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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Item 9.01. Financial Statements and Exhibits
99.1 Press Release of Stillwater Mining Company dated May 08, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
By: /s/ John R. Stark BILLINGS, MT -- 05/08/2008 -- STILLWATER MINING COMPANY (NYSE: SWC) today
reported net income for the first quarter 2008 of $3.2 million, or $0.03
per diluted share, on revenue of $173.0 million. The first quarter 2008
net income compares to a loss of $1.1 million ($0.01 per fully diluted
share) on $146.5 million of revenue reported for the corresponding period
in 2007. The first quarter of 2008 included a $2.2 million write-off of
unamortized financing costs associated with the retirement and replacement
of the Company's primary credit facility during the quarter.
Stillwater Mining Company mines and processes platinum and palladium from
two operating mines located in the Beartooth Mountains of south central
Montana. The market price of these metals has risen substantially over the
past year. Platinum's market price was $2,040 per ounce on March 31, 2008,
up from $1,530 per ounce at the end of 2007 and $1,244 per ounce at March
31, 2007. Similarly, the price of palladium had reached $445 per ounce at
the end of this year's first quarter, compared to $364 at the end of 2007
and $352 per ounce at the end of the first quarter 2007.(1)
Due to sales pricing arrangements, the Company's earnings do not benefit
fully from changes in market prices. The automotive contracts include
floor prices on palladium production and ceiling prices on a smaller
portion of platinum production, tending to insulate the Company from the
full effect of changes, up or down, in market prices. The Company also
has in place a nearly exhausted hedge book of forward sales commitments on
platinum at prices fixed well below the level of current market prices.
These forward sales reduced net revenues and profits by $7.0 million (on
9,000 hedged ounces) in the first quarter of 2008 and by $7.3 million (on
26,500 hedged ounces) in the first quarter of 2007. The last remaining
6,000 ounces covered by these below-market platinum hedges (committed at an
average overall price of $1,054 per ounce) will mature by the end of June
2008.
Despite these constraints, the Company's first quarter 2008 financial
performance did benefit significantly from the higher PGM market prices.
The average combined price realized on sales of mined platinum and
palladium in the first quarter of 2008 was $625 per ounce, compared to $506
per ounce in the corresponding quarter of 2007. And for the same periods,
total revenues from mining operations (net of hedging losses) grew to $81.3
million from $72.4 million. The first quarter 2008 improvement in earnings
was driven mostly by these stronger PGM prices.
Mine production of palladium and platinum in this year's first quarter
declined to 129,000 ounces from the 144,000 ounces produced in the same
quarter of 2007. The lower first-quarter 2008 production primarily results
from a fundamental transition in the Company's workforce that has occurred
since the first quarter of last year. As discussed in detail in our 2007
annual report, the Company implemented a change in work schedule at the
Stillwater Mine late in the first quarter of 2007 in order to better
utilize the existing workforce there and reduce the Company's reliance on
outside contractors. Associated with this schedule change, however, was a
period of very high employee turnover in which many of the Company's most
experienced miners left for jobs elsewhere. Average mining productivity
has begun to rebound however, as our newly trained local miners increase
their mining proficiency. At the East Boulder Mine, productivity also has
been somewhat lower as the Company transitions an increasing proportion of
stopes from predominantly bench and fill techniques to the more selective
methods such as captive cut-and-fill.
Beyond its mining activities, the Company has a significant recycling
business, processing spent catalyst from automotive catalytic converters
and, to a lesser extent, from petrochemical facilities. This business also
benefits from higher platinum-group metal (PGM) prices, although because
this material is priced well ahead of final delivery and sale, it takes
longer for the associated earnings benefit to flow through. Consequently,
much of the effect of the first quarter 2008 increase in PGM prices will
flow into the second quarter results.
Recycling sales increased slightly to nearly 61,000 ounces outturned and
sold during the first quarter of 2008 from about 58,000 ounces sold in the
first quarter of 2007. Recycling revenues likewise increased to $86.4
million from $70.0 million for the same periods. Recycling activities,
including financing charges, contributed about $5.9 million to the
Company's earnings in the first quarter of 2008, compared to about $5.3
million in 2007. Also reflecting the increased PGM prices, working capital
required for the recycling business, comprised of in-process inventories
and associated advances, increased to $93.7 million at March 31, 2008, from
$73.6 million a year earlier.
