain our palladium and platinum production guidance at 515,000 mined ounces for the year. "The Company realized strong PGM prices during the third quarter of 2011, which certainly contributed to our excellent earnings performance. However, as the third quarter progressed, market prices for these metals declined amid investor concerns about the financial turmoil in Europe and the overall condition of the world economy. At current PGM prices (New York) of about $670 per ounce for palladium and $1,641 per ounce for platinum, we believe the Company's available liquidity and continuing cash flow from operations will be adequate to support current operations. However, when PGM prices decline significantly, prudent management requires that we reassess our business plans in order to manage through the downturn in the cycle. We obviously have several capital intensive projects in our development pipeline. Until we are able to put firm financing in place for these projects, we have sought to retain significant discretion within our capital spending plan to reallocate resources and, to a reasonable extent, adjust the timing of spending as needed depending on metals prices and the Company's available cash flow. As we have discussed, we will continue to be opportunistic as we evaluate outside financing alternatives to strengthen our financial position and provide funding for longer-term capital needs. "Along with the exceptional operational performance during the quarter, we continued to make progress with the Blitz and Graham Creek development projects adjacent to our existing operations in Montana. The Company is awaiting delivery of a refurbished tunnel boring machine to facilitate the Blitz project, which is located just to the east of our existing Stillwater Mine. The Blitz project will be carried out over several years and ultimately will extend underground access out to about 26,000 feet east of the existing Stillwater shaft. We expect to take delivery of the TBM in February of next year and have it available for operation by May 2012. Our other Montana initiative, the Graham Creek project, is designed to advance another 7,000 feet, (in addition to the 1,200 feet developed during 2011) toward the west from the present East Boulder Mine infrastructure using an existing TBM that is already operating there. We currently estimate that the Graham Creek TBM drive could be completed as soon as the first half of 2013, to be followed by an intensive multi-year drilling program intended to more fully define the Graham Creek resource. "On October 4, 2011, we completed our acquisition of Peregrine Metals Ltd., a Canadian mining company with attractive exploration prospects in South America. Consideration paid for this acquisition included 12.0 million shares of Stillwater common stock and net cash of $165.7 million. Peregrine's principal asset is the Altar project, a major undeveloped copper-gold porphyry located on a large exploration tract in the San Juan province of Argentina. The Peregrine acquisition, along with the Marathon PGM acquisition completed last year, represent significant diversification measures for Stillwater, expanding well beyond the Company's current PGM operations along the J-M Reef in Montana. These acquisitions are the result of efforts over several years to identify appropriate diversification opportunities that will broaden our economic profile, mitigate our exposure to cycles in PGM prices and provide a platform for future growth. We anticipate spending approximately $8 million on Altar exploration drilling during the fourth quarter as part of a total $20 to $25 million exploration program in this year's November 2011 to May 2012 drilling season. "We also continue to make progress at our Marathon PGM-copper project in Ontario, Canada. This project is currently in the environmental assessment phase, with detailed engineering scheduled to begin in November 2011. In August the joint federal and provincial panel responsible for reviewing the Marathon project issued extensive guidelines for preparing the formal environmental assessment of the project. We have made considerable progress on the environmental and permitting requirements needed to complete the environmental assessment and subsequent operating permit processes, as well as establishing general arrangements for project infrastructure. We are scheduled to complete and submit the environmental assessment for consideration by the review panel in March 2012. Separately, we also have completed additional delineation drilling at Marathon in order to optimize design of the pit configurations and ensure proper placement of the tailings facility. Exploration drilling also is under way on various other Company properties in the area, with the goal of expanding the existing resource. Our preliminary estimate of the cost to construct the mine has increased and is now projected in the range of $550 million to $650 million, with increased tailings disposal infrastructure needed to meet the Company's standards and regulatory requirements comprising a large part of the higher cost. Project economics still appear very robust even at this higher level of capital spending. "Late last week we reported on two separate occurrences of smoke in the Stillwater Mine that each resulted in the mine being evacuated. No one was injured in these incidents. Upon investigation, the smoke was created as a result of premature failure of turbo chargers potentially caused by unburned carbon building up within the diesel particulate traps on the affected machines. Once we recognized the cause of the problem, we took our underground diesel equipment at both mines out of service in order to inspect for similar problems. As these inspections have been completed, the equipment has been placed back into operation. The Federal Mine Safety and Health Administration also has conducted an