Stillwater gets diluted

Vancouver — Armed with a revised operating plan, North America’s largest producer of platinum and palladium has completed a US$60 million financing.

Stillwater Mining (SWC-N) issued 4.3 million shares, or roughly 10% of its outstanding shares. The offering was priced at a discount of 10% from Stillwater’s closing share price of US$15.61 on Jan. 29. Salomon Smith Barney and J.P. Morgan acted as the company’s financial advisors.

“We are pleased to have accomplished the financing at this time,” says the company’s Chief Executive officer, Francis McAllister. “The company balanced its need to improve its financial structure against the modest dilution associated with the issuance of shares, and the board was convinced that this financing was the proper and necessary avenue.”

The move is intended to lessen the company’s dependence on its US$250-million revolving credit agreement. Stillwater ran into financial troubles last year when expansions at its Stillwater and East Boulder platinum group metals (PGM) operations in Montana coincided with tumbling prices for platinum and palladium.

Late last year, having already drawn down US$200 million, the major renegotiated its credit facility.Under the new agreement, US$65 million of the US$250 million will continue as a 5-year loan, whereas US$135 million will be in the form of a 7-year loan. The last US$50 million will be a 5-year revolving credit facility.

The Stillwater operation has been expanded in order to produce 2,500 tons per day, though a further plan to expand to 3,000 tons has been shelved. The operation is expected to produce 525,000-575,000 oz. platinum group metals per year. Total cash costs are expected to average US$230 per oz. The total capital required to maintain the production rate is estimated to be US$60 million in 2002, US$40 million in 2003 and US$45 million in 2004.

At the East Boulder mine, surface infrastructure is complete and Stillwater crews are completing the underground facilities and mine development to provide for the initial production rate of 1,000 tons per day. Based on the revised plan, production is expected to hit 140,000-170,000 oz. platinum group metals yearly. Total cash costs are pegged at US$300 per oz.; the total capital required to maintain the production rate, at US$15 million per year.

“The plan reflects our need to address the reality of a lower cash-flow environment while maintaining the flexibility to revisit this course if prices improve,” McAllister said. “It makes no sense for the company to increase output if the demand for our metal is down in the short term. We have a valuable resource and will not mine it unless it generates an appropriate margin.”

Stillwater plans to release its 2001 year-end results on February 11, 2002.