SOURCE: Stillwater Mining Company

Stillwater Mining Company

August 08, 2013 08:00 ET

Stillwater Mining Company Reports Second Quarter Earnings

BILLINGS, MT--(Marketwired - Aug 8, 2013) - STILLWATER MINING COMPANY (NYSE: SWC) (TSX: SWC.U)

  • Second quarter mine production of 131,500 PGM ounces -- 2013 guidance of 500,000 ounces reiterated
  • Recycling volume of 175,000 ounces sets second consecutive quarterly record
  • Capital expenditure guidance for 2013 reduced to a range of $145 million to $155 million
  • Consolidated net loss attributable to common stockholders of $5.3 million or $(0.04) per diluted share, including unusual items

Stillwater Mining Company today reported a consolidated net loss attributable to common stockholders for the 2013 second quarter of $5.3 million, or $(0.04) per diluted share. The loss reported for the quarter was primarily driven by expenses resulting from the accelerated vesting of equity-based compensation and from heightened corporate activity during the recent proxy contest. The second quarter included non-cash equity based compensation expense of $9.1 million resulting from change in control provisions triggered during the quarter. In addition, proxy contest related expenses of $1.5 million were incurred during the second quarter. Consolidated net income attributable to common stockholders reported for the 2012 second quarter was $19.2 million, or $0.17 per diluted share. Total revenues for the 2013 second quarter were $266.5 million, an increase of 25.2% compared to revenues of $212.8 million for the second quarter of 2012.

For the first six months of 2013, Stillwater reported net income attributable to common stockholders of $9.3 million, or $0.08 per diluted share, on revenues of $517.1 million, compared to net income of $25.1 million, or $0.22 per diluted share, on revenues of $415.8 million, for the same period in 2012.

Commenting on the Company's 2013 second quarter results, Terry Ackerman, the Company's interim Chief Executive Officer, stated, "Operational performance continued to be strong through the second quarter as our teams built on their history of consistent execution. Mined production results were once again ahead of plan and our recycling facilities processed a record number of PGM ounces, topping the previous record that was set just last quarter. Progress continues on the growth projects at our Montana operations with the Blitz, Graham Creek and Lower Far West projects all moving forward on plan. Outside of Montana, a detailed engineering and feasibility study on the Marathon project in Canada is in process and is expected to be completed during the fourth quarter of this year. A limited drilling program at the Altar project in Argentina for the 2012/2013 drilling season was completed in April and analysis of the core is now underway. An updated report on the Altar project should be published before year end.

"As previously announced, the Company welcomed four new members to its Board of Directors during the second quarter. Our management team has already formed a solid working relationship with the reconstituted Board. The Company has initiated a comprehensive internal review process with the intent of providing information necessary to assist the Board and management in charting a path forward that will build upon the Company's successes and help refine the strategic focus moving forward. This review includes the Company's capital allocation practices, corporate activities, mining operations and development and exploration projects. The review process will be completed as quickly as possible and the conclusions will be disclosed as appropriate. The management team is encouraged by this review process and believes it will help make Stillwater an even stronger Company."

Mr. Ackerman concluded, "Overall, the second quarter was another solid quarter for Stillwater. We incurred some unusual expenses during the second quarter which, at first glance, masks good underlying financial results. From a market perspective, we continue to believe that the supply-demand picture for our primary product, palladium, is very favorable and is characterized by steadily growing demand against constrained or possibly declining supply."

The Company's mines produced a total of 131,500 ounces of palladium and platinum during the second quarter of 2013 compared to production of 133,400 ounces in the second quarter of 2012. Production for the first six months was 258,600 ounces compared to 254,200 ounces in the first six months of 2012. The fluctuation in ounces produced is driven primarily by the normal result of changes in mining conditions and the array of stopes available for mining in any period. 

Second quarter 2013 revenues from sales of mined production (including proceeds from the sale of by-products) totaled $112.7 million, a decrease from $116.2 million in the same period last year. Combined sales realizations increased during the second quarter of 2013 for mined palladium and platinum ounces, averaging $865 per ounce, an increase from the $850 per ounce realized in the second quarter of 2012. The total quantity of mined palladium and platinum sold decreased to 122,300 ounces in the second quarter of 2013, compared to the 128,100 ounces sold during the same period in 2012.

