Wednesday, August 8, 2012


Stillwater Mining Company Reports Second Quarter Earnings

BILLINGS, MT--(Marketwire - August 08, 2012) - STILLWATER MINING COMPANY (NYSE: SWC) (TSX: SWC.U)
  • Mined production of 133,400 ounces - 500,000 ounce guidance for 2012 reiterated
  • Net income attributable to common stockholders of $18.2 million or $0.15 per diluted share
  • Combined mined palladium and platinum sales realizations decrease to $850 per ounce
  • Development projects advance in line with expectations
  • Altar exploration update provided separately today
Stillwater Mining Company today reported consolidated net income attributable to common stockholders for the 2012 second quarter of $18.2 million, or $0.15 per diluted share. Total revenues for the second quarter were $212.8 million. This compares to 2011 second quarter net income of $42.7 million, or $0.39 per diluted share on revenues of $222.6 million. The second-quarter 2012 results reflect lower PGM prices and higher consolidated total cash costs than in last year's second quarter and include a $3.8 million foreign currency gain and exploration expenses of $2.0 million.
For the first six months of 2012, Stillwater reported net income attributable to common stockholders of $20.6 million, or $0.18 per diluted share, on revenues of $415.8 million, compared to net income of $78.9 million, or $0.73 per diluted share, on revenues of $392.7 million, for the same period in 2011.
The Company's mines produced a total of 133,400 ounces of palladium and platinum during the second quarter of 2012, a 6.5% decrease from the 142,700 ounce production in the second quarter of 2011 and a 10.4% increase from the 120,800 ounces produced during the first quarter of 2012. Production for the first six months was 254,200 ounces compared to 273,800 ounces in the first six months of 2011. Most of the variability in production is the result of normal changes in mining conditions and the array of stopes available for mining period to period. Based on production results for the first half of 2012 and projections for the remainder of the year, the Company is reiterating its full year guidance for mined production of 500,000 ounces.
Second quarter 2012 revenues from sales of mined production (including by-products) totaled $116.2 million, down from $139.7 million in the same period last year on lower PGM prices and volumes. Combined sales realizations decreased during the second quarter of 2012 for mined palladium and platinum ounces, averaging $850 per ounce, an 11.8% decrease from the $964 per ounce realized in the second quarter of 2011. The total quantity of mined palladium and platinum sold decreased to 128,100 ounces in the second quarter of 2012, compared to 136,600 ounces sold during the same period in 2011, a 6.2% decrease. Income in the second quarter of 2012 consisted of $26.3 million from mining operations and $3.7 million from recycling activities. For the second quarter of 2011, income from mining operations and recycling activities were $59.5 million and $3.4 million, respectively.
Total cash costs per mined ounce (a non-GAAP measure defined below) averaged $454 in the second quarter of 2012, compared to total cash costs of $384 per ounce for the second quarter of 2011. This increase in cash costs, which was forecast, is primarily a result of higher labor costs, reflecting an increase in contractual wage and benefit rates and hiring for the Company's new miner training program, as well as lower mine production. Based on current projections, the Company is maintaining its total cash costs guidance of $500 per mined ounce for the full year 2012.
The Company processed recycling material containing 123,100 ounces of palladium, platinum and rhodium through the smelter and refinery during the second quarter of 2012, down slightly from the 125,200 ounces recycled during the second quarter of 2011. Recycling sales volumes, however, increased to 92,900 ounces in the second quarter of 2012, compared to 61,300 ounces in the second quarter of 2011, reflecting a higher proportion of recycling ounces purchased rather than tolled during the quarter. Revenues from sales of purchased recycling materials totaled $95.7 million in the 2012 second quarter, up from $81.6 million in the same period last year. Tolling revenues declined to $0.9 million in this year's second quarter, compared to $1.3 million in the comparable quarter of 2011. The Company's recycling segment had net income for the second quarter of 2012 of $3.7 million (including financing income), compared to net income of $3.4 million reported for the second quarter of 2011. The Company's combined average realized price for sales of recycled platinum, palladium and rhodium declined to $1,030 per ounce in the second quarter of 2012 from $1,330 per ounce in the second quarter of 2011.
Commenting on these results, Francis R. McAllister, Stillwater's chairman and chief executive officer, stated, "Overall, I am very pleased with the Company's performance during the second quarter. Mine production and costs were in-line with our expectations, ore grades were good, development was on plan and our recycling business continued to perform well. We also made good progress on all of our development projects. Unfortunately, PGM prices continued to decline during the quarter. Our average combined sales realizations from mined production decreased to $850 per ounce during the second quarter, down from $875 per ounce realized during the first quarter this year and $964 per ounce averaged during the second quarter last year. At the end of the second quarter palladium was quoted in London at $578 per ounce and platinum at $1,428 per ounce, which would yield a market basket realization for Stillwater of about $771 per ounce. While several factors, including the strengthening of the U.S. dollar, have recently depressed the market prices for palladium and platinum (along with many other commodities), we continue to believe the supply and demand fundamentals for PGMs -- and particularly palladium -- remain attractive and that over time our business will benefit from these fundamentals. However, if these lower PGM prices continue in the near term, they will negatively impact our 2012 earnings, and will require adjustment to the rate of our project spending.
