Stillwater Mining Company Reports Third Quarter 2014 Results

BILLINGS, Mont., Nov. 5, 2014 (GLOBE NEWSWIRE) -- Stillwater Mining Company SWC SWC today reported financial results for the third quarter ended September 30, 2014.

• Consolidated quarterly net income attributable to common stockholders of $18.1 million
• Cash generation of $37.2 million
• Total cash and investments up $7.2 million during the quarter to $509.1 million, after $30.0 million in debt repayment
• Corporate overhead expense, including exploration, reduced 9% year-over-year to $10.7 million
• All-in Sustaining Costs of $837 per mined ounce of palladium and platinum
• Total mined palladium and platinum production of 123,000 ounces

"Third quarter 2014 results were defined by strong profitability, debt reduction and substantial cash generation driven by improved management of the business and solid underlying operations," stated Mick McMullen, the Company's President and Chief Executive Officer. "Prices for platinum and palladium weakened as the third quarter progressed, reflecting both a strengthening U.S. dollar and a reduction in the negative impact of geopolitical issues around PGM supplies originating from Russia and South Africa. Our internal efforts, begun earlier this year to reduce costs and focus on profitable ounces, have put us in a much better position to manage a more volatile environment of fluctuating metal prices. Mine production has remained generally on track, with stronger output at East Boulder during the quarter. This was offset in part by the deferral of production at some less profitable mining stopes at the Stillwater Mine until new infrastructure is in place to improve the profitability of the mining operation in those areas.

"Mine production in the month of July was the lowest for 2014 as we made the changes at the Stillwater Mine indicated previously. As these changes came into effect, production has ramped up strongly during the third quarter and into October. Based on the current estimate October's production was approximately 20% higher than July's.

"Our all-in sustaining costs for the quarter were $837 per mined ounce. However, year-to-date, we are tracking at $805, which is solidly within our 2014 guidance range and a significant decrease from the $838 for the same period last year. Finally, recycling volumes have declined from their exceptionally strong 2013 levels, but they are in line with longer-term historical performance."

Mr. McMullen continued, "Shortly after the end of the third quarter, we finished the installation of the ventilation fan in the Graham Creek raise, thereby completing the infrastructure development at Graham Creek. The East Boulder Mine is already benefiting from some initial production out of the Graham Creek area and an extensive underground drill program is now getting underway to better define the ore body accessible from this new infrastructure. The Blitz project, on the Stillwater Mine side, continues to advance to the east. The deep drilling from surface to guide the underground development at Blitz has intercepted the J-M reef at depth as planned. As we have commented previously, spending at Marathon and Altar has been scaled back this year while we determine how best to realize value from each of these properties."

"Among the other highlights of the third quarter, we advanced capital projects to expand the tailings facilities at both mines, in order to assure sufficient tailings capacity will be available through about 2022 at the East Boulder Mine and about 2030 at the Stillwater Mine. Separately, our new refining and supply agreements with Johnson Matthey took effect on July 1, providing us with improved terms, access to additional recycling material and additional in-depth insight into the PGM markets. We redeemed the $30.0 million of outstanding 8.0% Exempt Facility Revenue Bonds in early July, saving about $2.5 million per year in interest cost. Even after redeeming the bonds, we grew our available liquidity, ending the quarter with $509.1 million of cash and short-term liquid investments which was a good result for shareholders," concluded Mr. McMullen.

Third quarter 2014 consolidated net income attributable to common stockholders was $18.1 million, or $0.14 per diluted share, compared to the third quarter 2013 consolidated net loss attributable to common stockholders of $201.5 million, or $1.69 per share. The third quarter of 2013 included a $290.4 million, before tax ($226.5 million, after tax) impairment charge related to the Altar mineral property in Argentina.

2014 Guidance:

Guidance for the full-year 2014 remains unchanged from the second quarter as detailed below.

In the third quarter of 2014, the Company's Montana mines produced a total of 123,000 ounces of palladium and platinum, a 1% decrease compared to mine production of 124,200 ounces in the third quarter of 2013.

Third Quarter Mine Production Comparison:

Revenue from the Company's Mine Production segment for the third quarter of 2014 (including proceeds from the sale of by-products) totaled $137.1 million, an 11.3% increase from $123.2 million in the same period of 2013. The combined average realized price for the sales of mined palladium and platinum increased for the third quarter of 2014, averaging $983 per ounce, compared to $887 per ounce realized in the third quarter of 2013. The total quantity of mined palladium and platinum sold in the third quarter of 2014 was 132,400 ounces compared to 131,400 ounces sold in the same period of 2013.