investigation of the incidents. While we clearly have seen lower mine production over the past few days as a result of all this, we have not adjusted our 2011 annual production guidance of 515,000 palladium and platinum ounces. This extensive inspection program has required a lot of dedicated effort over the past few days, and I appreciate all the hard work our employees have put into resolving this issue." Concluding his remarks, Mr. McAllister added, "Despite the decline in PGM prices that we have experienced recently, we continue to believe in the favorable underlying supply and demand fundamentals for PGMs. Mine output of palladium and platinum worldwide remains constrained, even in the face of strong continuing growth in demand for these metals from the auto industry. With respect to our ongoing capital expenditures and the need to finance our various expansion and development projects, in light of the recent turbulence in the financial markets, we are reviewing these spending requirements and expect to prioritize the needs for capital. At recent PGM prices, we do not believe the Company will have adequate cash resources to fund all the anticipated project spending if we are not able to arrange some form of external financing. We believe it prudent to carefully review these commitments and address time frames for development in light of the financial markets and the likely increased cost of funds." Combined sales realizations continued to improve during the third quarter of 2011 for mined palladium and platinum ounces, with our "market basket" price averaging $988 per ounce, significantly higher than the $687 per ounce realized in the third quarter of 2010. The total quantity of mined palladium and platinum sold increased to 137,800 ounces in the third quarter of 2011, compared to 120,500 ounces sold during the same period in 2010, reflecting the increased 2011 production at the Stillwater Mine. The difference between the 130,000 mined ounces produced during the third quarter and the 137,800 mined ounces sold is due to normal timing fluctuations for final processing. Total cash costs (a non-GAAP measure defined below) averaged $439 per ounce in the third quarter of 2011, compared to total cash costs of $402 per ounce for the same period in 2010. The Stillwater Mine's total cash costs averaged $411 per ounce in the third quarter of 2011, compared to $374 per ounce in the third quarter of 2010. This increase is primarily attributable to higher royalties and ad valorem taxes associated with increased PGM prices, as well as to the higher costs of mining in the east area of the mine. The East Boulder Mine costs averaged $520 per ounce during the third quarter of 2011, compared to $480 per ounce during the third quarter of 2010. The major driver of this increase was higher royalties and taxes during the quarter. Total cash costs for the first three quarters of 2011 averaged $419 per ounce compared to $386 per ounce for the same period in 2010. The Company is maintaining its total cash cost guidance of $430 per mined ounce for the full year 2011. The Company's smelting and refining complex in Columbus, Montana processes mine concentrates and recycles spent catalyst material received from third parties. A portion of the recycling material is purchased for the Company's own account and the balance is toll processed on behalf of others and returned. In total, the Company processed recycling material containing 133,500 ounces of platinum, palladium and rhodium through the smelter and refinery during the third quarter of 2011, up over 70% from the 78,500 ounces recycled during the third quarter of 2010. The higher volume in 2011 is the result of higher PGM prices which increase the financial incentive to collect material for recycling, as well as reflecting the new business attracted by the efficiency of the Company's redesigned processing facilities. The recycling segment had net income for the 2011 third quarter of $4.4 million (including financing income), up from net income of $3.1 million in the third quarter of 2010. Higher combined average realizations and higher sales volumes in the quarter were offset in part by increased costs as a result of modifications to supplier contracts that allow the Company to remain competitive in the recycling business. Cash Flow and Liquidity At September 30, 2011, the Company's available cash and cash equivalents (excluding $35.1 million of restricted cash) totaled $172.2 million, up significantly from the $105.0 million available at June 30, 2011. Including the Company's available-for-sale investments, total available cash and investments at September 30, 2011, was $261.9 million, up from the $254.9 million at June 30, 2011 and up $53.5 million, from $208.4 million at the end of last year. Net working capital -- comprised of total current assets including available cash and investments, less current liabilities -- increased during the third quarter of 2011 to $407.0 million, up from $376.5 million at June 30, 2011, and from $291.2 million at December 31, 2010. Reflecting higher PGM prices and increased recycling volumes, total value in inventory associated with the Company's recycling business was $102.9 million at September 30, 2011, up from $31.7 million at the same time last year. Net cash provided by operating activities (which includes changes in working capital) totaled $35.2 million in this year's third quarter, compared to $44.5 million of cash provided by operations in the third quarter of 2010. The decrease in cash from operations in the 2011 third quarter mostly reflects the substantial growth in recycling inventories during 2011, reflecting both the growth in volumes processed and higher PGM prices. Capital expenditures were $30.8 million (of which $2.8 million was included in payables at September 30, 2011) in the third quarter of 2011, up from $10.9 million in the