"The Blitz and Graham Creek development projects, located adjacent to our existing Montana mines, are moving ahead on plan. The underground launch chamber for the Blitz tunnel-boring machine (TBM) has been completed, and the assembly of the TBM is nearing completion. We anticipate that the TBM will be commissioned by the end of this quarter and will start developing to the east of the existing Stillwater Mine infrastructure. A separate TBM already in operation at the Graham Creek project, within the East Boulder Mine, advanced an additional 1,200 feet during the second quarter, bringing the total to about 3,700 feet for this drive since it began last year. The project is on target to complete the planned 8,200 new feet of primary access during the second quarter of 2013.
"We are pleased with the continued progress at our Marathon PGM-copper project in Canada. We announced early last month that the Company, through our 75%-owned subsidiary, Stillwater Canada Inc., had submitted the Environmental Impact Statement (EIS) for the project to a Joint Federal and Provincial Review Panel. Over the next several months, this review panel will coordinate an assessment of the project with local communities, organizations and other potentially affected parties in the Marathon area. We are working closely with these groups as the review process moves forward. And we are delighted to have put in place the joint venture agreement with Mitsubishi early in the second quarter.
"In April of this year, we finished up our first drilling season at the Altar copper-gold project in Argentina. The assays from that drilling have now been completed, and concurrently with the release of our second quarter results today, we are issuing a separate exploration update on the Altar project that includes this season's drill results. I would like to thank all those involved with the exploration team, including the contractors, for their dedicated contributions to the program. This year's drilling season at Altar, which included over 27,000 meters of new core drilled, has allowed us to confirm, expand and further delineate the copper and gold mineralization at Altar East, evaluate the deep copper mineralization at Altar Central and better define the gold mineralization in the Quebrada de la Mina area. In order to fully define the limits of the Altar deposit, further drilling remains. In the meantime, metallurgical testing is being conducted on the new drill core which will ultimately result in an updated resource estimate. I would encourage you to review the Altar exploration update."
Concluding his remarks, Mr. McAllister added, "I express my appreciation personally to all of our employees for their hard work and many contributions to Stillwater's success and in particular for their dedication to safety, which is our most important priority. The Company's safety incident rate (including contractors on site), measured in terms of reportable incidents per 200,000 hours worked, averaged a rate of 2.2 during the first half of 2012, down from 3.3 for the first half of 2011. I commend each of our employees for this significant improvement."
Cash Flow and Liquidity
At June 30, 2012, the Company's available cash was $197.2 million, compared to $109.1 million at December 31, 2011. If highly liquid short-term investments are included with available cash, the Company's balance sheet liquidity totaled $255.1 million at June 30, 2012, an increase from $158.6 million at December 31, 2011. Of the Company's current cash balance, $49.7 million is dedicated to the Marathon PGM-copper project (and other related properties) and is unavailable for other corporate purposes. Net working capital -- comprised of total current assets (including available cash and short-term investments), less current liabilities -- decreased to $269.0 million at June 30, 2012, from $327.8 million at year end 2011. The June 30, 2012 balance includes $166.5 million reclassified as the current portion of long-term debt, reflecting convertible debentures that may be redeemed by their holders on March 15, 2013.
Net cash provided by operating activities (which includes changes in working capital) totaled $39.4 million in the second quarter of 2012, compared to $58.8 million of cash provided in the second quarter of 2011. Capital expenditures were $36.6 million in the second quarter of 2012, up from $23.1 million in the second quarter of 2011. Capital expenditures are expected to total about $135 million for the full year 2012.
In view of the decrease in commodity prices this year, and in particular in PGMs, the Company is monitoring its spending closely. The Company may have to make adjustments such as deferring or extending certain spending commitments. Although the Company currently has a comparatively strong cash position, a number of factors weigh against drawing down cash balances. In this regard, the Company is considering the refinancing of its convertible debentures but, if market conditions remain unattractive, the Company will be in a position to redeem the debt with cash on hand. Taking into account the cyclical nature of the Company's commodity business and the desire to prudently maintain sufficient liquidity through a downturn, it is likely that the Company would scale back or delay certain of its projects. With these factors in mind, together with the assumptions underlying the Company's plans, the Company believes its liquidity position is sufficient at this time.