The Company processed recycling material containing 117,700 ounces of palladium, platinum and rhodium through its processing facilities during the third quarter of 2014. This represents a decrease of 29.7% from our record total of 167,500 ounces processed during the third quarter of 2013.

Third Quarter Recycling Ounces Processed Comparison:

Recycling sales volumes for the third quarter of 2014 decreased by 33.6%, to 101,400 ounces from 152,600 ounces sold in the third quarter of 2013. PGM Recycling revenue totaled $109.5 million for the 2014 third quarter, a 30.2% decrease from $156.8 million in the same period of 2013. The third quarter of 2013 included incremental revenue of $16.4 million on the sale of approximately 12,000 ounces of PGMs recovered internally from reprocessed smelter furnace brick at low cost. The Company's combined average realized price for sales of recycled palladium, platinum and rhodium increased by 4.1% to $1,068 per ounce in the third quarter of 2014 from $1,026 per ounce in the third quarter of 2013.

As PGM prices declined near the end of the third quarter, recycling volumes were reduced due to customers holding inventory in expectation of higher prices. Subsequent to the end of the third quarter as prices have recovered, volumes have increased as we would have anticipated.

The Company is utilizing a non-GAAP financial measure of mining efficiency, All-in Sustaining Costs (AISC), in monitoring and managing its performance going forward. This non-GAAP financial measure provides a comparative indication of the all-in resources consumed in any period to sustain the mining operations and produce at current levels. 

Combined total cash costs per mined ounce, net of by-product and recycling credits, (a non-GAAP financial measure) averaged $554 per mined ounce for the quarter ended September 30, 2014, compared to $427 for the same quarter of 2013. Sustaining capital related to mine production increased from $181 per mined ounce reported for the third quarter of 2013 to $184 for the third quarter of 2014. The primary driver of the increase was investment in development at the Stillwater and East Boulder mines. The table below illustrates the effect of by-product and recycling credits on the total cash costs per mined ounce, net of credits, for the combined Montana mining operations.

Cash Flow and Liquidity

At September 30, 2014, the Company's consolidated available cash balance was $257.6 million, compared to $286.7 million at December 31, 2013. If highly liquid investments are included with available cash, the Company's balance sheet liquidity totaled $509.1 million at September 30, 2014, an increase from $496.0 million at December 31, 2013, despite the redemption of the $30.0 million of 8.0% Exempt Facility Revenue Bonds. Of the Company's third quarter consolidated cash balance, $17.2 million is dedicated to the Marathon project (and other related Canadian properties) and is unavailable for other corporate purposes. Net working capital – composed of total current assets (including available cash and highly liquid investments), less current liabilities – increased to $616.9 million at September 30, 2014, from $614.8 million at the end of 2013.

Net cash provided by operating activities (which includes changes in working capital) totaled $131.7 million for the nine months ended September 30, 2014, compared to $81.7 million of cash provided for the same period of 2013. Cash flow from operations benefited from lower corporate overhead and higher metal prices during this year's first nine months. Capital expenditures, adjusted to a cash basis, were $87.0 million for the nine-month period ended September 30, 2014, compared to $91.2 million in the same period of 2013.

Outstanding balance sheet debt at September 30, 2014, was approximately $292.3 million, a decrease from $310.7 million at December 31, 2013. The Company's reported debt balance at September 30, 2014, included approximately $286.8 million of 1.75% convertible debentures (net of unamortized discount of approximately $110.0 million) and $2.2 million of 1.875% convertible debentures, plus a capital lease of $3.1 million and approximately $0.2 million of financing for a small installment land purchase. The decrease in the debt balance is attributable to the retirement of the $30.0 million, 8.0% Exempt Facility Revenue Bonds offset in part by the accretion of the discount on the Company's outstanding 1.75% convertible debentures.

Third Quarter Results - Details

For the third quarter of 2014, the Company's Stillwater Mine produced 76,900 ounces of palladium and platinum, a decrease of 8.2% from the 83,800 ounces produced in the third quarter of 2013. Production at the Company's East Boulder Mine of 46,100 ounces in the third quarter of 2014 reflected an increase of 14.1% over the 40,400 ounces produced in the same quarter of 2013.

Total costs of metals sold (before depletion, depreciation and amortization, and corporate overhead expenses) decreased 10.6% to $197.3 million in the third quarter of 2014 from $220.8 million in the third quarter of 2013. Mine Production costs included in costs of metals sold increased to $85.2 million in the 2014 third quarter from $83.9 million in the 2013 third quarter. Higher royalties and metalliferous mines license tax (MMLT) driven by higher realized PGM prices contributed to the increase in cost of metals sold. In addition, the third quarter of 2014 recognized a full quarter of the 4% pay increase at the Stillwater Mine and Columbus processing facilities provided under the current union contract.

