Forward contracts clip Stillwater earnings

Vancouver – Higher prices for platinum group metals (PGMs) pushed Stillwater Mining (SWC-N) into the black with net income of US$600,000 in the first quarter of 2006, compared to a net loss of US$1.2 million a year earlier. Despite improved PGM prices, platinum forward sales at below-market prices clipped the company’s earnings by US$5.4 million in the latest quarter.

Stillwater produced 113,000 oz. palladium and 33,000 oz. platinum (or 146,000 oz. combined PGMs) in the first quarter from its Stillwater and East Boulder mines near the small town of Nye, Montana. Total cash costs averaged US$313 per oz. combined PGMs, or about 4% lower than total cash costs of US$324 per oz. for the full year 2005.

Market prices of palladium averaged US$292 per oz. in the latest quarter, within a range of US$345 and US$265 per oz., and ended the quarter at US$332 per oz. Platinum traded in range of US$1,084 per oz. and US$962 per oz., and averaged US$1,037 per oz. for the quarter. Prices ended the quarter at US$1,076 per oz.

Stillwater realized average prices of US$360 per oz. on palladium production sales, and US$811 per oz. for mined platinum sales, compared with US$355 and US$820, respectively, in the first quarter of 2005.

At the end of the quarter, Stillwater had forward contracts covering 173,500 oz. of platinum at an overall average price of about US$902 per oz. until June 2008, representing about 40% of projected platinum production for the contract period.

On the operations front, Stillwater is reporting progress in its efforts to boost productivity and reduce unit costs by increasing underground development to allow the introduction of more selective mining methods. This program is “on track” with primary development footage at 13,400 feet, and captive cut-and-fill tonnage at 320 tonnes per day from both mines. The goal is to reach 550 tons per day at both mines by year-end.

The design capacity at Stillwater is about 2,750 tons per day, while the newer East Boulder mine is sized at about 2,000 tons per day. Stillwater operated below capacity because of reduced work areas during the latest quarter. Throughput averaged 1,956 tons per day, resulting in 93,000 oz. PGMs at average cash costs of US$312 per oz. East Boulder averaged 1,692 tons per day, and produced 53,000 oz. PGMs at total cash costs of US$315 per oz. during the same period.

By 2010, the company’s goal is to use selective, captive cut-and-fill methods exclusively at East Boulder, and about 35% at Stillwater, with the balance being mechanical ramp-and-fill mining. Capital spending this year is estimated at US$107 million, and will be reduced once the expanded development program is completed.