Outstanding debt at June 30, 2012, was $203.1 million, up from $196.0 million at December 31, 2011. The Company's total debt includes the $166.5 million outstanding in the form of convertible debentures, $29.5 million of Exempt Facility Revenue Bonds due in 2020, a capital lease of $6.7 million and $0.4 million for a small installment land purchase.
Second Quarter Results - Details
For the second quarter of 2012, the Company's mine production was 133,400 PGM ounces. The Company's Stillwater Mine produced 98,100 ounces, a decrease of 9.9% from the 108,900 ounces produced in the second quarter of 2011 but an increase of 11.9% over the 87,700 produced in the first quarter of 2012. The production decrease from last year's second quarter at the Stillwater Mine was primarily attributable to lower tons mined as a result of the fluctuations in overall mining conditions, the mix of mining stopes and the availability of miners. Production at the Company's East Boulder Mine of 35,300 ounces in the second quarter of 2012 reflected a 4.4% increase over the 33,800 ounces produced in the same quarter of 2011 and an increase of 6.6% from the 33,100 ounces produced in the first quarter of 2012.
Revenues for the second quarter of 2012 were $212.8 million, a decrease of 4.4% from the $222.6 million recorded in the second quarter of 2011. Proceeds from sales of mined PGMs and by-products totaled $116.2 million in the second quarter of 2012, a 16.8% decrease from the $139.7 million in the same quarter of 2011, reflecting the decrease in both ounces sold and PGM prices during the quarter. Recycling revenues increased by 16.5% to $96.6 million from $82.9 million in the second quarter of 2011 as a result of an increased proportion of purchased ounces as compared to toll material processed. Sales from mine production totaled 128,100 ounces in the second quarter of 2012 at an overall average realization of $850 per ounce, as compared to 136,600 ounces at $964 per ounce in the second quarter of 2011. Sales ounces were less than production in the quarter due to normal timing differences in inventory flows. The Company's average net realization on palladium sales from mine production was $643 per ounce in the second quarter of 2012, compared to $752 per ounce for the same period in 2011. The Company's average net realization on platinum was $1,502 per ounce in the second quarter of 2012 and $1,769 per ounce in the second quarter of 2011. Focusing on end of quarter prices, the London Bullion Market Association afternoon posted prices per ounce for palladium and platinum were $578 and $1,428, respectively, on June 29, 2012, and $761 and $1,722, respectively, on June 30, 2011.
Consolidated cash costs per mined ounce (a non-GAAP measure defined below) averaged $454 in the second quarter of 2012, an increase compared to total cash costs of $384 per ounce for the second quarter of 2011 but well below the $514 per ounce reported for the first quarter of 2012. The Stillwater Mine's total cash costs averaged $426 per ounce in the second quarter of 2012, compared to the $367 per ounce reported in the second quarter of 2011. The East Boulder Mine's total cash costs averaged $529 per ounce during the second quarter of 2012, compared to $442 per ounce during second quarter of 2011. The most significant driver of cash cost per mined ounce growth since the second quarter of last year at both mines was an increase in staffing levels, along with higher wage and benefit rates. The increase in staffing levels was primarily attributable to hiring for the new miner training program and to accommodate increasing travel distances as the mine expands.
Costs of metals sold (before depreciation and amortization expense) increased to $168.1 million in the second quarter of 2012 from $144.6 million in the second quarter of 2011. Mining costs included in costs of metals sold increased to $75.0 million in the 2012 second quarter from $65.1 million in the 2011 second quarter, the result of higher wage and benefit costs as well as some inflationary bias in materials costs. Recycling costs, which primarily reflect the cost of acquiring spent catalytic materials for processing, totaled $93.1 million in the second quarter of 2012, higher than the $79.6 million reported in the second quarter of 2011. The increase was due to a higher proportion of recycled material purchased outright by the Company during the second quarter of 2012 compared to the same period last year.
Depreciation and amortization expense decreased to $14.9 million in the second quarter of 2012 from $15.7 million in the same period of 2011. The decrease is attributable to a lower depreciable base in our fixed asset accounts in 2012, as many assets were fully depreciated during 2010 and 2011.
General and administrative ("G&A") costs increased to $10.1 million in the second quarter of 2012, a slight increase over the $9.9 million incurred during the same period of 2011. Exploration expenses totaled $2.0 million for the second quarter of 2012, of which almost all was attributable to the Altar copper-gold project. Exploration expenses incurred during the second quarter of 2011 were negligible. Marketing expenses increased to $3.7 million in the 2012 second quarter compared to $2.8 million in the same quarter of 2011. The Company continues its focus on developing markets for its primary product -- palladium. Research and development costs decreased to $0.1 million in this year's second quarter from $0.6 million in the same quarter of 2011.
