Stillwater revises facility

Vancouver — Armed with a revised operating plan, North America’s largest producer of platinum and palladium has renegotiated its US$250-million credit facility.

Stillwater Mining (SWC-N), which has already drawn down US$200 million under the facility, needed to amend certain covenants by the lender in order to obtain much-needed cash. 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 company plans to take out US$25 million shortly, with the remaining US$25 million contingent on Stillwater’s meeting financial targets. The company ran into financial troubles earlier this year when expansions at its Stillwater and East Boulder platinum group metals (PGM) operations in Montana coincided with tumbling prices for platinum and palladium.

“The long-term credit facility, with these amendments, should facilitate our ability to implement our optimization plan, assuming that metal prices do not decline further,” says Chief Executive Officer Francis McAllister. “It should also allow us to proceed with achieving commercial production at East Boulder during the first half of 2002.”

The mine has been expanded in order to produce 2,500 tons per day, though a further plan to expand to 3,000 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 says. “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.”

The price of palladium has dropped to US$327 per oz. at presstime from more than US$1,100 in late 2000. The plunging palladium price resulted in a selloff of Stillwater stock. Since January, shares in the company have fallen to US$17 from US$40.30.