Norilsk completes Stillwater acquisition

Russia’s Norilsk Nickel has completed its acquisition of 51% of Montana-based Stillwater Mining (SWC-N) by taking delivery of some 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. of palladium. The total price tag rang in at around US$257 million, based on a London afternoon close on June 23 of US$184 per oz. of palladium.

Norilsk may be required to buy another 4.35 million Stillwater shares at US$7.50 apiece within 30 days 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. The shares rebounded to the tune of US38 to US$5.05 in early trading on June 24.

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

McAllister said, in a prepared statement, “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.”

During 2002, Stillwater produced 476,000 oz. of 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 platinum group metal (PGM) prices and rising operational costs more than halved Stillwater’s earnings to US$32 million.

During the first quarter of 2003, Stillwater produced 112,000 oz. of palladium and 34,000 oz. of platinum, both slightly less than during the corresponding period of 2002. Total cash costs climbed by US$13 to US$281 per oz.

The lower production and sagging PGM prices pushed Stillwater to a first-quarter net loss of US$1.8 million, way off the year-ago net income of US$16.6 million.

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

Norilsk, the world’s largest palladium and nickel producer, accounts for about 45% of the world’s palladium production. The company also chips in around 10% of global platinum production.