Stillwater Mining Company Reports Second Quarter 2015 Results

LITTLETON, Colo., July 31, 2015 (GLOBE NEWSWIRE) -- Stillwater Mining Company SWC today reported financial results for the quarter ended June 30, 2015.

Second Quarter 2015 Highlights:

• Processed 151,600 ounces of recycled palladium, platinum and rhodium, an increase of 12.9% over 134,300 ounces recycled during the second quarter of 2014
• Consolidated net loss attributable to common stockholders of $27.5 million or $0.23 per share, including a $46.8 million (before-tax) impairment charge taken on the Marathon mineral properties
• Mined palladium and platinum production of 127,000 ounces, a slight increase from 126,400 ounces mined during the second quarter of 2014
• All-in Sustaining Costs (AISC)* of $785 per mined ounce of palladium and platinum, compared to $792 per mined ounce for the second quarter of 2014
• Cash and cash equivalents plus highly liquid investments of $531.2 million at quarter end, after $11.0 million increase in recycle working capital during the second quarter
• Labor contract with employees expired during the quarter; represented employees at the Stillwater Mine and Columbus processing facilities continue to work under the terms of the previous agreement

For the second quarter of 2015, the Company reported a consolidated net loss attributable to common stockholders of $27.5 million, or $0.23 per share, compared to consolidated net income attributable to common stockholders of $17.9 million, or $0.14 per diluted share for the second quarter of 2014. Second quarter 2015 earnings were impacted by a $46.8 million (before-tax) impairment charge against the carrying value of the Marathon mineral properties in Canada, which reduced the properties' carrying value to the estimated fair value of $8.6 million. While mine production was broadly similar, lower sales volumes impacted operating results and lower realized prices partially offset lower costs.

Mine production in the second quarter of 2015 was 127,000 ounces of palladium and platinum, a slight increase from 126,400 ounces produced during the second quarter of 2014 and a slight decline from 133,300 ounces produced during the first quarter of 2015. Second quarter 2015 production was negatively impacted by the scheduled seven-day shutdown of the concentrator, production hoist and underground crusher at the Stillwater Mine to perform major maintenance. The shutdown of the production hoist was extended by eight days as a result of issues identified during the maintenance process. The production hoist repairs are complete and the Stillwater Mine is now fully operational.

Commenting on the 2015 second quarter results, Mick McMullen, the Company's President and Chief Executive Officer stated, "Production in the month of June was negatively impacted by the major maintenance shut down at the Stillwater Mine. The replacement of the underground crusher, mill motor and production hoist bull gear was the first replacement of these items in the mine's history and was scheduled to be completed over the summer. Ore mining continued during the extended hoist shutdown and the stockpiled ore is being milled in the third quarter.

"We continue to operate amidst challenging metals markets and are currently witnessing a significant decline in PGM prices. The negative impact of decreasing metal prices is reflected in our second quarter results and has continued into the third quarter. As I have stated previously, Stillwater's operations and balance sheet must be structured to best position the Company to withstand all phases of the PGM pricing cycle. While I am pleased with the progress made to date across many areas of the business, striving for additional efficiency will continue to be essential to counter the headwinds impacting our industry.

"As of July 30, 2015, the closing market prices for palladium and platinum were approximately $621 and $984 per ounce, respectively. This equates to a basket price for mined production for the Company of approximately $701 per ounce, or approximately $84 per ounce below our second quarter AISC of $785. Given the current PGM market environment, we are taking additional necessary steps to improve our operating cost structure. This plan includes reducing the Company's salary and hourly workforce resulting in expected annual savings of $10 to $15 million. In addition, we have further modified our mine plan in an effort to focus on the most profitable mining areas within the Stillwater Mine and will continue to maximize production from the East Boulder Mine. These changes have resulted in an update to our 2015 mine production and cost guidance. We expect to incur approximately $1.5 to $3.1 million in reorganization costs during the third quarter.

"In addition to this reorganization effort, the Company continues to evaluate other options to maximize shareholder value and the long-term sustainability of the business. We are in a fortunate position to have a strong balance sheet that provides options, even in the current market environment. The Company regularly considers the deployment of cash for acquisitions, internal growth projects, the appropriate long-term capital structure, the buyback of outstanding convertible debentures, share repurchases as well as common share dividends. The Board has authorized management to repurchase a portion of the Company's outstanding convertible debentures if market conditions are appropriate.

"While the decisions relating to our workforce are difficult, we believe the current reorganization plan and our continued efforts to optimize our capital structure are essential for the long-term sustainability of the Company. Our goal is to continue to be in the lowest cost quartile of PGM producers, which will enable us to secure the future of the business and to be well positioned once an upturn in PGM prices occurs," concluded Mr. McMullen.

2015 Full-Year Guidance:

Based on the implementation of the reorganization plan, guidance for the full-year 2015 has been updated and is detailed in the table below.