PGM Recycling costs totaled $106.8 million in the third quarter of 2014, down from the $136.8 million reported in the third quarter of 2013. This decrease was due to significantly lower recycling volumes processed and sold and the corresponding decrease in the total cost of acquiring recycling material for processing.

General and administrative (G&A) costs were $10.0 million in the third quarter of 2014 compared to $9.4 million incurred during the same period of 2013. Exploration expenses were $0.7 million in the third quarter of 2014 compared to $2.1 million in the same period of 2013 as a result of steps taken to scale back exploration at the Altar and Marathon projects. Marketing expenses were $0.1 million in the 2014 third quarter compared to $0.2 million in the same quarter of 2013. Included in G&A costs for the third quarter were certain legal and recruitment fees totaling $0.6 million and also $0.5 million associated with the 2014 annual grant for the independent directors deferred share plan. The Company has commenced recovery action against several outstanding debtors, related to the recycling business, dating back over a period of years, and during the third quarter successfully recovered $0.6 million from one of these debtors.

Interest expense in the third quarters of 2014 and 2013 was $6.0 million and $5.6 million, respectively, net of capitalized interest of $1.4 million and $1.2 million, respectively.

During the third quarter of 2014, the Company recorded a net foreign currency transaction gain of $1.0 million. The net foreign currency transaction gain recorded for the third quarter of 2013 was $6.2 million, primarily attributable to periodic remeasurement of the deferred tax liability recorded in association with the acquisition of Peregrine Metals Ltd.

First Nine Months' Results - Details

During the first nine months of 2014, the Company's Stillwater Mine produced 250,600 ounces of palladium and platinum, a decrease of 6.3% from the 267,400 ounces produced in the same period of 2013. Production at the Company's East Boulder Mine of 129,500 ounces for the first nine months of 2014 reflected a 12.2% increase from the 115,400 ounces produced in the same period of 2013.

Total costs of metals sold (before depletion, depreciation and amortization, and corporate overhead expenses) decreased to $555.9 million for the nine-month period ended September 30, 2014, from $639.9 million in the same period of 2013. Mine Production costs included in costs of metals sold increased to $252.7 million for the nine-month period ended September 30, 2014, from $237.0 million in the same period of 2013.

PGM Recycling costs, which primarily reflect the cost of acquiring spent catalytic materials for processing, totaled $297.8 million for the nine-month period ended September 30, 2014, down from the $402.9 million reported in the same period of 2013. The decrease was due to lower volumes sold and the related reduction in total cost to acquire materials for processing.

General and administrative (G&A) costs were $27.4 million for the nine-month period ended September 30, 2014, a decrease from the $36.0 million incurred during the same period of 2013. Included in the G&A for the nine-month period ended September 30, 2013, were costs related to the retirement of the Company's former Chief Executive Officer, expenses related to the implementation of the CoreSafety program, increased legal and consulting costs, and research and development costs. The nine-month period ended September 30, 2014, included reorganization costs of $6.0 million. The same period of 2013 included proxy contest expenses of $4.3 million, and non-cash accelerated equity-based compensation of $9.1 million. The Company recognized $2.4 million in total exploration expenses related to its mineral properties in both Canada and South America for the nine-month period ended September 30, 2014, and $10.2 million in the same period of 2013. Marketing expenses declined to $0.6 million for the nine-month period ended September 30, 2014, compared to $4.2 million in the same time period of 2013, reflecting the curtailment of marketing palladium for jewelry.

Interest expense for the first nine months of 2014 and 2013 was $17.7 million and $17.6 million, respectively, net of capitalized interest of $3.6 million and $3.3 million, respectively.

During the nine-month periods ended September 30, 2014 and 2013, the Company recorded a net foreign currency transaction gain of $5.4 million and $15.7 million, respectively. Essentially all of these net gains relate to the periodic remeasurement into U.S. dollars of the deferred taxes recorded (and subsequently revalued upon impairment) in association with the acquisition of Peregrine Metals Ltd. The reduction of the net foreign currency transaction gain in the third quarter of 2014 is primarily driven by the reduction in the deferred tax liability following the impairment taken in the prior year. The gain was the result of the strength of the U.S. dollar relative to a rapidly depreciating Argentine peso. The gain reflects the effect of the high inflation rate in Argentina as the obligation is remeasured from Argentine pesos into U.S. dollars.

2014 Third Quarter Results Webcast and Conference Call

Stillwater Mining Company will conduct a conference call to discuss third quarter 2014 results at 12:00 noon Eastern Standard Time on Wednesday, November 5, 2014.

A simultaneous webcast and presentation to accompany the conference call will be available through the Investor Relations section of the Company's website at www.stillwatermining.com.

