Norilsk completes Stillwater purchase

Russia’s Norilsk Nickel has completed its acquisition of 51% of Montana-based Stillwater Mining (SWC-N) by taking delivery of 45.5 million freshly printed shares.

In return, Norimet, Norilsk’s London-based trading arm, sent Stillwater US$100 million in cash and 877,000 oz. palladium. The total price tag was US$257 million, based on a London afternoon close on June 23 of US$184 per oz. palladium.

Norilsk may be required to buy another 4.3 million Stillwater shares at US$7.50 apiece within a month, if the issue trades below that level for 15 trading days after the deal’s closing. The extra shares would bring the Russian’s stake to around 56%.

Shares in Stillwater, the lone U.S. producer of platinum and palladium, ended US19 lower at US$4.67 in New York on June 23, just prior to the deal’s completion. They gained US38, to US$5.05, in early trading on June 24.

Stillwater’s board comprises five Norimet appointees plus four existing Stillwater board members. Francis McAllister will remain as Stillwater’s chairman and chief executive officer.

“The investment made by our majority shareholder, Norilsk Nickel, brings much needed additional capital into the company to enable us, among other things, to reduce our debt,” says McAllister.

At the end of the first quarter, Stillwater had US$181.7 million outstanding under its term-loan facilities and US$7.5 million outstanding under its revolving credit facility.

Production in the 3-month period amounted to 112,000 oz. palladium and 34,000 oz. platinum, both slightly less than during the corresponding period of 2002. Total cash costs climbed by US$13 to US$281 per oz.

The decrease in production, combined with sagging prices for platinum group metals, pushed Stillwater to a quarterly loss of US$1.8 million, compared with a profit of US$16.6 million a year earlier.

In 2002, Stillwater produced 476,000 oz. palladium and 141,000 oz. platinum, up 22% from 2001, but 3.6% less than expected. Cash costs grew by US$23 per oz. to US$287 per oz. Falling prices and rising operational costs more than halved Stillwater’s earnings to US$32 million.

Norilsk produces 45% of the world’s palladium and 10% of all platinum.