On March 12, 2008, the Company issued and sold $181.5 million of
convertible debentures, due March 15, 2028, with five years to the date of
first call on March 22, 2013. The interest rate on the debentures is
1.875% per annum, and the conversion price is $23.51 per share. If fully
exercised, the debentures would increase the Company's outstanding shares
by 7.72 million. MMC Norilsk Nickel, the Company's controlling shareholder,
or one of its affiliates, purchased $80 million of the debentures in order
to maintain its controlling interest. Net proceeds to Stillwater from the
debentures totaled about $176.9 million, which were applied to retire the
Company's existing primary credit facility ($98.3 million) and to
collateralize outstanding letters of credit ($20.7 million). The remaining
$57.9 million of cash proceeds will be used to fund additional working
capital needs, in particular our recycling business, and for other general
corporate purposes.
Commenting on the Company's recent performance, Francis R. McAllister,
Stillwater Chairman and CEO, said, "On the whole, we are very pleased with
the Company's performance in this year's first quarter. Mine production
was right in line with plan. Platinum and palladium prices were
considerably stronger than we had expected, particularly in February and
March. Our mine transformation efforts appear to be on track. And after a
difficult year in 2007, it was very gratifying to see the Company now
returning to profitability. It also is important to note that our first
quarter results did not fully reflect the benefit of the higher PGM prices.
Earnings in the quarter were reduced by $2.2 million for the
non-cash write-off of some unamortized financing costs, and by about $7.0
million as a result of hedging losses on 9,000 ounces of platinum committed
several years ago for first quarter 2008 delivery at an average price of
$1,104 per ounce. We have another 6,000 ounces of these forward sales
obligations remaining in our hedge book for the second quarter, priced at
an average of $1,054 per ounce, and then we are finished with these
commitments. Separately, there also are some pricing lags within our
system, particularly for recycling and to a lesser degree for mine
production, so some first quarter sales did not benefit lockstep from the
higher PGM prices. And we expect mine production to increase throughout
this year, which could amplify the benefit to us of these higher PGM prices
in later quarters.
"We still have some challenges ahead. Costs are continuing to rise,
particularly for diesel fuel and electricity, although favorable supply
contracts in the quarter limited our exposure to otherwise steep price
increases for some other critical commodities, such as natural gas, steel
and explosives. And we will need to continue our aggressive new-miner
training program and continue to grow our cadre of skilled miners in order
to achieve our rising production targets for the year."
Referring to the Company's 2008 guidance, Mr. McAllister commented, "We
projected in our last earnings call that mine palladium and platinum
production for 2008 would be in the range of 550,000 to 565,000 ounces,
which assumed fairly steady growth in production during the year. First
quarter's actual production of 129,000 ounces was essentially right on our
forecasted trend. Consequently, we are reaffirming our earlier production
guidance for the year. We also projected that total cash costs per ounce,
a non-GAAP measure of extraction efficiency, would fall in the range of
$355 to $375 per ounce for the year, although it was likely to be a little
higher than that in the first half. Actual total cash costs for the first
quarter were $385 per ounce -- again, we are reaffirming our earlier
guidance here. Capital expenditure guidance for the full year was $110
million, including about $22 million for the construction of a second
smelter furnace at the Company's processing facility in Columbus, Montana.
Our capital spending in the first quarter was only about $20.8 million, but
construction of the furnace has not yet begun. So for now we are standing
by our earlier capital expenditure guidance for the year, although some of
the furnace spending could carry over into early 2009. Our final area of
guidance relates to progress toward improving the developed state of the
mines, for which we projected 39,000 feet of new primary development and
515,000 feet of new definitional drilling. Our actual footages in the first
quarter were just over 10,000 feet of added primary development and about
155,000 feet of diamond drilling, so both those programs remain on track to
meet or exceed guidance.
"While as a matter of policy we do not provide specific earnings guidance,
several developing issues could affect our earnings during the balance of
this year. I already have commented on the impact of our below-market
forward sales of platinum, which should have a diminished effect in the
second quarter and will be gone thereafter. Mine production is currently
the focus of several shorter-term management initiatives, including some
broad-based teams that are looking at equipment availability, mine
logistics and workplace safety. Although it is too early to measure their
effectiveness, they do appear to be making a difference. Similarly, in
recent weeks we have seen some encouraging volume growth in the recycling
business, probably associated with the higher PGM prices. And finally, on
the labor front, negotiations toward a new labor agreement at the East
Boulder Mine are just now getting under way; the present labor contract
will expire on July 1, 2008."
With regard to the state of platinum and palladium markets, Mr. McAllister
explained, "Several elements have combined in the past few months to shape
the almost unprecedented changes in these markets. After six or seven
years of steady output growth, the major South African PGM producers
earlier this year were forced to scale back their operations as a result of
some severe power shortages. These shortages at first appeared to be the
result of seasonal issues, but it now appears that they are more far
reaching and may take several years to resolve. In the meantime, not only
is existing production constrained, but the future of virtually all South
African PGM expansion projects is uncertain. Based on announced cutbacks
by the South African major producers, platinum and palladium production in
2008 is likely to be down significantly from 2007. South Africa in 2007
produced about 78% of the world's annual platinum supply and 34% of
palladium supply, so they are a critical supplier.