A telephone replay of the call will be available for one week following the event. The replay dial-in numbers are (877) 660-6853 (U.S.) and (201) 612-7415 (International), access code 13593498. In addition, the call transcript will be archived in the Investor Relations section of the Company's website.

About Stillwater Mining Company

Headquartered in Billings, Montana, Stillwater Mining Company is the only U.S. miner of platinum group metals (PGMs) and the largest primary producer of PGMs outside of South Africa and the Russian Federation. PGMs are rare precious metals used in a wide variety of applications, including automobile catalysts, fuel cells, hydrogen purification, electronics, jewelry, dentistry, medicine and coinage. The Company is engaged in the development, extraction and processing of PGMs from a geological formation in southern Montana known as the J-M Reef and from the recycling of spent catalytic converters. The J-M Reef is the only known significant source of PGMs in the United States and the highest-grade PGM resource known in the world. The Company also owns the Marathon PGM-copper deposit in Ontario, Canada, and the Altar porphyry copper-gold deposit located in the San Juan province of Argentina. 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. Information about the Company can be found at its website: www.stillwatermining.com.

Cautionary Note Concerning Forward-Looking Statements

Some statements contained in this report 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 from management's expectations. These statements may contain words such as "believes," "anticipates," "plans," "expects," "intends," "estimates," "will" or similar expressions. Such statements also include, but are not limited to, comments regarding expansion plans, costs, grade, production and recovery rates; permitting; financing needs and the terms of future credit facilities; exchange rates; capital expenditures; increases in processing capacity; cost reduction measures; safety; timing for engineering studies; environmental permitting and compliance; litigating; labor matters; and the palladium, platinum, copper and gold market. The forward-looking statements in this report are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. These statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and other important factors that could cause its actual performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Additional information regarding factors that could cause results to differ materially from management's expectations is found in the section entitled "Risk Factors" in the Company's 2013 Annual Report on Form 10-K, in its subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, and in corresponding filings with Canadian securities regulatory authorities. 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 forward looking statements herein speak only as of the date of this release. The Company disclaims any obligation to update forward-looking statements.

Reconciliation of Non-GAAP Financial Measures to Consolidated Costs of Revenues

The Company utilizes certain non-GAAP financial 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 financial measure included in the Company's Consolidated Statements of Comprehensive Income (Loss)) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP financial 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 financial 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 financial measures are not standardized across the mining industry and in most cases will not be comparable to similar measures that may be provided by other companies. These non-GAAP financial 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, the most directly comparable GAAP financial measure, for each period shown is provided as part of the following tables, and a description of each non-GAAP financial measure is provided below.

Total Consolidated Costs of Revenues: For the Company as a whole, this measure is equal to total costs of revenues, as reported in the Consolidated Statements of Comprehensive Income (Loss). For the Stillwater Mine, the 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 the Stillwater Mine, the East Boulder Mine and other PGM activities are equal in total to total consolidated costs of revenues as reported in the Company's Consolidated Statements of Comprehensive Income (Loss).

Total Cash Costs (Non-GAAP): This non-GAAP financial measure is 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, revenues from the sale of mine by-products, depreciation and amortization and asset retirement costs, and timing differences resulting from changes in product inventories. The Company uses this measure as a comparative indication of the cash costs related to production and processing operations in any period. It is a measure of extraction efficiency.

When divided by the total tons milled in the respective period, Total Cash Costs 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 Costs 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 Costs 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 cash 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 Costs 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.

Stillwater Mining Company
All-In Sustaining Costs (a Non-GAAP Financial Measure)
(Unaudited)

All-In Sustaining Costs (Non-GAAP): This non-GAAP financial measure is used as an indicator from period to period of the level of total cash required by the business to maintain and operate the existing mines, including corporate administrative costs and replacement capital. The measure is calculated beginning with total cash costs, net of credits, (another non-GAAP financial measure, described above), and adding to it the recycling income credit, domestic corporate overhead costs and marketing costs (excluding any depreciation and amortization costs as well as research and development, non-recurring and reorganization costs included in corporate overhead costs), and that portion of total capital expenditures associated with sustaining the current level of mining operations. (Capital expenditures for Blitz, Graham Creek and certain other one-time projects are not included in the calculation.)

When divided by the total recoverable PGM ounces in the respective period, All-In Sustaining Costs per Mined Ounce (non-GAAP) provides an indication of the level of total cash required to maintain and operate the mines per PGM ounce produced in the period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because the objective of PGM mining activity is to extract PGM material, the all-in cash costs per ounce to produce PGM material, administer the business and sustain the operating capacity of the mines is a useful measure for comparing overall extraction efficiency between periods. This measure is affected by the total level of spending in the period and by the grade and volume of ore produced.