SALES

Mine Production

The Company mines and processes ores containing palladium, platinum, rhodium, gold, silver, copper and nickel into intermediate and final products for sale to customers. Palladium, platinum, rhodium, gold and silver are sent to third party refineries for final processing from where they are sold to a number of consumers and dealers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) of 99.95% purity (rhodium of 99.9%) in sponge form are transferred upon sale from the Company’s account at third party refineries to the account of the purchaser. By-product precious metals are normally sold at market prices to customers, brokers or outside refiners. By-products of copper and nickel are produced by the Company at less than commercial grade, so prices for these metals typically reflect a quality discount. By-product sales are included in revenues from mine production. During the second quarter of 2012 and 2011, total by-product (copper, nickel, gold, silver and mined rhodium) sales were $7.2 million and $8.0 million, respectively. During the first six months of 2012 and 2011, total by-product (copper, nickel, gold, silver and mined rhodium) sales were $16.4 million and $15.5 million, respectively.

The Company has a three year supply agreement with General Motors Corporation (GM) that provides for fixed quantities of palladium to be delivered each month. The supply agreement with GM expires on December 31, 2013. The Company has a one year platinum supply agreement with Tiffany & Co set to expire at the end of 2012. The Company also has a new supply agreement with Johnson Matthey and recently renewed its year-to-year supply agreement with Ford Motor Company. Some of these agreements provide for pricing at a small discount to a trailing market price. The Company currently sells its remaining mine production under spot sales agreements.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred either physically or through an irrevocable transfer of metals to customers’ accounts, the price is fixed or determinable, no related obligations remain and collectability is probable.

PGM Recycling

The Company purchases spent catalyst materials from third parties and processes these materials in its facilities in Columbus, Montana to recover palladium, platinum and rhodium for sale. It also accepts material supplied from third parties on a tolling basis, processing it for a fee and returning the recovered metals to the supplier. The Company has entered into sourcing arrangements for catalyst material with several suppliers. Under these sourcing arrangements as currently structured, the Company advances cash against a shipment of material shortly before actually receiving the physical shipment. These advances are included in Other current assets on the Company’s Consolidated Balance Sheet until such time as the material has been physically received and title has transferred to the Company. The Company holds a security interest in materials procured by its largest recycling supplier that have not been received by the Company. Once the material is physically received and title has transferred, the associated advance is reclassified from Other current assets into Inventories. Finance charges collected on advances and inventories prior to being earned are included in Other current liabilities on the Company’s Consolidated Balance Sheet. Finance charges are reclassified from Other current liabilities to Interest income ratably from the time the advance was made until the out-turn date of the inventory.

At the same time the Company purchases recycling material, it typically enters into a fixed forward contract for future delivery of the PGMs contained in the recycled material at a price consistent with the purchase cost of the recycled material. The contract commits the Company to deliver finished metal on a specified date that normally corresponds to the expected out-turn date for the metal from the final refiner. The purpose of this arrangement is to eliminate the Company’s exposure to fluctuations in market prices during processing, while at the same time creating an obligation for the Company to deliver metal at a future point in time that could be subject to operational risks. If the Company were unable to complete the processing of the recycled material by the contractual delivery date, it could either cover its delivery commitments with mine production or purchase finished metal in the open market. If open market purchases are used, the Company would bear the cost (or benefit) of any change in the market price relative to the price stipulated in the delivery contract.

Total Sales

Total sales to significant customers as a percentage of total revenues for the three- and six- month periods ended June 30, 2012 and 2011 were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Customer A	25	%	24	%	25	%	24	%
Customer B	17	%	19	%	17	%	21	%
Customer C	16	%	—	%	17	%	—	%
Customer D	13	%	—	%	12	%	—	%
Customer E	—	%	24	%	—	%	21	%
Customer F	—	%	—	%	—	%	10	%
	71	%	67	%	71	%	76	%

-% represents less than 10% of total revenues