"In addition to these power issues, the South African producers have been
challenged by a shortage of skilled mining professionals. Engineers,
geologists and other essential technical specialists have been leaving the
country in favor of mining opportunities in Australia, Canada and other
significant mining provinces. While such shortages are common throughout
the industry, they are clearly concerns of the South African PGM producers;
indeed, Stillwater also faces a shortage of skilled miners, as previously
discussed.
"Separately, a drop in Russian sales of palladium from government
inventories this year also has affected PGM markets. For many years, the
Russian government has more or less systematically drawn down its old Cold
War era strategic stockpiles of palladium by selling typically one to two
million ounces per year of additional supply into the market, tending to
moderate palladium prices. This year, Russian government exports appear to
be only a small fraction of the usual volume, creating a tighter palladium
supply picture than usual.
"On the demand side, the volume of PGM consumed in catalytic converters
depends on the number of new cars produced each year and on the mix of
engine types. Diesel engines generally require higher PGM ounce loadings
than gasoline engines. In the U.S. and parts of Western Europe, new car
sales have declined in the past few months as the economy softened,
suggesting that PGM demand also could decline. However, the same is not
true worldwide. China reportedly produced about 9 million cars in 2007
and, based on rates reported for the first quarter of 2008, should exceed
10 million units this year. BMW just recently reported that it is diverting
new cars from the U.S. into emerging markets, where presumably demand is
stronger. General Motors reported for the first quarter of 2008 that only
its North American operations were unprofitable.
"In view of this apparent continuing growth in world automobile production
despite a U.S. slowing, PGM markets seem destined to remain very tight for
the foreseeable future. With PGM supply growth constrained and a mandatory
PGM allotment in essentially every new car built, platinum and, to a lesser
extent, palladium consumption will be rationed by price. Consistent with
this, reports suggest that, as a result of high prices, platinum use in
jewelry has declined significantly in North America and Japan over the past
year or so, although until recently platinum jewelry demand in China
remained strong. Some commentators now suggest, though, that with the
run-up in platinum prices in the first quarter of 2008, even Chinese demand
for platinum jewelry is declining. Interestingly, however, the same
commentators suggest that Chinese demand for palladium jewelry has
strengthened noticeably in 2008, probably substituting for more expensive
platinum and gold."
Commenting on the Company's operations, McAllister advised, "Our long-term
efforts to transform our mining operations are continuing during 2008, with
some noteworthy progress. As we discussed in our 2007 Annual Report, there
are five broad areas of emphasis in this effort: safety and environmental
compliance, improving developed state, added flexibility in mining methods,
increased mine production, and identifying other cost reduction
opportunities. On the safety front, seeking to further strengthen our
safety performance, the Company recently engaged an outside auditor to
review our safety practices and identify opportunities for improvement. We
are now implementing many of the suggestions that emerged from the audit.
Our efforts to improve developed state have focused heavily on mine
development, targeting having proven reserves in place equal to about 40
months of future production. We are now at that level at the Stillwater
Mine and approaching it at East Boulder. This area of emphasis also
includes ongoing measures toward strengthening infrastructure at the
operations. Infrastructure projects currently include ore pass remediation
at East Boulder and development of an electric truck ramp to access the
lower levels of the Stillwater Mine.
"Probably our largest effort at this time, though, relates to implementing
more selective mining methods. While there are areas at each mine where
the previous mechanized bulk mining methods are still very appropriate,
mechanical ramp-and-fill and captive cut-and-fill stopes are being
introduced wherever they are more attractive economically. The latter
methods are generally more manpower intensive, and as a result we are very
aggressively hiring and training new miners in the requisite mining skills.
This effort is progressing very well, but it will take some time for each
new miner to reach his full potential. Consequently, we expect
productivity and overall production to increase gradually as the workforce
steadily gains experience.
"On the processing side, we have now let contracts associated with our
second smelter furnace and expect construction to begin by the end of the
second quarter. This is a significant project that we expect to increase
smelter throughput capacity and PGM recoveries for future growth in mining
and recycling, as well as ensuring we have a backup facility whenever one
of the furnaces is down.
"Our recycling business remains healthy and very dynamic, contributing $5.9
million toward 2008 first-quarter earnings. As PGM prices have risen, we
recently have seen an increase in recycling volumes coming through the
smelter and refinery, which may bode well for the rest of 2008."
Finally, with regard to the Company's recent convertible debt issuance, Mr.
