Production down, earnings up for Stillwater

Production difficulties related to an expansion program at its namesake mine in Montana has forced Stillwater Mining (SWC-X) to record a loss for the second quarter of the year.

The company intended to increase production in the quarter to 3,000 tons per day, but infrastructure construction held output to 1,850 tons. The company produced 98,000 oz. platinum and palladium at the mine, in southwestern Montana, down from 120,000 oz. for the corresponding period in 1998. Cash costs climbed as a result, to US$197 per oz. over the period from US$147 per oz. in the second three months of 1998.

Production for the first six months of the year reached 206,000 oz. at a cost of US$186 per oz., down from 220,000 oz. at US$150 per oz. in the first half of 1998.

Infrastructure construction hampered the use of the underground rail system, forcing the company to truck ore using bypass routes. Stillwater expects the rail system should resume operation by August to help increase throughput to the mill.

At the same time, ramp and fill mining, which causes dilution by increasing the component of waste mined, helped lower headgrades going to the mill. Stillwater hopes to increase the use of sub-level stoping, which is more cost effective, and reduce the amount of ramp and fill mining. However, it plans to re-evaluate mining methods on a stope-by-stope basis, said William Nettles, Stillwater’s chairman.

Nettles also said Stillwater wants to boost the number of stopes by 30% to 65 by the end of the year, giving the company greater flexibility with the orebody.

Stillwater also lost productivity at the mine because of the large number of new employees at the mine. Many of these employees require extensive training. The company recently signed a new labour contract, which should improve worker productivity.

By addressing these difficulties, Stillwater expects throughput to rise to as much as 2,800 tons per day by the end of the year. However, because of the effects of the second quarter the company has revised its production estimates downward to 500,000 to 525,000 oz. platinum and palladium in 1999 at an average cost of as much as US$175 per oz.

For the second quarter, Stillwater reported net income of US$8 million (or 22 cents per share), compared with income of US$3.1 million (10 cents per share) for the second quarter of 1998.

Revenues increased by 39% over the corresponding quarter in 1998, to US$26.5 million.

In the first half of 1999, the company posted earnings of US$18.6 million (52 cents per share), compared with income of US$4 million (13 cents per share) in the first half of 1998. Revenues for the half year were 56% higher than in 1998, to US$74.9 million.

Meanwhile, Stillwater is proceeding on schedule with construction of two long adits into the platinum-bearing J-M reef at the East Boulder project, 13 miles west of the Stillwater mine.