Stillwater reports rosy second quarter

Record production and earnings made for a profitable second quarter for Stillwater Mining (SWC-X), though its hedging policy kept the company from reaching the maximum value of its namesake platinum-palladium mine in Montana.

Income during the period amounted to US$3.1 million (or 15cents per share) on revenue of US$26.5 million, compared with a loss of US$679,000 (3cents per share) on US$22.3 million in the corresponding period last year.

For the first six months of 1998, income totalled US$4 million (20cents per share) on revenue of US$48 million, compared with US$2.9 million (14cents per share) on US$38.3 million in the first half of last year.

The higher revenue reflects a 54% increase in production between the two second quarters (from 78,000 to 120,000 oz.), and a 40% boost between the two January-to-June periods (from 157,000 to 220,000 oz.)

Cash costs fell 22% between the two second quarters, to a record low of US$147 per combined ounce.

The company realized a price of US$225 per oz. platinum and palladium during the 1998 second quarter, and US$224 for the first half of this year, compared with US$232 and US$215 in the corresponding year-ago periods.

However, spot prices for the metals have been considerably higher than the company’s realized prices. Had Stillwater realized the market price, its quarterly earnings would have been 51cents per share, states Chairman William Nettles.

The company’s hedging position hangs over production, covering 63% of output in the third quarter of 1997 and 38% in the fourth quarter. But Nettles remains undaunted.

“Our production is going up, costs are dropping and the below-market hedges are expiring,” he says. “And we expect this positive-earnings trend to continue.”

Stillwater plans to boost production of platinum and palladium to 1.3 million oz. by 2003. The first part of the increase involves lifting mine and mill capacity to 3,000 tons per day from the current 2,000 tons. The company has already installed 20 additional flotation cells in the concentrator circuit; these and other improvements in the second quarter have increased mill recovery by 6%, to 92%.

Stillwater has also added 11 miners to the underground workforce and assembled a boring machine to drive a tunnel toward the PGM-bearing structure known as the J-M reef, 13 miles to the east. The company is looking to accelerate the 18-month schedule for the tunnel-boring project.

The J-M reef forms part of the East Boulder project, which is to operate as a stand-alone mine. When it starts up, production is expected to double to 1.3 million oz.

In April, the company also held a final hearing concerning a draft environmental impact statement for a long-term tailings facility. The final statement is to be published by year-end.