McAllister noted, "We were extremely pleased with the success of our
offering of $181.5 million in convertible debentures into the market in
early March. This alleviated the uncertainty associated with the need to
renew our previous credit facility prior to its expiration in the middle of
next year, particularly in view of the very difficult credit conditions in
today's market. The terms of the offering, including a coupon rate of
1.875% and a conversion price of $23.51, were very favorable to the
Company. We used the proceeds of the debt offering to pay off our old
credit facility and collateralize letters of credit that support our
long-term reclamation obligations. The remaining cash will provide for
future working capital needs and other general corporate purposes."
Cash Flow and Liquidity
The Company's available cash and cash equivalents totaled $126.5 million at
March 31, 2008, up from $61.5 million at the end of 2007. Including the
Company's available-for-sale investments in highly liquid federal agency
notes and commercial paper, the Company's total available liquidity was
$140.9 million at the end of the 2008 first quarter, up about $51.9 million
from liquidity of $89.0 million at the end of 2007. The increase in
liquidity was attributable to the net proceeds from the issuance of the
convertible debentures, offset in part by increased working capital
requirements, particularly with regard to the Company's recycling business.
Working capital constituting marketable inventories and related advances in
the Company's PGM recycling business increased to $93.7 million at March
31, 2008, from $83.7 million at the end of 2007. If this highly liquid
recycling working capital is included in liquidity, the Company's adjusted
liquidity increased by $61.9 million to $234.6 million at March 31, 2008,
from $172.7 million at the end of 2007.
Net cash provided from operating activities totaled $13.1 million in the
first quarter of 2008, slightly below the $15.2 million generated in the
same quarter of 2007. Changes in working capital requirements more than
offset the benefit of higher earnings between the periods. Capital
expenditures in the first quarter of 2008 were $20.8 million, a little less
than the $21.6 million reported for the first quarter of 2007. The
Company's capital expenditure guidance for the full year 2008 is about $110
million, which includes about $22 million for constructing a second smelter
furnace.
The Company's outstanding debt balance at March 31, 2008, was $211.2
million. Approximately $0.2 million of the outstanding debt balance is due
within the next twelve months.
First Quarter Results - Details
In the first quarter of 2008, the Company's mining operations produced
129,000 PGM ounces, including 86,000 ounces from the Stillwater Mine and
43,000 ounces from East Boulder Mine. For the comparable quarter of 2007,
Stillwater Mine produced 98,000 ounces and East Boulder Mine 46,000 ounces.
The sharp decrease (12.2%) in Stillwater Mine's production between the 2008
and 2007 quarters is partially attributable to an overall drop in mining
productivity. The average experience level of the workforce declined
following a period of high employee attrition associated with a schedule
change and other labor issues at the mine during 2007. The Company's
new-miner training program is gradually filling in this void in experience,
but bringing new miners up to full productivity does take time.
Maintenance and logistical issues within the mine also contributed to the
lower
first-quarter 2008 production. The smaller production decrease at the East
Boulder Mine primarily reflects the challenges of transitioning from highly
mechanized methods toward more selective mining.
Sales from mine production totaled 130,000 ounces in the first quarter of
2008 at an overall average realization of $625 per ounce, compared to
143,000 ounces at $506 per ounce in the first quarter of 2007. The lower
sales volumes in the 2008 first quarter generally tracked the lower mine
production in the same period. The higher realizations mostly reflect
higher market prices for PGMs in the first quarter of 2008, tempered to
some extent by the negative effect of platinum ceiling prices and
below-market forward sales commitments. Taking these into account, in the
first quarter of 2008 approximately 46% of platinum ounces sold were
subject to ceiling prices or hedges that reduced net income in the quarter
by about $10.4 million. By way of comparison, for the first quarter of
2007 approximately 91% of platinum ounces were sold subject either to
ceiling prices or to below-market forward sales, reducing 2007 first
quarter net income by about $8.8 million. On the other hand, the Company's
net income benefited from floor prices on palladium sales by about $1.2
million in the 2008 first quarter and by $4.6 million in the first quarter
of 2007. The Company's average realization on palladium sales from mine
production was $414 per ounce in the 2008 first quarter, compared to $377
per ounce in the same period of 2007. The comparable average realization
on platinum, net of the loss on forward sales and the contractual price
ceiling, was $1,383 per ounce in the first quarter of 2008 and $915 per
ounce in the 2007 first quarter.
In its recycling activities, the Company processes both material it
purchases from third parties and material toll processed on behalf of
others for a fee. During the first quarter of 2008, the Company processed
in total about 78,000 ounces of PGMs from recycled catalytic materials.
By comparison, in the first quarter of 2007 the Company processed about
87,000 ounces of recycled material. This degree of fluctuation in volumes
received and processed is not unusual in the Company's recycling
activities, as the business is very competitive.