Total cash costs per mined ounce (a non-GAAP measure defined below) averaged $532 in the second quarter of 2013, compared to total cash costs of $454 per ounce for the second quarter of 2012. The increase is primarily the result of the ever-expanding underground mining operations, general wage and other cost inflation, as well as the priority given to the new-miner training programs in support of the Company's projects and growth initiatives. The Company processed recycling material containing a quarterly record 175,000 ounces of palladium, platinum and rhodium through its smelter and refinery during the second quarter of 2013. This represents the second successive record quarter for the recycling facilities and represents a 42.2% increase compared to the total of 123,100 ounces processed during the second quarter of 2012. The increased volumes were primarily attributable to growing volumes of material received from new suppliers. Recycling sales volumes increased 54.0%, to 143,100 ounces in the second quarter of 2013, from 92,900 ounces in the second quarter of 2012. Recycling revenues totaled $153.7 million in the 2013 second quarter, up from $96.6 million in the same period of 2012. The Company's combined average realized price for sales of recycled palladium, platinum and rhodium increased to $1,070 per ounce in the second quarter of 2013 from $1,030 per ounce in the second quarter of 2012.

Total recycled ounces processed in the second quarter of 2013 included approximately 8,000 PGM ounces recovered from reprocessed furnace brick. Subsequent to the end of the second quarter of 2013, approximately 12,000 additional PGM recycling ounces were processed from the furnace brick. Most of the revenue associated with the 20,000 PGM ounces from reprocessed furnace brick is expected to be recognized in the third quarter of 2013.

Guidance

Based on results for the first six months and projections for the remainder of the year, the Company has reviewed its previous mined production, cash cost per ounce and capital expenditure guidance. As a result of this review, the Company has reiterated its previous guidance of 500,000 ounces of mined palladium and platinum for 2013. The Company also is maintaining its full-year 2013 guidance for cash costs per mined ounce of $560. The Company has concluded to reduce its original capital expenditure guidance for 2013 to a range of $145 to $155 million from $172.8 million.

Cash Flow and Liquidity

At June 30, 2013, the Company's available cash was $222.4 million, compared to $379.7 million at December 31, 2012. If highly liquid investments are included with available cash, the Company's balance sheet liquidity totaled $446.9 million at June 30, 2013, a decrease from $641.7 million at December 31, 2012. Most of this decrease was related to debt redemption during the first quarter of 2013. Of the Company's current cash balance, $34.2 million is dedicated to the Marathon project (and other related properties) and is unavailable for other corporate purposes. Net working capital -- comprised of total current assets (including available cash and investments), less current liabilities -- increased to $608.4 million at June 30, 2013, from $606.0 million at year end 2012.

Net cash provided by operating activities (which includes changes in working capital) totaled $30.9 million for the first six months of 2013, compared to $55.4 million of cash provided in the first half of 2012. The lower cash generation in the first six months of 2013 largely reflected growth in recycling working capital attributable to the greater volumes being processed this year. Capital expenditures were $58.8 million in the first half of 2013, a slight decrease from the $59.3 million in the first half of 2012. Of the capital expenditures for the first six months of 2013, $6.0 million was attributable to the major development projects underway on the J-M Reef in Montana.

Outstanding debt at June 30, 2013 was $303.6 million, down from $461.1 million at December 31, 2012. In March 2013, the Company repaid $164.3 million of its 1.875% convertible debentures. The Company's debt balance currently includes $268.2 million outstanding in the form of convertible debentures, $29.6 million of exempt facility revenue bonds due in 2020, a capital lease of $5.5 million and $0.3 million for a small installment land purchase.

