Stillwater surges ahead after completing expansion

Nye, Mont. — Stillwater Mining is hitting full stride at North America’s only primary platinum-palladium producer, the company’s namesake mine.

And with the size of its hedge position diminishing, the company is poised to benefit from the skyrocketing prices of the platinum-group metals (PGMs).

The Stillwater operation, situated here at the foot of the scenic Beartooth Mountains, has reached its production capacity of 2,000 tons of ore per day.

The company achieved this by completing a 1,950-ft. shaft in 1997, enabling it to increase tonnage mined by 37% and tons milled by 29% over 1996.

The company is faced with the task of mining a sulphide zone (known as the J-M reef) within the Stillwater Complex, a large layered mafic intrusion.

The J-M reef averages about 8.5 ft. in thickness and has a strike length of 28 miles.

The reef can balloon out to thicknesses of up to 75 ft., into what Stillwater’s geologists call “ballrooms,” and can also narrow to as little as 1 ft. On a recent visit to the mine, The Northern Miner was told that changes in how the reef is mined can make a big difference in recovery, productivity and, ultimately, profitability.

“We’ve come full circle with regards to mining methods,” said Ennis Geraghty, chief geologist at Stillwater. “We’ve tried bulk mining techniques with higher dilution, but in the last few years we’ve come around to mining more selectively.”

Currently, the company employs four mining methods in order to cover the various ground conditions and mining widths encountered along the reef.

Nearly half the operation uses mechanized ramp cut-and-fill methods and another 15% uses mechanized captive cut-and-fill methods. The increase in the use of mechanical methods played a big part in the expansion of the operation in 1997, and also helped to keep costs down.

Stillwater also uses sub-level mining in the west side of the deposit, where the reef is very continuous and dips 45. The technique is practical here because the ground conditions on the west side are much better than elsewhere. “As a rule of thumb, the steeper the dip of the reef, the poorer the ground conditions,” Geraghty said. Nearly 20% of the production at the mine comes from this sub-level extraction.

The fourth mining method used involves slusher cut-and-fill stopes.

Dilution is the most important issue facing the miners at Stillwater.

“Internal structure [within the layered mafic intrusion] and grade control are crucial,” said geologist Mike Koski.

In the company’s favor, mine geologists are able to visually estimate the grade of the rock based on the sulphide content. After each blast, Koski, like each of the company’s 13 grade-control geologists, visits the working face, marks the ore zones with a can of spray paint and takes a sample for assay. The visual data is then cross-checked with assay data to minimize dilution. This system works well, despite there being as many as 35 active working faces in the mine at any time. Recorded dilution through 1997 was 10% and the waste-to-ore ratio was 0.7 to 1.

Last year, Stillwater produced 84,000 oz. platinum and 271,000 oz.

palladium. Results from the first quarter of 1998 show a 26% increase in production as a result of the expansion to 2,000 tons per day. Cash production costs during the quarter fell 17% to US$153 per oz. combined platinum and palladium.

The PGMs at Stillwater are locked up with sulphide species — pentlandite, pyrrhotite and chalcopyrite — found in the interstices of the cumulate layers that make up the J-M reef. PGM-bearing minerals include the sulphides braggite and cooperite, isoferroplatinum (as metal) and moncheite (a telluride). Most of the palladium comes from a solid-solution in pentlandite. Byproducts include copper, nickel, rhodium, gold, silver and cobalt, though they only account for 5% of the overall revenue.

The Stillwater mine is the product of over 60 years of exploration perseverance that followed the discovery of the Stillwater Complex and the recognition of its similarity to the PGM-rich Bushveld Complex in South Africa. During the Second World War, the U.S. government commissioned a chromium mine here. In the 1960s and 1970s, mining companies evaluated the copper and nickel potential of the Stillwater Complex. At the same time, Johns Manville began looking for platinum group metals.

The J-M reef (named for Johns Manville) was discovered in 1974, though it took a number of years to delineate an orebody. The decision to move to production was made in August 1986.

Stillwater became a public company in December 1994; Manville sold its interest the following year.

At year-end 1997, reserves at Stillwater stood at 23.4 million tons grading 0.79 oz. combined platinum and palladium per ton.

Stillwater plans to continue lowering costs where possible and is looking to implement another expansion program that would triple annual production to 1.3 million oz. combined platinum and palladium by 2003. The board recently approved an increase in capital spending for 1998 to US$55 million from US$22 million, which could allow the company to reach 1.3 million oz. “in a shorter time frame than we had originally planned,” said Stillwater Chairman William Nettles.

The funds will be used for several development projects, including a paste backfill project that could boost the volume of mill feed by 5%, and a copper-nickel processing circuit.

