Stillwater Mining Co. Reports Upswing Despite Loss of GM

BILLINGS – Stillwater Mining Company executives say the Columbus company capped losses at just $9.1 million in 2009, despite the loss of a major precious metals contract with General Motors.

When GM announced last summer that it was canceling its long-standing agreement with Stillwater as part of the automaker’s bankruptcy reorganization, the Montana platinum and palladium producer warned that job losses could soon follow.

Gov. Brian Schweitzer and Montana’s congressional delegation pushed GM to reverse the move, but made little headway against a reorganization plan crafted in part by the Obama administration.

Nevertheless, Stillwater found new customers to replace GM, as precious metals prices rebounded from a market collapse in late 2008.

Also, job cuts made in 2008 helped keep operating expenses low. The company managed to increase production in 2009 from its primary mine near Nye by almost 45,000 ounces, or about 13 percent, to 394,000 ounces for the year.

Stillwater has two mines in the Beartooth Mountains, 90 miles southwest of Billings. The company employs about 1,300 people at the mines and its corporate offices and smelter in Columbus.

Revenues dropped sharply in 2009 to $394 million, from $855 million in 2008.

Costs also dropped, allowing Stillwater to keep its 2009 losses to just 10-cents per share, or $9.2 million. That’s versus losses of $1.26 per share — or $117 million — for 2008.

A Russian company, Norilsk, controls 53 percent of Stillwater’s stock.

With precious metals prices expected to remain healthy through 2010, chief executive Frank McAllister says Stillwater plans to increase its mine development spending to $50 million for the year. And it could go even higher.

“If (platinum group metals) prices remain strong, the company may consider expanding its capital expenditures modestly to include some more discretionary projects, as well,” McAllister said.

Platinum and palladium are used in jewelry and in vehicle catalytic converters to screen out pollution. The metals are mined in just two other countries, Russia and South Africa.

GM dropped Stillwater as a supplier when the automaker emerged from bankruptcy protection last July.

In their calls to restore that contract, Montana politicians highlighted Stillwater’s status as the only source of mined platinum and palladium in the nation. They failed to persuade GM — or the Obama administration — to reverse the move.

That could have proved disastrous for Stillwater if prices had not rebounded.

Still hanging over the mining company is the end of a similar supply agreement with Ford Motor Company at the end of 2010. Like the GM contract, Ford’s sets guaranteed floor and ceiling prices for Stillwater’s metals. That’s a built-in shield against market fluctuations that works to Stillwater’s benefit when prices are low.

“Without the benefit of these guaranteed floors after 2010, we will need to be sure we are operating as efficiently as possible,” McAllister said.

He added that for 2010, the company has put a priority on keeping down costs rather than increasing mine production.