Mine Production Comparison:  

Revenue from the Company's Mine Production segment, (including proceeds from the sale of by-products) totaled $119.0 million, in the second quarter of 2015, down from $147.2 million for the second quarter of 2014. The decrease in Mine Production revenues reflects both lower volumes sold as the second quarter of 2014 included the sale of 17,600 ounces of PGMs from inventory and lower average realized prices during the second quarter of 2015.  The 2015 combined average realized price for the sales of mined palladium and platinum decreased for the second quarter to $842 per ounce, compared to $962 per ounce realized in the second quarter of 2014. The total quantity of mined palladium and platinum sold in the second quarter of 2015 was 133,000 ounces compared to 144,000 ounces sold in the same period of 2014.

Total costs of metals sold (before depletion, depreciation and amortization, and corporate overhead expenses) decreased 23.6% to $145.1 million in the second quarter of 2015 from $189.8 million in the second quarter of 2014. Mine Production costs included in costs of metals sold decreased to $80.6 million in the 2015 second quarter from $89.5 million in the 2014 second quarter.

Recycling Activity Comparison:

Recycling material processed during the second quarter of 2015 contained 151,600 ounces of palladium, platinum and rhodium, an increase of 12.9% from the total of 134,300 ounces processed during the second quarter of 2014. The proportion of ounces processed on a toll basis has increased compared to purchased ounces as a result of a shift in customer mix that began during the first quarter and continued into the second quarter of 2015. While tons of recycle catalyst feed has increased by 32.0% year on year, PGM loadings have decreased during the course of the past year and ounces processed have increased by a lesser amount.

PGM Recycling revenue totaled $66.3 million for the 2015 second quarter, a decrease from $102.7 million in the same period of 2014. This decrease was a result of the shift from purchased to tolled ounces processed. The Company's combined average realized price for sales of recycled palladium, platinum and rhodium was $954 per ounce in the second quarter of 2015 compared to $1,002 per ounce in the second quarter of 2014. Recycling sales volumes for the second quarter of 2015 decreased to 68,100 ounces from 101,400 ounces sold in the second quarter of 2014.

PGM Recycling costs totaled $64.4 million in the second quarter of 2015, down from the $100.3 million reported in the second quarter of 2014. This decrease was primarily due to the shift from purchased to tolling ounces processed during the quarter, as overall contained ounces volume increased. Net income, before income taxes, from the recycling segment totaled $2.0 million for the second quarter of 2015 compared to $2.9 million for the same quarter of 2014. Earnings in the recycling segment typically lag corresponding volume processed by approximately two to three months.

General and administrative costs were $10.4 million in the second quarter of 2015 compared to $8.6 million incurred during the same period of 2014. This increase was primarily attributable to an increase of $1.7 million in the provision for medical costs based on recent claims history.

All-In Sustaining Costs Per Mined Ounce:

All-in Sustaining Costs per Mined Ounce (AISC)* totaled $785 for the second quarter of 2015, a decrease from $792 recorded for the same period of 2014. 

Cash Costs Per Mined Ounce:

Combined Total Cash Costs per Mined Ounce (net of by-product and recycling credits)* averaged $530 per ounce for the second quarter of 2015, compared to $550 per ounce for the second quarter of 2014. The table below illustrates the effect of by-product and recycling credits on the total cash costs per mined ounce, net of credits, for the combined Montana mining operations.

Labor Matters

The represented employees at the Company's Stillwater Mine and Columbus processing facilities continue to work under the terms of the expired contract. On July 30, 2015, the Company notified the union that negotiations had reached an impasse.

Cash Flow and Liquidity

At June 30, 2015, the Company's consolidated available cash balance was $222.8 million, compared to $280.3 million at December 31, 2014. The Company's cash and cash equivalents plus highly liquid investments totaled $531.2 million at June 30, 2015, a slight decrease from $531.5 million at December 31, 2014. Net working capital increased to $622.5 million at June 30, 2015, compared to $619.4 million at the end of 2014.

Net cash provided by operating activities (which includes changes in working capital) totaled $59.6 million for the six months ended June 30, 2015, compared to $60.3 million of cash provided for the same period of 2014. Cash capital expenditures were $58.2 million for the six months ended June 30, 2015, compared to $53.8 million in the same period of 2014.

Outstanding total balance sheet debt reported at June 30, 2015, was approximately $304.2 million, an increase from $296.2 million at December 31, 2014. The Company's reported debt balance at June 30, 2015, included approximately $300.2 million of 1.75% convertible debentures (net of unamortized discount of approximately $96.5 million), $2.2 million of 1.875% convertible debentures and approximately $1.8 million for a capital lease and financing for a small installment land purchase. The increase in the debt balance is attributable to the accretion of the discount on the Company's outstanding 1.75% convertible debentures.

* These are non-GAAP financial measures. For a full description and reconciliation of these and other non-GAAP financial measures to GAAP financial measures, see Reconciliation of Non-GAAP Financial Measures to Consolidated Costs of Revenues below.

2015 Second Quarter Results Webcast and Conference Call

Stillwater Mining Company will conduct a conference call to discuss second quarter 2015 results at 12:00 noon Eastern Daylight Time on Friday, July 31, 2015.

A simultaneous webcast and presentation to accompany the conference call will be available through the Investor Relations section of the Company's website at www.stillwatermining.com.