Second Quarter Results - Details

For the second quarter of 2013, the Company's Stillwater Mine produced 91,000 ounces of palladium and platinum, a decrease of 7.2% from the 98,100 ounces produced in the second quarter of 2012. Production at the Company's East Boulder Mine of 40,500 ounces in the second quarter of 2013 reflected an increase from the 35,300 ounces produced in the same quarter of 2012. The Stillwater Mine experienced significant variations in ore grade delivered to the mill during the 2013 second quarter, resulting in an overall reduction in the reported mill head grade. The normal grade challenges during the quarter were compounded by a series of infrastructure factors including dilution resulting from the loss of a key muck pass, which led to using another pass for both ore and waste rock during part of the period. These issues are being addressed but have not been completely remedied to date. The current developed state of the Montana mines is providing the operational flexibility to work through this issue and the Company's production and development goals remain intact.

Costs of metals sold (before depletion, depreciation and amortization expense) increased to $226.5 million in the second quarter of 2013 from $168.1 million in the second quarter of 2012. Mining costs included in costs of metals sold increased slightly to $77.4 million in the 2013 second quarter from $75.0 million in the 2012 second quarter. Recycling costs, which primarily reflect the cost of acquiring spent catalytic materials for processing, totaled $149.2 million in the second quarter of 2013, more than the $93.1 million reported in the second quarter of 2012. The increase was due to higher volumes sold and the related higher market value of the materials acquired for processing.

General and administrative costs were $14.1 million in the second quarter of 2013, up from the $10.1 million incurred during the same period of 2012. The increase was primarily due to costs related to the retirement of the Company's former Chief Executive Officer. Exploration expenses were $2.2 million for the second quarter of 2013, of which almost all was attributable to the Altar copper-gold project, compared to $2.0 million, in the same period of 2012. Marketing expenses declined to $2.3 million in the 2013 second quarter compared to $3.7 million in the same quarter of 2012. The Company plans to curtail marketing expenses for the remainder of 2013.

Interest expense reported for the second quarters of 2013 and 2012 was $5.4 million and $1.2 million, respectively. This increase is principally the result of non-cash accretion of the debt discount related to the 1.75% convertible debentures that is charged to earnings over the expected life of the convertible debentures. The amount of these non-cash charges to earnings in the second quarter of 2013 was $3.9 million.

During the second quarter of 2013, the Company recorded a net foreign currency transaction gain of $5.2 million, primarily related to the deferred tax liability recorded in association with the acquisition of Peregrine Metals Ltd. The foreign currency transaction gain recorded for the second quarter of 2012 was $3.7 million.

First Six Months' Results - Details

For the first six months of 2013, the Company's Stillwater Mine produced 183,600 ounces, a decrease of 1.2% from the 185,800 ounces produced in the first six months of 2012. Production at the Company's East Boulder Mine of 75,000 ounces in the first six months of 2013 reflected a 9.6% increase from the 68,400 ounces produced in the same period of 2012.

Costs of metals sold (before depletion, depreciation and amortization expense) increased to $419.1 million in the first six months of 2013 from $326.3 million in the first half of 2012. Mining costs included in costs of metals sold increased to $153.1 million in the first half of 2013 from $149.0 million in the same period in 2012. Recycling costs, which primarily reflect the cost of acquiring spent catalytic materials for processing, totaled $266.0 million in the first six months of 2013, more than the $177.3 million reported in the first six months of 2012. The increase was due to higher volumes sold and the related higher market value of the materials acquired for processing.

General and administrative costs were $26.5 million in the first six months of 2013, up from the $22.6 million incurred during the same period of 2012. The Company recognized $8.1 million in exploration expenses related to its mineral properties in both Canada and South America in the first six months of 2013 and $12.1 million in the first six months of 2012. Marketing expenses declined to $4.0 million in the first half of 2013 compared to $6.0 million in the same time period of 2012. As a result of the recent proxy contest and the change in control provisions in the Company's employee and director equity incentive plans, the Company recognized costs of $4.3 million and $9.1 million, (non-cash charge) respectively, for the six-month period ended June 30, 2013.

Interest expense reported for the first six months of 2013 and 2012 was $12.1 million and $2.9 million, respectively. This increase is principally the result of non-cash accretion of the debt discount related to the 1.75% convertible debentures that is charged to earnings over the expected life of the convertible debentures. The amount of these non-cash charges to earnings in the first six months of 2013 was $7.7 million.