third quarter of 2010. With its ongoing mining operations, the expansion projects of Blitz and Graham Creek, the desire to proceed with the Marathon and Altar projects, and the likely need to refinance its convertible debt in 2013, the Company expected to utilize a combination of its internal cash being generated and external funds raised in the capital markets to satisfy its capital needs. In view of the recent financial markets, the Company is reviewing its capital and spending requirements and prioritizing its capital needs. In the absence of external financing, the Company does not believe that it will have sufficient cash available to fund all its budgeted projects. The Company's ability to access the capital markets (taking into account the inherent costs associated therewith) or otherwise entertain a joint venture partner on satisfactory terms will heavily influence the timing and development of projects. The Company emphasizes that no decisions have been made but management believes it prudent to carefully review its commitments and address time frames for development in light of the financial markets and the likely increased costs of funds. Management expects to reassess development and capital spending from time to time in any case, monitoring the effect on the Company's available liquidity of changes in metal prices, financing costs and the cost of mining. Outstanding debt at September 30, 2011, was $196.0 million, essentially unchanged from June 30, 2011, and December 31, 2010. The Company's total debt includes $166.5 million outstanding in the form of debentures due in 2028 (with a date of first call in March 2013) and $29.5 million of Exempt Facility Revenue Bonds due in 2020. Third Quarter Results - Details For the third quarter of 2011, the Company's mine production was 130,000 PGM ounces including 96,800 ounces from the Stillwater Mine and 33,200 ounces from the East Boulder Mine. For the comparable quarter of 2010, the mines produced 122,400 ounces including 89,600 ounces at the Stillwater Mine and 32,800 ounces at the East Boulder Mine. The sharp increase in production at the Stillwater Mine was primarily attributable to additional tons mined, higher ore grades in the lower off-shaft area and contributions from higher grade ore in the east area of the mine. Ounces sold from mine production totaled 137,800 ounces in the third quarter of 2011 at an overall average realization of $988 per ounce, up from 120,500 ounces at $687 per ounce in the third quarter of 2010. Mine revenues increased to $145.0 million in the 2011 third quarter from $88.2 million in the same quarter of 2010. The higher 2011 mine revenues resulted from higher volumes of mined ounces sold at significantly higher PGM prices. The Company's average realization on palladium sales from mine production was $772 per ounce in the 2011 third quarter, compared to $471 per ounce for the same period in 2010. The Company's average net realization on platinum was $1,784 per ounce in the third quarter of 2011 and $1,448 per ounce in the 2010 third quarter. The strong PGM prices during the third quarter began to decline late in the period amid world economic concerns. The London Bullion Metals Association afternoon posted prices per ounce for palladium and platinum were $614 and $1,511, respectively, on September 30, 2011, and $573 and $1,662, respectively, on September 30, 2010. In its recycling activities, the Company processes material purchased from third parties for its own account and toll material that is processed on behalf of others for a fee, normally recovering platinum, palladium and rhodium. During the third quarter of 2011, the Company processed 133,500 total ounces of PGMs from recycled catalytic materials, including both purchased and tolled material. By comparison, in the third quarter of 2010, the Company processed 78,500 ounces of recycled material. The Company delivered for sale a total of 86,700 ounces of platinum, palladium and rhodium from recycled inventories during the third quarter of 2011 at an overall average price of $1,230 per ounce; for the third quarter of 2010, the Company sold 48,900 recycled ounces at an average realization of $1,099 per ounce. The increased level of activity in the third quarter of 2011 reflected a much higher level of PGM recycling activity worldwide as a result of higher metals prices. Total revenues for the third quarter of 2011 were $253.7 million, up 77.5% from the $142.9 million recorded in the third quarter of 2010. Proceeds from sales of mined PGMs and by-products totaled $145.0 million in the third quarter of 2011, 64.4% higher than the $88.2 million in the same quarter of 2010, again resulting from higher volumes of mined ounces sold and higher PGM prices in the third quarter of 2011. Recycling revenues increased to $107.5 million from $54.7 million in last year's third quarter. Costs of metals sold (before depreciation and amortization expense) increased to $175.5 million in the third quarter of 2011 from $109.9 million in the third quarter of 2010. Mining costs included in costs of metals sold increased to $71.0 million in the third quarter of 2011 from $58.2 million in the third quarter of 2010. Recycling costs, which primarily reflect the cost of acquiring spent catalytic materials for processing, increased to $103.3 million in the third quarter of 2011, compared to the $51.7 million reported in the third quarter of 2010. The increase was due to higher recycling volumes processed and sold and the higher value of the materials acquired for processing. Depreciation and amortization expense decreased to $15.6 million in the 2011 third quarter from $18.1 million in the same period of 2010. The decrease is attributable to lower amortization rates per ton in the third quarter of 2011. General and administrative ("G&A") costs, including marketing, research and development and