A telephone replay of the call will be available for one week following the event. The replay dial-in numbers are (877) 660-6853 (U.S.) and (201) 612-7415 (International), access code 13609615. 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. miner of platinum group metals (PGMs) and the largest primary producer of PGMs outside of South Africa and the Russian Federation. PGMs are rare precious metals used in a wide variety of applications, including automobile catalysts, fuel cells, hydrogen purification, electronics, jewelry, dentistry, medicine and coinage. The Company is engaged in the development, extraction and processing of PGMs from a geological formation in south-central Montana known as the J-M Reef. The J-M Reef is the only known significant source of PGMs in the U.S. and the highest-grade PGM resource known in the world. The Company also recycles PGMs from spent catalytic converters and other industrial sources. The Company owns the Marathon PGM-copper deposit in Ontario, Canada, and the Altar porphyry copper-gold deposit located in the San Juan province of Argentina. The Company's shares are traded on the New York Stock Exchange under the symbol SWC. Information about the Company can be found at its website: www.stillwatermining.com.

Cautionary Note Concerning Forward-Looking Statements

Some statements contained in this press 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 from management's expectations. These statements may contain words such as "believes," "anticipates," "plans," "expects," "intends," "estimates," "predicts," "should," "will," "may" or similar expressions. Such statements also include, but are not limited to, comments regarding taking additional steps to improve operating cost structure; plans for a workforce reduction; estimated savings from a workforce reduction; anticipated third quarter reorganization costs; evaluating other options to maximize shareholder value and the long-tern sustainability of the business; being in the lowest cost quartile of PGM producers enabling the Company to secure the future of the business and be well positioned for an upturn in PGM prices when it occurs; growing profitability; controlling costs; improving the efficiency of our operations; strengthening our financial and operating performance; managing our business through volatile metal prices; estimated 2015 production, cash costs per mined ounce, AISC, general and administrative costs, exploration expense, and capital expenditures; and the usefulness of non-GAAP financial measures. The forward-looking statements in this release are based on assumptions and analyses made by Management in light of experience and perception of historical trends, current conditions, expected future developments, and other factors that are deemed appropriate. 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 Annual Report on Form 10-K. 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 forward-looking statements herein speak only as of the date of this release. The Company disclaims any obligation to update forward-looking statements.

Reconciliation of Non-GAAP Financial Measures to Consolidated Costs of Revenues

The Company utilizes certain non-GAAP financial 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 financial measure included in the Company's Consolidated Statements of Comprehensive (Loss) Income) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP financial 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 financial 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 financial measures are not standardized across the mining industry and in most cases will not be comparable to similar measures that may be provided by other companies. These non-GAAP financial 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, the most directly comparable GAAP financial measure, for each period shown is provided as part of the following tables, and a description of each non-GAAP financial measure is provided below.

Total Consolidated Costs of Revenues: For the Company as a whole, this measure is equal to total costs of revenues, as reported in the Consolidated Statements of Comprehensive (Loss) Income. For the Stillwater Mine, the East Boulder Mine, and PGM Recycling and Other, 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 the Stillwater Mine, the East Boulder Mine and PGM Recycling and Other are equal in the aggregate, to total consolidated costs of revenues as reported in the Company's Consolidated Statements of Comprehensive (Loss) Income.

Total Cash Costs (Non-GAAP): This non-GAAP financial measure is 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 mine by-products, depreciation and amortization and asset retirement costs, and timing differences resulting from changes in product inventories. The Company uses this measure as a comparative indication of the cash costs related to mine production and processing operations in any period. It is a measure of extraction efficiency.

When divided by the total tons milled in the respective period, Total Cash Costs 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, mine 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 mine production tons are measured precisely. Consequently, Total Cash Costs 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 Costs 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 Costs 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.

Stillwater Mining Company

All-In Sustaining Costs (a Non-GAAP Financial Measure)

(Unaudited)

All-In Sustaining Costs (Non-GAAP): This non-GAAP financial measure is used as an indicator from period to period of the level of total cash required by the Company to maintain and operate the existing mines, including corporate administrative costs and replacement capital. The measure is calculated beginning with total cash costs (another non-GAAP financial measure, described above), and adding to it the recycling income credit, domestic corporate overhead and marketing costs (excluding any depreciation, research and development, and reorganization costs included in corporate overhead costs) and that portion of total capital expenditures associated with sustaining the current level of mining operations. (Capital expenditures for Blitz, Graham Creek and certain other one-time projects are not included in the calculation.)

When divided by the total recoverable PGM ounces in the respective period, All-In Sustaining Costs per Mined Ounce (Non-GAAP) provides an indication of the level of total cash required to maintain and operate the mines per PGM ounce produced in the period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because the objective of PGM mining activity is to extract PGM material, the all-in cash costs per ounce to produce PGM material, administer the business and sustain the operating capacity of the mines is a useful measure for comparing overall extraction efficiency between periods. This measure is affected by the total level of spending in the period and by the grade and volume of ore produced.

Prior year numbers have been restated to conform to current year presentation.