Revenues for the first quarter 2008 totaled $173.0 million, up 18% from
$146.5 million in the first quarter of 2007. Proceeds (net of hedging
offsets) from sales of mined PGMs totaled $81.3 million in the 2008 first
quarter, an increase from $72.4 million in the same quarter of 2007,
reflecting stronger 2008 PGM prices. Recycling revenues also increased to
$86.4 million on nearly 61,000 ounces sold from the $70.0 million on about
58,000 ounces sold in last year's first quarter, again driven by higher
market prices for PGMs. Resales of purchased metal generated $5.3 million
and $4.1 million in revenue during the 2008 and 2007 first quarters,
respectively.
Costs of metals sold (before depreciation and amortization expense) grew to
$140.0 million in the 2008 first quarter from $118.5 million in the first
quarter of 2007, mostly reflecting higher costs for power, fuel, royalties
and taxes, plus the higher value of contained PGMs in recycling materials
purchased. Mining costs included in costs of metals sold increased to
$52.6 million in the 2008 first quarter from $48.3 million in the 2007
first quarter. Recycling costs, largely comprised of the cost to purchase
spent catalytic materials for processing, totaled $82.1 million in the
first quarter of 2008, compared to $66.2 million in the first quarter of
2007. Purchases totaling approximately 12,000 ounces of palladium for
resale in each period added $5.3 million and $4.0 million to first-quarter
2008 and 2007 costs, respectively.
Depreciation and amortization expense increased very slightly to $20.7
million in the 2008 first quarter from $20.4 million in the same period of
2007. The increase is a trade-off between lower mine production and higher
amortization rates in the first quarter of 2008.
General and administrative ("G&A") costs, which include marketing and
exploration expenses, decreased to $7.7 million in the first quarter of
2008 from $8.8 million in the 2007 first quarter. The decrease between the
periods is mostly just the result of different timing for marketing
expenditures in each year.
Net income of $3.2 million for the first quarter of 2008 included, by
business segment, $8.0 million from mining operations and $5.9 million from
recycling activities, less corporate costs including $7.7 million of G&A
expense and $3.0 million of unallocated net interest expense. The
unallocated interest expense includes a $2.2 million write-off of
unamortized financing costs associated with the retirement and replacement
of the Company's primary credit facility.
For the first quarter of 2007, the reported net loss of $1.1 million
included income from mining operations of $3.8 million and income from
recycling activities of $5.3 million. These earnings items were offset by
$8.8 million of G&A expense and $1.4 million of net unallocated interest
expense.
Stillwater Mining Company will host its 2008 first quarter results
conference call in conjunction with the Annual Meeting of Shareholders
beginning at 3:30 p.m. Eastern Daylight Time on May 8, 2008. The
conference call dial-in numbers are 800-288-8968 (U.S.) and 612-332-0226
(International). The conference call will simultaneously be 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 available on the Company's website
or by a telephone replay, numbers (800) 475-6701 (U.S.) and (320) 365-3844
(International), access code 921729, which is scheduled to begin on May 9,
2008 6:30 p.m. Eastern Time through May 16, 2008, 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 the Russian Federation. 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 2007 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.
(1) Based on the final fixing price quoted on the London Metals Exchange
for each of the respective dates.
Key Factors Tables and Financial Statements follow.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Securities Exchange Act of 1934.
Date of Report: May 08, 2008
(Date of earliest event reported)
Stillwater Mining Company
(Exact name of registrant as specified in its charter)
DE
(State or other jurisdiction
of incorporation)
001-13053
(Commission File Number)
81-0480654
(IRS Employer
Identification Number)
1321 Discovery Drive
(Address of principal executive offices)
59102
(Zip Code)
406.373.8700
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Item 2.02. Results of Operations and Financial Condition
On May 8, 2008, Stillwater Mining Company issued a press release for 2008 First Quarter results. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
(a) Financial statements:
None
(b) Pro forma financial information:
None
(c) Shell company transactions:
None
(d) Exhibits
(d) Exhibits.
99.1 Press release issued on May 8, 2008 by Stillwater Mining Company.
Dated: May 08, 2008
STILLWATER MINING COMPANY
John R. Stark
Vice President
Exhibit No.
