Stillwater scales back work on Marathon PGM project

Stillwater Mining (TSX: SWC.U; NYSE: SWC) intends to reduce work at its 75%-held Marathon platinum–palladium–copper project in Ontario, as part of a wider strategic review.

Earlier this year, Stillwater suspended permitting activities at the project, noting that at prevailing metal prices it did not provide enough returns. It emphasized that the company and its 25% partner Mitsubishi were still working to update a feasibility study and assess ways to improve Marathon’s economics.

A 2009 feasibility study envisioned Marathon as a 22,000-tonne-per-day operation, with start-up costs of $351 million, and a 17% after-tax internal rate of return.

Marathon has reserves of 91.4 million tonnes grading 0.83 gram palladium, 0.23 gram platinum and 0.24% copper per tonne.

It is located 10 km north of the town of Marathon, Ont. The Hemlo mining camp is 30 km southeast. 

Today, Stillwater has halved its staffing levels at the project and cut expenditures. It does not expect to make a major decision on the project until mid-2015.

In September, the company reiterated that the project was uneconomic in today’s market.

Stillwater expects to spend $4 million to $6 million on its sole Canadian asset, down from its previous 2014 guidance of $5 to $10 million. It intends to carry out limited exploration during the current field season.

Looking ahead, Marathon’s costs should be $1 million to $3 million a year, depending on the level of exploration activity and success.

The company intends to “maintain tenure and look for opportunities to realize value from the project in the future.”

The miner, which operates two platinum group metals (PGM) mines in Montana, is the only major PGM producer in the U.S.

It picked up the Marathon deposit through its US$118-million acquisition of Marathon PGM in 2010. This was one of acquisitions that later led shareholder Clinton Group to launch a proxy contest, where it replaced more than half of Stillwater’s board in May 2013.

In the fourth quarter of 2013, Marathon took a pre-tax impairment charge of $171.4 million on the Marathon project and reduced the project’s net book value to $57.2 million.