Stillwater awaits regulatory nod

Vancouver London-based Norimet, the marketing arm of Russia’s Norilsk Nickel, has reaffirmed its desire to acquire a 51% stake in Stillwater mining (SWC-N).

The World’s largest palladium producer first proposed the deal back in Nov. by offering US$100 million in cash and 877,000 oz of palladium that at the time were worth US$241 million (TNM Dec. 2-8,2002). Since then, palladium prices have fallen substantially, cutting the value of the Russian palladium to US$189 million as of the end of March.

Stillwater is in much need of the cash infusion, as net income in 2002 came in at US$32 million, down from about US$66 million in 2001. Although production of palladium and platinum came in at 617,000 oz, up substantially from 504,000 oz in 2001, the company was hit by falling palladium prices. Palladium has dropped from a high of US$1,090 per oz in Jan., 2001 to below US$200 per oz since the end of March.

At the end of 2002, the company had US$26 million in cash on hand and if the Russian deal is not completed by Jan. 2, 2004, Stillwater will be in violation of its credit agreement, leading to possible bankruptcy. The company managed to stave off creditors earlier this year after receiving an amendment, the fifth, to its credit agreement (TNM Feb. 24-March 2, 2003).

Among other hurdles, the Norilsk deal must win approval by two federal agencies, including U.S. antitrust regulators, as well as the shareholders. In Jan., U.S. regulators asked the company for more information on the proposed sale. Stillwater expects the deal to close by the end of the second quarter, while Norilsk is slightly less optimistic, putting the deal to bed by the third quarter.

“We are covered through 2010 for the majority of our production. Our focus now is on getting the deal approved,” said Vice President Terry Ackerman.

Stillwater operates two mines in Montana, East Boulder and Stillwater.

The Stillwater mine, which sits on the eastern end of the J-M reef, contributed 492,000 oz. of combined palladium-platinum in 2002, — noticeably less than the 504,000 oz produced a year earlier, reflecting lower head grades, labour unrest and inadequate infrastructure.

At East Boulder, which sits on the western end of the reef, 125,000 oz of combined platinum-palladium were produced during the year.