During the first six months of 2013, the Company recorded a net foreign currency transaction gain of $9.5 million, primarily related to the deferred tax liability recorded in association with the acquisition of Peregrine Metals Ltd. The foreign currency transaction gain recorded for the first six months of 2012 was $6.6 million. About $10.7 million and $4.4 million of the 2013 and 2012 net gain, respectively, related to the remeasurement into U.S. dollars of the deferred taxes recorded in association with the acquisition of Peregrine Metals Ltd. The gain reflects the effect of the high inflation rate in Argentina as the obligation is remeasured from pesos into U.S. dollars.

Second Quarter Results Webcast and Conference Call

Stillwater Mining Company will conduct a conference call to discuss second quarter results at approximately 12:00 p.m. Eastern Daylight Time on Thursday, August 8, 2013.

Dial-In Numbers:
United States: (800) 288-8961
International: (612) 332-0335

The conference call will be simultaneously webcast through the Company's website at www.stillwatermining.com in the Investor Relations section. 
A telephone replay of the call will be available for one week following the event. The replay dial-in numbers are (800) 475-6701 (U.S.) and (320) 365-3844 (International), access code 299099. In addition, the call transcript will be archived in the Investor Relations section of the Company's website.

About Stillwater Mining Company

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 and on the Toronto Stock Exchange under the symbol SWC.U. Information on Stillwater Mining Company 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 "desires," "believes," "anticipates," "plans," "expects," "intends," "estimates" 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. 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 2012 Annual Report on Form 10-K, in its quarterly Form 10-Q filings, 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 Company disclaims any obligation to update forward-looking statements.

 
Stillwater Mining Company
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands, except per share data)
       
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2013   2012   2013   2012
REVENUES                      
  Mine production $ 112,742     $ 116,190     $ 241,056     $ 232,894  
  PGM recycling   153,749       96,585       276,083       182,932  
      Total revenues   266,491       212,775       517,139       415,826  
COSTS AND EXPENSES                      
  Costs of metals sold                      
    Mine production   77,376       74,996       153,129       149,025  
    PGM recycling   149,154       93,149       266,016       177,264  
      Total costs of metals sold   226,530       168,145       419,145       326,289  
  Depletion, depreciation and amortization                      
    Mine production   13,742       14,601       28,767       29,005  
    PGM recycling   261       261       519       529  
      Total depletion, depreciation and amortization   14,003       14,862       29,286       29,534  
        Total costs of revenues   240,533       183,007       448,431       355,823  
  Marketing   2,263       3,650       3,990       5,988  
  Exploration   2,153       2,000       8,104       12,117  
  Research and development   25       77       88       782  
  Proxy contest expense   1,529       --       4,307       --  
  Accelerated equity based compensation expense   9,063       --       9,063       --  
  General and administrative   14,121       10,117       26,530       22,595  
  Loss on long-term investments   1,092       --       1,654       --  
  Abandonment of non-producing property   --       --       --       2,835  
  Loss on disposal of property, plant and equipment   4       297       40       292  
        Total costs and expenses   270,783       199,148       502,207       400,432  
OPERATING INCOME (LOSS)   (4,292 )     13,627       14,932       15,394  
OTHER INCOME (EXPENSE)                      
  Other   17       577       1,162       585  
  Interest income   1,214       790       2,414       1,435  
  Interest expense   (5,438 )     (1,153 )     (12,090 )     (2,868 )
  Foreign currency transaction gain, net   5,222       3,653       9,459       6,574  
INCOME (LOSS) BEFORE INCOME TAX (PROVISION) BENEFIT   (3,277 )     17,494       15,877       21,120  
Income tax (provision) benefit   (2,380 )     1,303       (7,230 )     3,617  
NET INCOME (LOSS) $ (5,657 )   $ 18,797     $ 8,647     $ 24,737  
Net loss attributable to noncontrolling interest   (349 )     (358 )     (628 )     (358 )
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (5,308 )   $ 19,155     $ 9,275     $ 25,095  
Other comprehensive income (loss), net of tax                      
  Net unrealized gains/(losses) on securities available-for-sale   (5 )     (109 )     69       199  
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (5,313 )   $ 19,046     $ 9,344     $ 25,294  
Comprehensive loss attributable to noncontrolling interest   (349 )     (371 )     (628 )     (371 )
TOTAL COMPREHENSIVE INCOME (LOSS) $ (5,662 )   $ 18,675     $ 8,716     $ 24,923  
                       