Reported net income attributable to common stockholders for the second quarter of 2012 of $18.2 million included, by business segment, net income of $26.3 million from mining operations, net income of $3.7 million from recycling activities (including financing income), net income of $1.4 million related to the Altar copper-gold project (including a foreign currency gain of $3.8 million), $1.2 million of costs associated with the Marathon properties, and corporate costs of $12.5 million. In addition, the Company reported a $0.2 million income tax benefit and a $0.4 million net loss attributable to noncontrolling interest for the second quarter of 2012. The net income attributable to common stockholders of $42.7 million recorded for the second quarter 2011 included, by business segment, $59.5 million of income from mining operations and $3.4 million income from recycling activities (including financing income), $0.8 million of costs associated with the Marathon properties and corporate costs of $13.7 million. For the second quarter of 2011, the Company reported a $5.7 million income tax provision.
First Six Months' Results - Details
During the first six months of 2012, the Company's mining operations produced 254,200 ounces of palladium and platinum, including 185,800 ounces from the Stillwater Mine and 68,400 ounces from the East Boulder Mine. For the comparable period in 2011, total mine production of 273,800 ounces included Stillwater Mine production of 207,500 ounces and East Boulder production of 66,300. The decrease in ounces produced at the Stillwater Mine for the first half of 2012 was primarily the result of fewer tons mined.
Sales of palladium and platinum from mine production totaled 251,100 ounces in the first six months of 2012 at an overall average realization of $862 per ounce. The first six months of 2011 saw sales of mine production totaling 251,700 ounces at $978 per ounce. The Company's average realization to date in 2012 on palladium sales from mine production was $657 per ounce, compared to $767 per ounce in the 2011's first half. The comparable average realization on platinum from mine production was $1,547 per ounce for the first six months of 2012 and $1,775 per ounce in the 2011 first half.
During the first half of 2012, the Company processed about 230,400 ounces of PGMs from recycled catalytic materials, including both purchased catalysts and toll materials processed on behalf of others for a fee. By comparison, in the first six months of 2011, the Company processed about 240,800 ounces of recycled material. Of the purchased catalysts processed, the Company sold a total of 175,300 ounces of platinum, palladium and rhodium during the first half of 2012 at an overall average price of about $1,034 per ounce; for the first half of 2011, the Company sold about 104,000 recycled ounces at an average realization of $1,234 per ounce.
Revenues for the first six months of 2012 totaled $415.8 million, up 5.9% from $392.7 million in the first six months of 2011. Recycling revenues increased to $182.9 million in the first half of 2012 up from $131.0 million in last year's first half, accounting for all the growth in total revenue. Proceeds from sales of mined PGMs totaled $232.9 million in the 2012 first half, down from $261.7 million in the same period of 2011.
Costs of metals sold (before depreciation and amortization expense) increased to $326.3 million in the 2012 first six months of 2012 from $250.1 million in the first half of 2011. Mining costs included in costs of metals sold increased to $149.0 million in the 2012 first half from $125.3 million in the 2011 period. Recycling costs, largely comprised of the cost to purchase spent catalytic materials for processing, totaled $177.3 million in the first half of 2012, up from $124.7 million in the first six months of 2011. The increase in costs was primarily due to a higher proportion of recycled material purchased outright by the Company during the second quarter of 2012, compared to the same period last year.
Depreciation and amortization expense decreased slightly to $29.5 million in the first half of 2012 compared to $31.7 million in the same period of 2011.
General and administrative ("G&A") costs increased to $22.6 million in the first half of 2012 an increase over the $16.3 million for the same period of 2011. This increase was primarily attributable to one-time software licensing fees, higher legal and advisory services and growth in project administrative costs. Exploration expenses totaled $12.1 million for the six-months ending June 30, 2012, of which almost all was attributable to the Altar copper-gold project. Marketing expenses increased to $6.0 million in the first half of 2012 compared to $3.7 million in the same time period of 2011.
The Company's reported net income attributable to common stockholders of $20.6 million for the first six months of 2012 included, by business segment, $54.6 million of income from mining operations, net income of $6.0 million from recycling activities (including financing income), costs of $4.9 million associated with the Marathon properties, costs of $7.5 million related to the Altar copper-gold project (net of a foreign currency gain of $6.7 million), and corporate costs of $26.9 million. For the first half of 2012, the Company reported a $1.0 million income tax provision and a net loss of $0.4 million attributable to noncontrolling interest. The net income attributable to common stockholders of $78.9 million recorded for the first six months of 2011 included, by business segment, $105.4 million of income from mining operations and $6.3 million income from recycling activities (including financing income), $1.0 million of costs associated with the Marathon properties and corporate costs of a $22.0 million. The Company reported a $9.8 million income tax provision for the first six months of 2011.

About Stillwater Mining Company
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. 

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