Description
99.1
Press Release of Stillwater Mining Company dated May 08, 2008
Stillwater Mining Company
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share data)
Three months ended
March 31,
----------------------
2008 2007
---------- ----------
Revenues
Mine production $ 81,290 $ 72,371
PGM recycling 86,416 69,988
Other 5,340 4,091
---------- ----------
Total revenues 173,046 146,450
Costs and expenses
Costs of metals sold
Mine production 52,639 48,290
PGM recycling 82,083 66,175
Other 5,303 4,021
---------- ----------
Total costs of metals sold 140,025 118,486
Depreciation and amortization
Mine production 20,647 20,414
PGM recycling 48 24
---------- ----------
Total depreciation and amortization 20,695 20,438
---------- ----------
Total costs of revenues 160,720 138,924
Exploration - 61
Marketing 1,331 2,100
General and administrative 6,342 6,675
Gain on disposal of property, plant and equipment (2) (115)
---------- ----------
Total costs and expenses 168,391 147,645
Operating income (loss) 4,655 (1,195)
Other income (expense)
Other 53 (2)
Interest income 3,087 2,963
Interest expense (4,530) (2,825)
Income (loss) before income tax provision 3,265 (1,059)
Income tax provision (53) -
---------- ----------
Net income (loss) $ 3,212 $ (1,059)
---------- ----------
Other comprehensive income (loss), net of tax 88 (5,175)
---------- ----------
Comprehensive income (loss) $ 3,300 $ (6,234)
========== ==========
Weighted average common shares outstanding
Basic 92,554 91,588
Diluted 93,215 91,588
Basic earnings (loss) per share
---------- ----------
Net income (loss) $ 0.03 $ (0.01)
========== ==========
Diluted earnings (loss) per share
---------- ----------
Net income (loss) $ 0.03 $ (0.01)
========== ==========
See accompanying notes to the financial statements
Stillwater Mining Company
Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
March 31, December 31,
2008 2007
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 126,453 $ 61,436
Restricted cash 26,580 5,885
Investments, at fair market value 14,473 27,603
Inventories 122,309 118,663
Advances on inventory purchases 38,890 28,396
Trade receivables 16,794 12,144
Deferred income taxes 4,330 4,597
Other current assets 5,001 6,092
------------ ------------
Total current assets $ 354,830 $ 264,816
------------ ------------
Property, plant and equipment (net of $320,836
and $301,212 accumulated depreciation and
amortization) 465,820 465,054
Long-term investments 3,903 3,556
Other noncurrent assets 11,220 8,981
------------ ------------
Total assets $ 835,773 $ 742,407
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,355 $ 17,937
Accrued payroll and benefits 22,566 20,944
Property, production and franchise taxes
payable 9,563 10,528
Current portion of long-term debt 190 1,209
Fair value of derivative instruments 5,678 6,424
Unearned income 742 788
Other current liabilities 12,704 11,144
------------ ------------
Total current liabilities 67,798 68,974
Long-term debt 211,024 126,841
Deferred income taxes 4,330 4,597
Accrued workers compensation 9,508 9,982
Asset retirement obligation 10,720 10,506
Other noncurrent liabilities 6,291 4,103
------------ ------------
Total liabilities $ 309,671 $ 225,003
------------ ------------
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;
92,743,742 and 92,405,111 shares issued and
outstanding 927 924
Paid-in capital 632,020 626,625
Accumulated deficit (100,908) (104,120)
Accumulated other comprehensive loss (5,937) (6,025)
------------ ------------
Total stockholders' equity 526,102 517,404
------------ ------------
Total liabilities and stockholders' equity $ 835,773 $ 742,407
============ ============
Stillwater Mining Company
Statements of Cash Flows
(Unaudited)
(in thousands)
Three months ended
March 31,
------------------------
2008 2007
----------- -----------
Cash flows from operating activities
Net income (loss) $ 3,212 $ (1,059)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 20,695 20,438
Gain on disposal of property, plant and
equipment (2) (115)
Asset retirement obligation 214 178
Stock issued under employee benefit plans 1,403 1,446
Amortization of debt issuance costs 2,423 204
Share based compensation 1,028 1,168
Changes in operating assets and liabilities:
Inventories (4,372) (4,992)
Advances on inventory purchases (10,494) 713
Trade receivables (4,650) 5,369
Employee compensation and benefits 1,622 (304)
Accounts payable (1,582) (8,537)
Property, production and franchise taxes payable 1,223 (1,779)
Workers compensation (474) 753
Unearned income (46) (1,922)
Other 2,864 3,600
----------- -----------
Net cash provided by operating activities 13,064 15,161
----------- -----------
Cash flows from investing activities
Capital expenditures (20,825) (21,596)
Purchases of long-term investments (347) -
Proceeds from disposal of property, plant and