Weighted average common shares outstanding                      
  Basic   118,435       115,819       117,937       115,686  
  Diluted   118,435       123,855       118,391       116,671  
Basic earnings (loss) per share attributable to common stockholders $ (0.04 )   $ 0.17     $ 0.08     $ 0.22  
Diluted earnings (loss) per share attributable to common stockholders $ (0.04 )   $ 0.17     $ 0.08     $ 0.22  
                               
                               
 
Stillwater Mining Company
Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
 
 
  June 30,
2013
  December 31,
2012
ASSETS          
Current assets          
Cash and cash equivalents $ 222,438     $ 379,680  
Investments, at fair market value   224,480       261,983  
Inventories   188,449       153,208  
Trade receivables   4,397       9,953  
Deferred income taxes   21,304       21,304  
Prepaids   7,986       4,967  
Other current assets   27,729       21,767  
  Total current assets   696,783       852,862  
Mineral properties   579,092       579,092  
Mine development, net   349,772       320,133  
Property, plant and equipment, net   123,103       122,677  
Deferred debt issuance costs   8,686       9,609  
Other noncurrent assets   4,832       6,390  
  Total assets $ 1,762,268     $ 1,890,763  
LIABILITIES AND EQUITY          
Current liabilities          
Accounts payable $ 31,350     $ 28,623  
Accrued compensation and benefits   30,197       31,369  
Property, production and franchise taxes payable   13,770       13,722  
Current portion of long-term debt and capital lease obligations   1,983       168,432  
Income taxes payable   3,358       --  
Other current liabilities   7,693       4,702  
  Total current liabilities   88,351       246,848  
Long-term debt and capital lease obligations   301,600       292,685  
Deferred income taxes   189,419       199,802  
Accrued workers compensation   6,274       5,815  
Asset retirement obligation   8,303       7,965  
Other noncurrent liabilities   5,344       5,068  
  Total liabilities   599,291       758,183  
EQUITY          
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; 119,016,207 and 116,951,081 shares issued and outstanding   1,190       1,170  
Paid-in capital   1,080,639       1,058,978  
Accumulated earnings   30,045       20,770  
Accumulated other comprehensive loss   (30 )     (99 )
  Total stockholders' equity   1,111,844       1,080,819  
Noncontrolling interest   51,133       51,761  
  Total equity   1,162,977       1,132,580  
  Total liabilities and equity $ 1,762,268     $ 1,890,763  
                 
                 
 
Stillwater Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
  Six Months Ended
  June 30,
  2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $ 8,647   $ 24,737  
Adjustments to reconcile net income to net cash provided by operating activities:        
  Depletion, depreciation and amortization   29,286     29,534  
  Loss on disposal of property, plant and equipment   40     292  
  Loss on long-term investments   1,654     --  
  Deferred taxes   51     2,105  
  Foreign currency transaction gain, net   (9,459 )   (6,574 )
  Abandonment of non-producing property   --     2,835  
  Accretion of asset retirement obligation   338     310  
  Amortization of debt issuance costs   923     629  
  Accretion of convertible debenture debt discount   7,725     --  
  Accelerated share based compensation   9,063     --  
  Share based compensation and other benefits   11,039     7,887  
  Non-cash capitalized interest   (2,022 )   (341 )
  Excess tax expense for stock based compensation   1,470     --  
Changes in operating assets and liabilities:        
  Inventories   (35,113 )   9,920  
  Trade receivables   5,556     (2,380 )
  Prepaids   (3,020 )   (3,399 )
  Accrued compensation and benefits   (1,172 )   1,234  
  Accounts payable   3,329     (2,336 )
  Property, production and franchise taxes payable   338     396  
  Income taxes payable   3,358     (3,115 )
  Workers compensation   459     502  
  Restricted cash   --     75  
  Other   (1,559 )   (6,943 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   30,931     55,368  
CASH FLOWS FROM INVESTING ACTIVITIES        
  Capital expenditures   (58,825 )   (59,313 )
  Proceeds from disposal of property, plant and equipment   46     28  
  Purchases of investments   (65,267 )   (31,887 )
  Proceeds from maturities of investments   101,006     23,549  
NET CASH USED IN INVESTING ACTIVITIES   (23,040 )   (67,623 )
CASH FLOWS FROM FINANCING ACTIVITIES        
  Proceeds from sale of noncontrolling interest, net of transaction costs   --     93,821  
  Issuance of long-term debt   --     7,176  
  Payments on debt and capital lease obligations   (165,247 )   (495 )
  Payments for debt issuance costs   --     (219 )
  Issuance of common stock   114     32  
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES   (165,133 )   100,315  
CASH AND CASH EQUIVALENTS        
  Net increase (decrease)   (157,242 )   88,060  
  Balance at beginning of period   379,680     109,097  
BALANCE AT END OF PERIOD $ 222,438   $ 197,157  
             
