Stillwater Mining Company (SWC, Financial) filed Quarterly Report for the period ended 2010-06-30.
Stillwater Mining Company has a market cap of $1.31 billion; its shares were traded at around $13.41 with a P/E ratio of 63.9 and P/S ratio of 3.3. SWC is in the portfolios of Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, John Hussman of Hussman Economtrics Advisors, Inc..
The Companys stated operating objectives for 2010 include targeted mine production of 515,000 combined ounces of palladium and platinum at a total consolidated cash cost (a non-GAAP measure of extraction efficiency) of $360 per ounce and capital expenditures of about $50 million. After a favorable first quarter this year, the Company fell short of tracking these objectives in the second quarter, producing just 112,600 ounces of palladium and platinum at a total consolidated cash cost of $393 per ounce produced. This total cash cost per ounce was above the annual guidance, reflecting the effect on royalties and taxes of higher PGM prices, as well as lower overall mine production. Capital spending in the second quarter was $13.9 million, below the planned level of spending, as expenditures to complete the recycle crushing and sampling facility in Columbus appear to be coming in under budget.
Mining performance at the East Boulder Mine through the second quarter was better than plan, with combined palladium and platinum production of 33,400 ounces, and total cash costs of $407 per ounce. In comparison, during the second quarter of 2009 the East Boulder Mine produced 34,700 ounces of palladium and platinum at total cash costs of $371 per ounce. Capital expenditures at the mine were $1.2 million in the second quarter of 2010 compared to $1.5 million in the second quarter of 2009. Actual primary development footage of 800 feet at the East Boulder Mine was slightly better than plan during the second quarter, as was secondary development of 3,400 feet in the quarter, and diamond drilling footage of 24,000 feet essentially equaled engineering projections.
Recognizing the challenges facing the Stillwater Mine in particular for the remainder of 2010, the Company has concluded to scale back its earlier production guidance for the year from 515,000 ounces of mined palladium and platinum to 490,000 combined ounces. Average combined total cash costs are now projected to increase to $385 per ounce from the $360 per ounce prior guidance. Capital expenditures, with the approval of the Board, have been increased to $57 million from the earlier guidance of $50 million, reflecting additional infrastructure development and some tactical opportunities to expand production modestly in 2011 and 2012. Engineering assessments of mining conditions for the balance of the year suggest that ore grades are likely to remain a little lower on average than projected previously, at least until development reaches the Lower West area of the Stillwater Mine late in 2010. This is believed to be primarily a consequence of timing and has not been determined to be indicative of any longer-term trend. Once the immediate production challenges are worked through, the Company projects its fourth quarter 2010 production to be back at approximately the 515,000 ounce annual rate.
Along with its mine concentrates, the Company also processes spent catalyst material through its smelting and refining facilities in Columbus, Montana, recovering palladium, platinum and rhodium from these materials. For the second quarter of 2010, the Company earned $3.4 million from recycling operations on revenues of $42.3 million, reflecting a combined average realization (including rhodium) of $1,106 per sold ounce. By comparison, in the second quarter of 2009 the Companys net income from recycling operations was $2.1 million on revenues of $12.5 million, a combined average realization of $643 per sold ounce. Total tons of recycling material processed during the 2010 second quarter, including tolled material, averaged 16.6 tons per day, up from 9.7 tons per day in the second quarter of 2009. Higher PGM prices created a stronger incentive for suppliers to collect material and the Company was able to enter into new sourcing arrangements for catalyst material with several suppliers.
During the second quarter of 2010, PGM market prices fell. Afternoon postings by the London Bullion Metals Association for platinum and palladium were $1,532 and $446 per ounce, respectively, at June 30, 2010, down from $1,645 and $479 per ounce, respectively, at the end of first quarter 2010. The second-quarter 2010 decrease in PGM prices was likely driven by several factors, including a stronger U.S. dollar, uncertainties regarding the timing and extent of economic recovery and industrial demand growth, and some seasonality in the PGM markets. It is anticipated that there will be a continued demand from Asia for PGMs and raw materials, continued investor interest in precious metals, and gradually recovering automotive demand. With respect to supply, there has been a diminished amount of palladium exports from the Russian government stockpiles. The supply and demand factors have combined to support PGM prices this year. As discussed in the Companys 2009 Annual Report, longer-term market fundamentals appear favorable for PGMs.
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Stillwater Mining Company has a market cap of $1.31 billion; its shares were traded at around $13.41 with a P/E ratio of 63.9 and P/S ratio of 3.3. SWC is in the portfolios of Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, John Hussman of Hussman Economtrics Advisors, Inc..
