Stillwater Mining Company (SWC, Financial) filed Quarterly Report for the period ended 2009-03-31.
Stillwater Mining Company is engaged in the exploration development mining and production of platinum palladium and associated metals from the Stillwater Complex in southern Montana which the company believes isthe only significant primary source of platinum and palladium outside theRepublic of South Africa. The Stillwater Complex includes an extensivemineralized zone containing platinum group metals known as the J-M ReefThe Stillwater Complex has been prospected for gold copper nickel and chromium. Stillwater Mining Company has a market cap of $528.4 million; its shares were traded at around $5.62 with and P/S ratio of 0.6.
With the sharp decrease in PGM prices and restructuring of operations in the fourth quarter 2008, the Companys operating objectives set for 2009 included mine production of 495,000 ounces at a total cash cost of $399 per ounce and capital expenditures of $39 million while maintaining a neutral to positive cash flow. The Company performed well against these objectives in the first quarter producing, as previously mentioned, 124,800 ounces at a gross mining cost of $405 per ounce with capital spending of $8.1 million. The cost per ounce at the mining operations was a little higher than the annual target but actually a little better than plan for the quarter. Recycling credits were $2.3 million lower due to the volume of business in the first quarter.
For the first quarter of 2009, the Company recognized net income from its recycling operations of $1.3 million on revenues of $21.5 million, reflecting a combined average realization of $1,148 per sold ounce. Total tons of recycling material fed to the furnace during the 2009 first quarter, including tolled material, averaged 5.6 tons per day. The lower volume was in response to a managed reduction in advances to suppliers and the significant decline in PGM prices which resulted in reduced incentives in the market place for recycled material collectors and ultimately steep losses incurred by them. By way of comparison, for the first quarter of 2008, the Company recorded recycling segment net income of $5.5 million on revenues of $86.4 million, an average realization of $1,412 per sold ounce. Total recycling tons fed to the furnace in last years first quarter averaged 13.3 tons per day. Volumes of material available for recycling appeared to be gradually recovering as the first quarter progressed, but remain far below their year-earlier levels.
The Company has assessed the PGM price levels that it requires in order to maintain its operations in a cash neutral position and provide adequate reinvestment in the business. The assessment is dependent on several factors, including the level of recycling activity, the prices received for by-products, and whether the floor and ceiling prices in the automotive contracts are taken into account. For the first quarter of 2009, all-in cash costs from operations, capital spending and corporate overhead, offset by by-product sales proceeds and recycling profits, averaged $556 per ounce. Assuming the contractual average floor price of $364 per ounce is received for palladium, to remain cash neutral requires a platinum price approaching $1,200 per ounce. If the floor prices are ignored, indicative cash breakeven prices would need to be on the order of $275 per ounce for palladium and $1,500 per ounce for platinum. Clearly, with the upcoming expiration of the auto contracts beginning at the end of 2010, an urgent strategic focus for the Company is to bring down its all-in cash costs as far as possible and to seek other ways to improve the Companys competitiveness.
Capital spending of $12.2 million in the 2009 first quarter included infrastructure and mine development investment of $6.9 million at the Stillwater Mine and $0.5 million at the East Boulder Mine. Total equipment spending during the quarter totaled $4.8 million, including $3.3 million toward completion of the second electric furnace. As noted already, total capital spending for 2009 is projected at about $39 million. Commissioning of the second electric furnace was underway at the end of the first quarter.
The Company has set a mine production objective for 2009 of 495,000 PGM ounces, generally in the same range as 2008. First quarter 2009 mine production of 124,800 ounces was a little ahead of this pace. Total cash costs per ounce (a non-GAAP measure of extraction efficiency) for 2009 are projected at $399, again in the same range as the $396 per ounce in 2008. For the first quarter of 2009, total cash costs per ounce were $405, a little higher than the annual target but actually a little better than plan for the quarter. Capital expenditures will decline sharply to about $39 million in 2009, down from about $82.3 million in 2008. First quarter 2009 capital expenditures of $12.2 million were a little ahead of the targeted pace, but include expenditures for the new smelter furnace. At the Stillwater Mine, lower development activity in 2009 should still be sufficient to maintain the current developed state, but will eliminate additional spending to expand the developed state that has been included for the past several years. At East Boulder Mine, development has been pared back further, providing only the additional development needed to support 2009 production. The Company is evaluating the opportunity to increase development expenditures modestly at East Boulder in 2009 in view of somewhat higher than planned PGM prices realized to date. Cash balances modestly grew during the quarter.
Read the The complete ReportSWC is in the portfolios of John Hussman of Hussman Economtrics Advisors, Inc..
Stillwater Mining Company is engaged in the exploration development mining and production of platinum palladium and associated metals from the Stillwater Complex in southern Montana which the company believes isthe only significant primary source of platinum and palladium outside theRepublic of South Africa. The Stillwater Complex includes an extensivemineralized zone containing platinum group metals known as the J-M ReefThe Stillwater Complex has been prospected for gold copper nickel and chromium. Stillwater Mining Company has a market cap of $528.4 million; its shares were traded at around $5.62 with and P/S ratio of 0.6.