             
 
Stillwater Mining Company
Key Operating Factors
(Unaudited)
 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands, except where noted)   2013   2012   2013   2012
OPERATING AND COST DATA FOR MINE PRODUCTION                        
Consolidated:                        
Ounces produced                        
Palladium     102     102     200     196
Platinum     30     31     59     58
Total     132     133     259     254
Tons milled     308     269     601     539
Mill head grade (ounce per ton)     0.46     0.54     0.46     0.51
Sub-grade tons milled (1)     21     18     41     30
Sub-grade tons mill head grade (ounce per ton)     0.18     0.16     0.17     0.16
Total tons milled (1)     329     287     642     569
Combined mill head grade (ounce per ton)     0.44     0.51     0.44     0.49
Total mill recovery (%)     92     92     92     91
Total operating costs per ounce (Non-GAAP) (2)   $ 448   $ 374   $ 439   $ 400
Total cash costs per ounce (Non-GAAP) (2)   $ 532   $ 454   $ 527   $ 482
Total production costs per ounce (Non-GAAP) (2)   $ 644   $ 562   $ 640   $ 596
Total operating costs per ton milled (Non-GAAP) (2)   $ 179   $ 174   $ 177   $ 179
Total cash costs per ton milled (Non-GAAP) (2)   $ 213   $ 211   $ 213   $ 216
Total production costs per ton milled (Non-GAAP) (2)   $ 258   $ 261   $ 258   $ 266
Stillwater Mine:                        
Ounces produced                        
Palladium     70     75     142     143
Platinum     21     23     42     43
Total     91     98     184     186
Tons milled     199     168     391     340
Mill head grade (ounce per ton)     0.49     0.63     0.50     0.59
Sub-grade tons milled (1)     12     10     22     17
Sub-grade tons mill head grade (ounce per ton)     0.23     0.20     0.22     0.21
Total tons milled (1)     211     178     413     357
Combined mill head grade (ounce per ton)     0.48     0.61     0.48     0.57
Total mill recovery (%)     92     92     93     92
Total operating costs per ounce (Non-GAAP) (2)   $ 450   $ 352   $ 429   $ 375
Total cash costs per ounce (Non-GAAP) (2)   $ 532   $ 426   $ 515   $ 451
Total production costs per ounce (Non-GAAP) (2)   $ 658   $ 538   $ 638   $ 569
Total operating costs per ton milled (Non-GAAP) (2)   $ 194   $ 195   $ 191   $ 195
Total cash costs per ton milled (Non-GAAP) (2)   $ 229   $ 235   $ 229   $ 234
Total production costs per ton milled (Non-GAAP) (2)   $ 284   $ 297   $ 284   $ 296
                         
                         
 