equipment 18 202
Purchases of investments (9,505) (22,993)
Proceeds from maturities of investments 22,171 16,998
----------- -----------
Net cash used in investing activities (8,488) (27,389)
----------- -----------
Cash flows from financing activities
Payments on long-term debt and capital lease
obligations (98,336) (883)
Payments for debt issuance costs (4,995) -
Proceeds from issuance of convertible debentures 181,500 -
Restricted cash (20,695) -
Issuance of common stock 2,967 20
----------- -----------
Net cash provided by (used in) financing
activities 60,441 (863)
----------- -----------
Cash and cash equivalents
Net increase (decrease) 65,017 (13,091)
Balance at beginning of period 61,436 88,360
Balance at end of period $ 126,453 $ 75,269
=========== ===========
Stillwater Mining Company
Key Factors
(Unaudited)
Three months
ended
March 31,
---------------
2008 2007
------- -------
OPERATING AND COST DATA FOR MINE PRODUCTION
Consolidated:
Ounces produced (000)
Palladium 100 111
Platinum 29 33
------- -------
Total 129 144
======= =======
Tons milled (000) 265 305
Mill head grade (ounce per ton) 0.52 0.51
Sub-grade tons milled (000) (1) 39 21
Sub-grade tons mill head grade (ounce per ton) 0.16 0.13
Total tons milled (000) (1) 304 326
Combined mill head grade (ounce per ton) 0.47 0.49
Total mill recovery (%) 91 91
Total operating costs per ounce (Non-GAAP) (2) $ 314 $ 244
Total cash costs per ounce (Non-GAAP) (2) $ 385 $ 309
Total production costs per ounce (Non-GAAP) (2) $ 541 $ 456
Total operating costs per ton milled (Non-GAAP) (2) $ 133 $ 108
Total cash costs per ton milled (Non-GAAP) (2) $ 163 $ 136
Total production costs per ton milled (Non-GAAP) (2) $ 229 $ 201
Stillwater Mine:
Ounces produced (000)
Palladium 66 75
Platinum 20 23
------- -------
Total 86 98
======= =======
Tons milled (000) 157 178
Mill head grade (ounce per ton) 0.58 0.59
Sub-grade tons milled (000) (1) 20 21
Sub-grade tons mill head grade (ounce per ton) 0.15 0.13
Total tons milled (000) (1) 177 199
Combined mill head grade (ounce per ton) 0.53 0.54
Total mill recovery (%) 92 92
Total operating costs per ounce (Non-GAAP) (2) $ 296 $ 227
Total cash costs per ounce (Non-GAAP) (2) $ 366 $ 290
Total production costs per ounce (Non-GAAP) (2) $ 496 $ 418
Total operating costs per ton milled (Non-GAAP) (2) $ 143 $ 112
Total cash costs per ton milled (Non-GAAP) (2) $ 176 $ 143
Total production costs per ton milled (Non-GAAP) (2) $ 239 $ 206
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months ended
March 31,
---------------------
2008 2007
---------- ----------
OPERATING AND COST DATA FOR MINE PRODUCTION
(Continued)
East Boulder Mine:
Ounces produced (000)
Palladium 34 36
Platinum 9 10
---------- ----------
Total 43 46
========== ==========
Tons milled (000) 108 128
Mill head grade (ounce per ton) 0.43 0.40
Sub-grade tons milled (000) (1) 19 -
Sub-grade tons mill head grade (ounce per ton) 0.17 -
Total tons milled (000) (1) 127 128
Combined mill head grade (ounce per ton) 0.39 0.40
Total mill recovery (%) 90 90
Total operating costs per ounce (Non-GAAP) (2) $ 348 $ 281
Total cash costs per ounce (Non-GAAP) (2) $ 422 $ 348
Total production costs per ounce (Non-GAAP) (2) $ 629 $ 537
Total operating costs per ton milled (Non-GAAP) (2) $ 120 $ 101
Total cash costs per ton milled (Non-GAAP) (2) $ 145 $ 125
Total production costs per ton milled (Non-GAAP) (2) $ 216 $ 194
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months ended
(in thousands, where noted) March 31,
---------------------
2008 2007
---------- ----------
SALES AND PRICE DATA
Ounces sold (000)
Mine production:
Palladium (oz.) 102 109
Platinum (oz.) 28 34
---------- ----------
Total 130 143
Other PGM activities: (5)
Palladium (oz.) 38 37
Platinum (oz.) 30 27
Rhodium (oz.) 5 6
---------- ----------
Total 73 70
---------- ----------
By-products from mining: (6)
Rhodium (oz.) 1 1
Gold (oz.) 2 3
Silver (oz.) 2 2
Copper (lb.) 300 383
Nickel (lb.) 281 306
Average realized price per ounce (3)
Mine production:
Palladium ($/oz.) $ 414 $ 377
Platinum ($/oz.) $ 1,383 $ 915
Combined ($/oz)(4) $ 625 $ 506
Other PGM activities: (5)
Palladium ($/oz.) $ 406 $ 336
Platinum ($/oz.) $ 1,443 $ 1,149
Rhodium ($/oz) $ 6,563 $ 5,052
By-products from mining: (6)
Rhodium ($/oz.) $ 8,176 $ 5,912
Gold ($/oz.) $ 940 $ 667
Silver ($/oz.) $ 18 $ 14
Copper ($/lb.) $ 3.18 $ 2.78
Nickel ($/lb.) $ 12.36 $ 17.62
Average market price per ounce (4)
Palladium ($/oz.) $ 441 $ 343
Platinum ($/oz.) $ 1,867 $ 1,190
Combined ($/oz)(4) $ 753 $ 546
(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 and
interest income and expense are not included in total operating costs,
total cash costs or total production costs. 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. 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"
and the accompanying discussion for additional detail.