Highlight of Business Operations:
For the second quarter of 2010, the Company reported net income of $14.6 million, or $0.15 per share, higher than the $4.6 million, or $0.05 per share, reported in the second quarter 2009. Stronger realized prices in the 2010 second quarter for the Companys primary products, palladium and platinum, more than offset substantially lower ounce production compared to the second quarter of 2009. The combined average realized prices differ from equivalent average market prices as the result of ceiling prices on a portion of the Companys mined platinum, floor prices on the Companys mined palladium at prices prevailing during the second quarter of 2009, small contractual discounts on metal not subject to the floors and ceilings, and selling prices based on monthly averages which generally lag the market price by one month. Mine production of platinum and palladium totaled 112,600 ounces in the 2010 second quarter, as compared to 137,700 ounces in the same period of 2009; the lower production in this years second quarter was primarily attributable to operational issues in the off-shaft portion of the Stillwater Mine. The Companys total available liquidity, expressed as cash plus short-term investments, at June 30, 2010, was $228.1 million, up from $220.6 million at March 31, 2010, and $201.2 million at the end of 2009. Net working capital (including cash and investments) increased over the quarter to $316.9 million, up from $297.6 million at the end of first quarter 2010 and $269.5 million at year end 2009.The Companys stated operating objectives for 2010 include targeted mine production of 515,000 combined ounces of palladium and platinum at a total consolidated cash cost (a non-GAAP measure of extraction efficiency) of $360 per ounce and capital expenditures of about $50 million. After a favorable first quarter this year, the Company fell short of tracking these objectives in the second quarter, producing just 112,600 ounces of palladium and platinum at a total consolidated cash cost of $393 per ounce produced. This total cash cost per ounce was above the annual guidance, reflecting the effect on royalties and taxes of higher PGM prices, as well as lower overall mine production. Capital spending in the second quarter was $13.9 million, below the planned level of spending, as expenditures to complete the recycle crushing and sampling facility in Columbus appear to be coming in under budget.
Mining performance at the East Boulder Mine through the second quarter was better than plan, with combined palladium and platinum production of 33,400 ounces, and total cash costs of $407 per ounce. In comparison, during the second quarter of 2009 the East Boulder Mine produced 34,700 ounces of palladium and platinum at total cash costs of $371 per ounce. Capital expenditures at the mine were $1.2 million in the second quarter of 2010 compared to $1.5 million in the second quarter of 2009. Actual primary development footage of 800 feet at the East Boulder Mine was slightly better than plan during the second quarter, as was secondary development of 3,400 feet in the quarter, and diamond drilling footage of 24,000 feet essentially equaled engineering projections.
Recognizing the challenges facing the Stillwater Mine in particular for the remainder of 2010, the Company has concluded to scale back its earlier production guidance for the year from 515,000 ounces of mined palladium and platinum to 490,000 combined ounces. Average combined total cash costs are now projected to increase to $385 per ounce from the $360 per ounce prior guidance. Capital expenditures, with the approval of the Board, have been increased to $57 million from the earlier guidance of $50 million, reflecting additional infrastructure development and some tactical opportunities to expand production modestly in 2011 and 2012. Engineering assessments of mining conditions for the balance of the year suggest that ore grades are likely to remain a little lower on average than projected previously, at least until development reaches the Lower West area of the Stillwater Mine late in 2010. This is believed to be primarily a consequence of timing and has not been determined to be indicative of any longer-term trend. Once the immediate production challenges are worked through, the Company projects its fourth quarter 2010 production to be back at approximately the 515,000 ounce annual rate.
Along with its mine concentrates, the Company also processes spent catalyst material through its smelting and refining facilities in Columbus, Montana, recovering palladium, platinum and rhodium from these materials. For the second quarter of 2010, the Company earned $3.4 million from recycling operations on revenues of $42.3 million, reflecting a combined average realization (including rhodium) of $1,106 per sold ounce. By comparison, in the second quarter of 2009 the Companys net income from recycling operations was $2.1 million on revenues of $12.5 million, a combined average realization of $643 per sold ounce. Total tons of recycling material processed during the 2010 second quarter, including tolled material, averaged 16.6 tons per day, up from 9.7 tons per day in the second quarter of 2009. Higher PGM prices created a stronger incentive for suppliers to collect material and the Company was able to enter into new sourcing arrangements for catalyst material with several suppliers.
During the second quarter of 2010, PGM market prices fell. Afternoon postings by the London Bullion Metals Association for platinum and palladium were $1,532 and $446 per ounce, respectively, at June 30, 2010, down from $1,645 and $479 per ounce, respectively, at the end of first quarter 2010. The second-quarter 2010 decrease in PGM prices was likely driven by several factors, including a stronger U.S. dollar, uncertainties regarding the timing and extent of economic recovery and industrial demand growth, and some seasonality in the PGM markets. It is anticipated that there will be a continued demand from Asia for PGMs and raw materials, continued investor interest in precious metals, and gradually recovering automotive demand. With respect to supply, there has been a diminished amount of palladium exports from the Russian government stockpiles. The supply and demand factors have combined to support PGM prices this year. As discussed in the Companys 2009 Annual Report, longer-term market fundamentals appear favorable for PGMs.
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