Stillwater Mining Company
Key Operating Factors (continued)
(Unaudited)
 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands, except where noted)   2013   2012   2013   2012
OPERATING AND COST DATA FOR MINE PRODUCTION                        
(Continued)                        
East Boulder Mine:                        
Ounces produced                        
Palladium     32     27     58     53
Platinum     9     8     17     15
Total     41     35     75     68
Tons milled     109     101     211     199
Mill head grade (ounce per ton)     0.41     0.38     0.39     0.38
Sub-grade tons milled (1)     9     9     19     13
Sub-grade tons mill head grade (ounce per ton)     0.10     0.11     0.11     0.11
Total tons milled (1)     118     110     230     212
Combined mill head grade (ounce per ton)     0.38     0.36     0.36     0.36
Total mill recovery (%)     91     91     90     90
Total operating costs per ounce (Non-GAAP) (2)   $ 442   $ 434   $ 464   $ 468
Total cash costs per ounce (Non-GAAP) (2)   $ 532   $ 529   $ 559   $ 569
Total production costs per ounce (Non-GAAP) (2)   $ 614   $ 628   $ 647   $ 670
Total operating costs per ton milled (Non-GAAP) (2)   $ 152   $ 140   $ 152   $ 151
Total cash costs per ton milled (Non-GAAP) (2)   $ 183   $ 171   $ 183   $ 184
Total production costs per ton milled (Non-GAAP) (2)   $ 211   $ 203   $ 212   $ 216
                         
(1) Sub-grade tons milled includes reef waste material only. Total tons milled includes ore tons and sub-grade tons only. See "Proven and Probable Ore Reserves - Discussion" in the Company's 2012 Annual Report on Form 10-K for further information.
(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 write-downs, 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.
   
   
 
Stillwater Mining Company
Key Operating Factors (continued)
(Unaudited)
 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands, except for average prices)   2013   2012   2013   2012
SALES AND PRICE DATA                        
Ounces sold                        
Mine production:                        
  Palladium (oz.)     98     97     199     193
  Platinum (oz.)     25     31     54     58
    Total     123     128     253     251
PGM recycling: (1)                        
  Palladium (oz.)     81     57     147     103
  Platinum (oz.)     50     30     92     60
  Rhodium (oz.)     12     6     21     13
    Total     143     93     260     176
By-products from mining: (2)                        
  Rhodium (oz.)     1     1     2     2
  Gold (oz.)     3     2     5     5
  Silver (oz.)     2     2     4     3
  Copper (lb.)     260     175     474     349
  Nickel (lb.)     348     252     687     541
Average realized price per ounce (3)                        
Mine production:                        
  Palladium ($/oz.)   $ 716   $ 643   $ 720   $ 657
  Platinum ($/oz.)   $ 1,446   $ 1,502   $ 1,544   $ 1,547
Combined ($/oz.)(4)   $ 865   $ 850   $ 897   $ 862
PGM recycling: (1)                        
  Palladium ($/oz.)   $ 732   $ 680   $ 706   $ 664
  Platinum ($/oz.)   $ 1,600   $ 1,610   $ 1,603   $ 1,569
  Rhodium ($/oz.)   $ 1,163   $ 1,413   $ 1,145   $ 1,500
Combined ($/oz.)(4)   $ 1,070   $ 1,030   $ 1,058   $ 1,034
By-products from mining: (2)                        
  Rhodium ($/oz.)   $ 1,082   $ 1,295   $ 1,143   $ 1,378
  Gold ($/oz.)   $ 1,354   $ 1,594   $ 1,478   $ 1,644
  Silver ($/oz.)   $ 21   $ 29   $ 25   $ 31
  Copper ($/lb.)   $ 3.05   $ 3.35   $ 3.20   $ 3.48
  Nickel ($/lb.)   $ 5.14   $ 6.52   $ 5.78   $ 7.11
Average market price per ounce (3)                        
  Palladium ($/oz.)   $ 712   $ 628   $ 726   $ 656
  Platinum ($/oz.)   $ 1,465   $ 1,499   $ 1,550   $ 1,555
Combined ($/oz.)(4)   $ 866   $ 838   $ 902   $ 863
                         
(1) Ounces sold and average realized price per ounce from PGM recycling relate to ounces produced from processing of catalyst materials.
(2) 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.
(3) The Company's average realized price represents revenues, which include the effect of hedging gains and losses realized on commodity instruments and agreement discounts, divided by ounces sold. The average market price represents the average London Bullion Market Association afternoon postings for the actual months of the period.
(4) The Company reports a combined average realized and a combined average market price of palladium and platinum at the same ratio as ounces that are produced from the base metal refinery.
   