exploration expenses, increased to $18.3 million in the third quarter of 2011 from $8.4 million in the same period of 2010. Included in G&A costs for the third quarter of 2011 were $4.3 million in marketing expenses, $0.5 million related to research and development efforts, $0.3 million in exploration expenses, $0.2 million of overhead expenses at the Marathon project, $4.7 million in expenses associated with financing options and $1.3 million of acquisition costs related to Peregrine Metals Ltd. Reported net income for the third quarter of 2011 of $40.7 million included, by business segment, net income of $58.6 million from mining operations and $4.4 million from recycling activities (including financing income), less corporate costs including $18.3 million of G&A expense, $2.8 million income tax provision and $1.2 million of unallocated net interest expense. The reported net income of $5.9 million for the third quarter of 2010 included, by business segment, a net income of $12.0 million from mining operations and $3.1 million from recycling activities, less corporate costs including $9.2 million of G&A expense. First Nine Months' Results - Details In the first nine months of 2011, the Company's mining operations produced 403,800 PGM ounces including 304,200 ounces from the Stillwater Mine and 99,600 ounces from the East Boulder Mine. For the comparable period in 2010, total mine production of 364,000 ounces included Stillwater Mine production of 265,100 ounces and East Boulder Mine production of 98,900 ounces. Production at the Stillwater Mine has increased due to additional tons mined and higher ore grades in the lower off-shaft area and contributions from the east areas of the mine. Sales of palladium and platinum from mine production totaled 389,500 ounces in the first nine months of 2011 at an overall average realization of $981 per ounce; the same period in 2010 sales of mine production totaled 372,300 ounces at $683 per ounce. The Company's average realization to date in 2011 on palladium sales from mine production was $769 per ounce, compared to $456 per ounce in the same period of 2010. The comparable average realization on platinum sales of mine production was $1,778 per ounce for the first nine months of 2011 and $1,465 per ounce in the first nine months of 2010. During the first nine months of 2011, the Company processed about 374,300 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 2010, the Company processed about 297,000 ounces of recycled material. Of the purchased catalyst processed, the Company sold a total of 190,700 ounces of platinum, palladium and rhodium during the first nine months of 2011 at an overall average price of about $1,232 per ounce; for the first nine months of 2010, the Company sold about 121,600 recycled ounces at an average realization of $1,042 per ounce. Revenues for the first nine months of 2011 totaled $646.3 million, up 57.2% from $411.2 million in the first nine months of 2010. Revenues from sales of mined PGMs totaled $406.7 million in the first nine months of 2011, up from $276.0 million in the same period of 2010. Recycling revenues increased to $238.4 million from $130.6 million in the first nine months of 2010. Higher total revenue in 2011 was a result of both higher sales volumes and higher PGM prices. Sales of purchased metals in the first nine months of 2011 totaled $1.1 million, in the same period of 2010 sales of purchased metals totaled $4.6 million. Costs of metals sold (before depreciation and amortization expense) increased to $425.5 million in the first nine months of 2011, up from $297.6 million in the same period of 2010. Mining costs included in costs of metals sold increased to $196.4 million in the first nine months of 2011 up from $171.0 million in the same period of 2010. Recycling costs, largely comprised of the cost to purchase spent catalytic materials for processing, totaled $228.0 million in the first nine months of 2011, up from $121.9 million in the first nine months of 2010. The increase in cost was attributable to the higher value of the contained metals in the material purchased for recycling and the higher volumes purchased. The costs for the first nine months included purchases of PGM ounces for resale, for 2011 these costs were $1.1 million and $4.6 million for the same period in 2010. Depreciation and amortization expense decreased to $47.4 million in the first nine months of 2011 compared to $53.2 million in the same period of 2010. The decrease is attributable to lower amortization rates per ton in 2011. General and administrative costs (G&A), including marketing, research and development and exploration expenses, totaled $39.4 million for the first nine months of 2011 and $23.4 million in the same period of 2010. Included in G&A costs for the first nine months of 2011 were $8.0 million in marketing expenses, $1.6 million related to research and development efforts, $1.5 million of expenses related to the Marathon project, $4.7 million in expenses associated with financing options, $1.3 million of acquisition costs related to Peregrine Metals Ltd. and $0.4 million in exploration expense. The Company's reported net income of $119.6 million for the first nine months of 2011 included, by business segment, net income of $164.0 million from mining operations and $10.7 million from recycling activities, less corporate costs including $39.4 million of G&A expense, a $12.6 million income tax provision and $3.6 million of unallocated net interest expense. The Company's reported net income of $33.8 million for the first nine months of 2010 included, by business segment, net income of $52.1 million from mining operations and $9.4 million from recycling activities, less corporate costs including $27.7 million of G&A expense.     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 and on the Toronto Stock Exchange under the symbol SWC.U.