Highlight of Business Operations:
For the first quarter of 2009, the Company has reported a net loss of $11.6 million, or $0.12 per share, compared to a profit of $2.8 million, or $0.03 per share, in the first quarter 2008. Most of the difference is attributable to lower metal prices the combined average realization per mined ounce sold for platinum and palladium was $510 in the first quarter of 2009 compared to $625 (net of hedging losses) in last years first quarter. Mine production of platinum and palladium totaled 124,800 ounces in the 2009 first quarter, as compared to 129,000 ounces in the same period of 2008, reflecting performance improvement at Stillwater Mine offset by the scaling back of operations at the East Boulder Mine. In the current low-price environment for PGMs, the Company is managing toward maintaining neutral or slightly positive cash flow, rather than focusing on earnings. The Companys total available cash and short-term investments at March 31, 2009, was $181.8 million, up very slightly from the balance of $180.8 million at the end of 2008. Net working capital (including cash and investments) also increased slightly over the quarter to $227.4 million from $230.4 million at year end 2008.With the sharp decrease in PGM prices and restructuring of operations in the fourth quarter 2008, the Companys operating objectives set for 2009 included mine production of 495,000 ounces at a total cash cost of $399 per ounce and capital expenditures of $39 million while maintaining a neutral to positive cash flow. The Company performed well against these objectives in the first quarter producing, as previously mentioned, 124,800 ounces at a gross mining cost of $405 per ounce with capital spending of $8.1 million. The cost per ounce at the mining operations was a little higher than the annual target but actually a little better than plan for the quarter. Recycling credits were $2.3 million lower due to the volume of business in the first quarter.
For the first quarter of 2009, the Company recognized net income from its recycling operations of $1.3 million on revenues of $21.5 million, reflecting a combined average realization of $1,148 per sold ounce. Total tons of recycling material fed to the furnace during the 2009 first quarter, including tolled material, averaged 5.6 tons per day. The lower volume was in response to a managed reduction in advances to suppliers and the significant decline in PGM prices which resulted in reduced incentives in the market place for recycled material collectors and ultimately steep losses incurred by them. By way of comparison, for the first quarter of 2008, the Company recorded recycling segment net income of $5.5 million on revenues of $86.4 million, an average realization of $1,412 per sold ounce. Total recycling tons fed to the furnace in last years first quarter averaged 13.3 tons per day. Volumes of material available for recycling appeared to be gradually recovering as the first quarter progressed, but remain far below their year-earlier levels.
The Company has assessed the PGM price levels that it requires in order to maintain its operations in a cash neutral position and provide adequate reinvestment in the business. The assessment is dependent on several factors, including the level of recycling activity, the prices received for by-products, and whether the floor and ceiling prices in the automotive contracts are taken into account. For the first quarter of 2009, all-in cash costs from operations, capital spending and corporate overhead, offset by by-product sales proceeds and recycling profits, averaged $556 per ounce. Assuming the contractual average floor price of $364 per ounce is received for palladium, to remain cash neutral requires a platinum price approaching $1,200 per ounce. If the floor prices are ignored, indicative cash breakeven prices would need to be on the order of $275 per ounce for palladium and $1,500 per ounce for platinum. Clearly, with the upcoming expiration of the auto contracts beginning at the end of 2010, an urgent strategic focus for the Company is to bring down its all-in cash costs as far as possible and to seek other ways to improve the Companys competitiveness.
Capital spending of $12.2 million in the 2009 first quarter included infrastructure and mine development investment of $6.9 million at the Stillwater Mine and $0.5 million at the East Boulder Mine. Total equipment spending during the quarter totaled $4.8 million, including $3.3 million toward completion of the second electric furnace. As noted already, total capital spending for 2009 is projected at about $39 million. Commissioning of the second electric furnace was underway at the end of the first quarter.
The Company has set a mine production objective for 2009 of 495,000 PGM ounces, generally in the same range as 2008. First quarter 2009 mine production of 124,800 ounces was a little ahead of this pace. Total cash costs per ounce (a non-GAAP measure of extraction efficiency) for 2009 are projected at $399, again in the same range as the $396 per ounce in 2008. For the first quarter of 2009, total cash costs per ounce were $405, a little higher than the annual target but actually a little better than plan for the quarter. Capital expenditures will decline sharply to about $39 million in 2009, down from about $82.3 million in 2008. First quarter 2009 capital expenditures of $12.2 million were a little ahead of the targeted pace, but include expenditures for the new smelter furnace. At the Stillwater Mine, lower development activity in 2009 should still be sufficient to maintain the current developed state, but will eliminate additional spending to expand the developed state that has been included for the past several years. At East Boulder Mine, development has been pared back further, providing only the additional development needed to support 2009 production. The Company is evaluating the opportunity to increase development expenditures modestly at East Boulder in 2009 in view of somewhat higher than planned PGM prices realized to date. Cash balances modestly grew during the quarter.
Read the The complete ReportSWC is in the portfolios of John Hussman of Hussman Economtrics Advisors, Inc..