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 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 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 Company's 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 Stillwater Mine, East Boulder Mine and other PGM activities are equal in total to total costs of revenues as reported in the Company's Consolidated Statements of 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, revenues from the sale of mined by-products 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 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 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.

 
Stillwater Mining Company
Reconciliation of Non-GAAP Measures to Costs of Revenues
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
(In thousands)   2013   2012   2013   2012
Consolidated:                        
Reconciliation to consolidated costs of revenues:                        
                         
Total operating costs (Non-GAAP)   $ 58,838     $ 49,915     $ 113,628     $ 101,743  
  Royalties, taxes and other     11,082       10,612       22,774       20,915  
Total cash costs (Non-GAAP)   $ 69,920     $ 60,527     $ 136,402     $ 122,658  
  Asset retirement costs     171       157       338       311  
  Depletion, depreciation and amortization     13,742       14,601       28,767       29,005  
  Depletion, depreciation and amortization (in inventory)     881       (294 )     128       (358 )
Total production costs (Non-GAAP)   $ 84,714     $ 74,991     $ 165,635     $ 151,616  
  Change in product inventories     (5,827 )     3,554       (9,510 )     3,737  
  Cost of PGM recycling     149,154       93,149       266,016       177,264  
  PGM recycling - depreciation     261       261       519       529  
  Add: Profit from by-products     6,943       7,229       14,451       16,351  
  Add: Profit from PGM recycling     5,288       3,823       11,320       6,326  
Total consolidated costs of revenues   $ 240,533     $ 183,007     $ 448,431     $ 355,823  
Stillwater Mine:                        
Reconciliation to costs of revenues:                        
Total operating costs (Non-GAAP)   $ 40,914     $ 34,566     $ 78,809     $ 69,692  
  Royalties, taxes and other     7,440       7,230       15,688       14,054  
Total cash costs (Non-GAAP)   $ 48,354     $ 41,796     $ 94,497     $ 83,746  
  Asset retirement costs     158       145       313       288  
  Depletion, depreciation and amortization     10,518       11,067       22,127       22,237  
  Depletion, depreciation and amortization (in inventory)     792       (228 )     192       (484 )
Total production costs (Non-GAAP)   $ 59,822     $ 52,780     $ 117,129     $ 105,787  
  Change in product inventories     (4,100 )     2,040       (6,214 )     3,294  
  Add: Profit from by-products     4,084       4,636       8,748       10,602  
  Add: Profit from PGM recycling     3,643       2,803       8,041       4,615  
Total costs of revenues   $ 63,449     $ 62,259     $ 127,704     $ 124,298  
East Boulder Mine:                        
Reconciliation to costs of revenues:                        
Total operating costs (Non-GAAP)   $ 17,924     $ 15,349     $ 34,819     $ 32,052  
  Royalties, taxes and other     3,642       3,382       7,086       6,860  
Total cash costs (Non-GAAP)   $ 21,566     $ 18,731     $ 41,905     $ 38,912  
  Asset retirement costs     13       12       25       23  
  Depletion, depreciation and amortization     3,224       3,534       6,640       6,769  
  Depletion, depreciation and amortization (in inventory)     89       (66 )     (64 )     125  
Total production costs (Non-GAAP)   $ 24,892     $ 22,211     $ 48,506     $ 45,829  
  Change in product inventories     (1,727 )     1,514       (3,296 )     443  
  Add: Profit from by-products     2,859       2,593       5,703       5,749  
  Add: Profit from PGM recycling     1,645       1,020       3,279       1,711  
Total costs of revenues   $ 27,669     $ 27,338     $ 54,192     $ 53,732  
PGM Recycling:                        
Reconciliation to costs of revenues:                        
  PGM recycling - depreciation   $ 261     $ 261     $ 519     $ 529  
  Cost of PGM recycling     149,154       93,149       266,016       177,264  
Total costs of revenues   $ 149,415     $ 93,410     $ 266,535     $ 177,793