Stillwater also plans to increase the number of active working faces to more than 40 and to add new miners. However, hiring new people hasn’t been easy, as “there’s still a shortage of qualified miners,” said Gill Clausen, vice president of operations. The company trains four miners per month in its teaching stopes, and recruits at other operations around the country, Clausen said. Stillwater also received a labor certification allowing it to employ foreign miners, particularly from Canada.

The company is awaiting approval of an Environmental Impact Statement (EIS) covering a new tailings facility. In the EIS document, Stillwater has requested the removal of tonnage restrictions. The company expects to receive a record of decision by year-end.

In another important step toward reaching its production target, the company has begun development of a second mine along the J-M reef at East Boulder, 13 miles distant. After having mothballed the plan in the third quarter of 1996, the company restarted the fully permitted project in November 1997.

Currently, Stillwater is 150 ft. in from the portal at East Boulder and is preparing for the arrival of a tunnel-boring machine in late May. The 430-ft.-long machine will dig a tunnel 18,500 ft. into the mountain to the J-M reef, advancing at a rate of 125 ft. per day. The resulting adit is expected to be completed within a year.

Once the tunnel is complete, the company will commission a final feasibility study before making a production decision. The East Boulder mine would have a capacity of over 2,000 tons per day.

The Stillwater plant uses a flotation circuit much like copper and nickel operations. Through a primary and secondary grinding unit, the flotation process upgrades the platinum-palladium grades to 65 oz. per ton from the head grade of 0.75 oz. The material is shipped 35 miles to Columbus for smelting and refining.

To process ore from the East Boulder mine, the company is considering constructing a second processing plant at East Boulder, eliminating the need to transport concentrates nearly 100 miles by road back to the Stillwater mine and then on to the smelter in Columbus, Mont.

“We’re confident that we’ll soon be able to order materials for a second processing plant,” said John Andrews, Stillwater’s president.

At the smelter complex, copper, nickel and iron are removed at the base metals refinery, such that the final product, which is shipped to Belgium for refining, is 65% platinum-palladium. The copper and nickel, in solution, are currently shipped to Canada for processing. However, the company intends to construct electrowinning cells at Columbus this year to process the solution. Currently, the c
ompany receives payment for 60% of the nickel and nothing for the copper. With the new facility, Stillwater should realized an additional US$3 per oz. from byproduct credits.

This year is a transitional one for Stillwater in terms of hedging. The company is emerging from a poorly chosen hedging strategy that has kept it from realizing higher metal prices while platinum and particularly palladium prices soar. In 1997, the company realized US$144 per oz. palladium and US$388 per oz. platinum, whereas the average market prices for these metals were US$178 and US$395 per oz.

Stillwater is expected to clear from under these hedge contracts by the end of the year. Currently, the company holds a position totaling 175,000 oz.

palladium at an average price of US$138 per oz. and 4,255 oz. platinum at an average price of US$369 per oz. through the end of the year. This position, declining each quarter, has 73% of second-quarter palladium production covered by the hedge position. That figure drops to 63% in the third quarter and 38% in the fourth quarter, after which the company has no further positions.

Stillwater anticipates producing 370,000 oz. palladium and 108,000 oz.

platinum during 1998. Those ounces not covered by the hedge will be sold at spot prices.

“We do not intend to put ourselves in a position again where we will not realize the benefit of rising metal prices,” stated Nettles in the 1997 annual report.

Last year was dominated by oversupply of both platinum and palladium. South Africa accounted for 70% of the year’s 5 million oz. of global production, while Russia was the controlling factor in the 7-million-oz. palladium market. Most of the palladium came from stockpiles at the Noril’sk nickel operation, which are expected to run out in the next few years.

So far this year, Russia has delayed delivery of palladium and platinum, sending the price of both metals into the stratosphere. When shipments will resume remains unknown. Stillwater expects increased demand for both metals this year from the electronics sector, where palladium is increasingly used in semiconductors, and the automobile industry, where the metals are used in catalytic converters.

Environmentally speaking, Stillwater is different from other hardrock mines in North America in that the platinum and palladium mineralization is not the result of hydrothermal alteration that also concentrates elements dangerous to the environment, such as arsenic, mercury or cadmium. Moreover, the company doesn’t use cyanide, nor is acid mine drainage a problem.

As a zero-discharge facility, Stillwater’s only environmental problem is nitrates derived from blasting materials. Excess nitrates can upset the chemical balance in the Stillwater River, a blue-ribbon trout stream running close to the mine. To ward off this potential problem, the company routes runoff to nitrate consuming plants and employs anaerobic biodenitrification technology during the winter months.