Stillwater rethinks East Boulder

Platinum producer Stillwater Mining (SWC-N) posted net income of US$10.3 million (or 26 per share) for the third quarter of 2001, compared with restated net income of US$13.9 million (36 per share) in the corresponding period of 2000.

Revenue between the two periods climbed to US$52.9 million from US$49.1 million.

For the first nine months of 2001, the Montana-based company’s net income amounted to US$61 million ($1.55 per share), on revenue of US$218.1 million, compared with year-ago restated net income of US$38 million (97 per share), on US$146.6 million.

During the recent quarter, the Stillwater mine, in southwestern Montana, produced 123,000 oz. combined platinum and palladium (78% palladium), up 26% from a year earlier, thanks mostly to a 28% increase in total tons of ore milled. Mill head grades slipped slightly to 0.65 oz. per ton from 0.69 oz. per ton. The company realized prices of US$475 per oz. for its palladium and US$504 per oz. for platinum.

Total cash costs per oz. fell to US$264 from US$306 between the two periods. The decrease is attributed to a US$24-per-oz. drop in operating costs and a US$18-per-oz. fall in royalties and taxes on lower metal prices.

So far this year, the Stillwater mine has pumped out a total of 370,000 oz. of palladium and platinum, compared with 308,000 oz. the previous year. Total cash costs were unchanged at US$ 263 per oz. Stillwater expects the mine to churn out 500,000 oz. of palladium and platinum this year.

Meanwhile at the East Boulder project near Big Timber, Montana, Stillwater still expects to begin commercial production in 2002, and annual production of about 1 million oz. during 2003. However, thanks to sharply declining palladium prices, the company is looking at whether its planned financing sources are sufficient to meet capital requirements. The project’s original funding was based on higher palladium prices, and therefore it may have to revise production goals.

Palladium prices have plummeted about US4320 per oz. since setting a record high of US$1,115 per oz. in late January.

According to Reutersabout US$240 million of the US$370 million in capital required for the mine’s construction has been committed.

During the three months ended September 30, development activities at East Boulder generated 9,000 oz. of palladium and platinum. Revenues from those ounces will be credited against the capital costs. Pre-commercial processing will continue in the fourth quarter as more stopes are developed.

Underground work continued on the crusher, mechanical shop, sand plant, central ramp, crusher ore and waste bins and the central ore pass. Footwall lateral development and reef sill excavation and development continued to allow test mining. Permanent rail installation is ongoing as is remedial tunnel ground support work. Concentrator commissioning at the surface continues.

Since the initial 132-hole program, 603 holes totalling more than 5,000 ft. have tested the orebody. The holes average 0.65 oz. per ton over a horizontal thickness of 7.1 ft. Recently 170 holes along 2,000 ft. of the west end of the footwall lateral have indicated the presence of a higher grade zone. Preliminary results indicate an undiluted weighted average grade around 0.71 to 0.78 oz. per ton.

At September 30, 2001, Stillwater had US$17.9 in cash and cash equivalents.