(3) The Company's average realized price represents revenues, which include
the effect of contract floor and ceiling prices, hedging gains and
losses realized on commodity instruments and contract discounts,
divided by ounces sold. The average market price represents the
average London PM Fix for the actual months of the period.
(4) The Company reports a combined average realized and market price of
palladium and platinum at the same ratio as ounces that are produced
from the base metal refinery.
(5) Ounces sold and average realized price per ounce from other PGM
activities relate to ounces produced from processing of catalyst
materials, ounces purchased in the open market for resale.
(6) By-product metals sold reflect contained metal. Realized prices
reflect net values (discounted due to product form and transportation
and marketing charges) per unit received.
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 Income (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 as a whole, this measure is equal to total costs of revenues, as reported in the Statement of Operations and Comprehensive Income (Loss). For the Stillwater Mine, East Boulder Mine, and other PGM activities, the Company segregates the expenses within total costs of revenues that are directly associated with each of these activities and then allocates the remaining facility costs included in total 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 total costs of revenues as reported in the Company's Statement of Operations and Comprehensive Income (Loss).
Total Production Costs (Non-GAAP): Calculated as total costs of revenues (for each mine or combined) 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 combined -- 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 combined -- 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.
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 combined. 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 combined -- 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 combined -- 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 combined 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 combined -- 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 combined -- 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.
Reconciliation of Non-GAAP Measures to Costs of Revenues Three months ended March 31, (in thousands) 2008 2007 --------- --------- Consolidated: Reconciliation to consolidated costs of revenues: Total operating costs (Non-GAAP) $ 40,473 $ 35,210 Royalties, taxes and other 9,198 9,284 --------- --------- Total cash costs (Non-GAAP) $ 49,671 $ 44,494 Asset retirement costs 215 177 Depreciation and amortization 20,647 20,414 Depreciation and amortization (in inventory) (727) 638 --------- --------- Total production costs (Non-GAAP) $ 69,806 $ 65,723 Change in product inventories 2,872 1,653 Costs of recycling activities 82,083 66,175 Recycling activities - depreciation 48 24 Add: Profit from recycling activities 5,911 5,349 --------- --------- Total consolidated costs of revenues $ 160,720 $ 138,924 ========= ========= Stillwater Mine: Reconciliation to costs of revenues: Total operating costs (Non-GAAP) $ 25,250 $ 22,237 Royalties, taxes and other 5,969 6,220 --------- --------- Total cash costs (Non-GAAP) $ 31,219 $ 28,457 Asset retirement costs 156 124 Depreciation and amortization 11,395 12,133 Depreciation and amortization (in inventory) (468) 210 --------- --------- Total production costs (Non-GAAP) $ 42,302 $ 40,924 Change in product inventories 1,038 (83) Add: Profit from recycling activities 3,893 3,629 --------- --------- Total costs of revenues $ 47,233 $ 44,470 ========= ========= East Boulder Mine: Reconciliation to costs of revenues: Total operating costs (Non-GAAP) $ 15,223 $ 12,972 Royalties, taxes and other 3,229 3,064 --------- --------- Total cash costs (Non-GAAP) $ 18,452 $ 16,036 Asset retirement costs 59 54 Depreciation and amortization 9,252 8,281 Depreciation and amortization (in inventory) (259) 428 --------- --------- Total production costs (Non-GAAP) $ 27,504 $ 24,799 Change in product inventories (3,469) (2,285) Add: Profit from recycling activities 2,018 1,720 --------- --------- Total costs of revenues $ 26,053 $ 24,234 ========= ========= Other PGM activities: (1) Reconciliation to costs of revenues: Change in product inventories $ 5,303 $ 4,021 Recycling activities - depreciation 48 24 Costs of recycling activities 82,083 66,175 --------- --------- Total costs of revenues $ 87,434 $ 70,220 ========= ========= (1) Other PGM activities include recycling and other.
CONTACT: Dawn McCurtain (406) 373-8787-----END PRIVACY-ENHANCED MESSAGE-----