NYE – More than 1,500 feet underground beneath the jagged peaks of the Beartooth Mountains, the man in charge of the only platinum and palladium mines in the U.S. is digging in against the worldwide slump in commodities.
As global prices have fallen in recent months for goods ranging from gold and copper to oil and coal, Stillwater Mining Co. Chief Executive Mick McMullen said he was determined that Montana’s largest mining company would emerge as the industry’s “last man standing.”
During an annual shareholder meeting set for Monday, McMullen and the company’s chairman, former Montana Gov. Brian Schweitzer, are expected to tout Stillwater’s expansion plans and other upcoming changes intended to keep its mines viable for decades to come.
Yet plans to remake the 23-year-old company into a more efficient operation are running into growing union opposition. That’s put McMullen in the precarious position of balancing his workers’ demands against a desire among shareholders for greater returns on their investments.
“As we often say in mining when you can see the light at the end of the tunnel: Is that the exit or just a train coming the other way?” McMullen said during a recent tour of the company’s Stillwater Mine near Nye.
Schweitzer declined comment.
This isn’t the first commodities slump to hit Stillwater, which has been chaired by Schweitzer since shareholders demanded a leadership change two years ago.
Over the past decade, the company weathered striking workers, the temporary closure of one of its two mines and a recession that prompted customers in the auto industry to look elsewhere for the precious metals they need for catalytic converters to control vehicle pollution.
Since McMullen took the helm in late 2013, he’s sought to drive down costs wherever possible. That started with cuts to overhead and personnel in the corporate office. It’s extended to minute details such as coming up with quicker routes to bring mined ore to the surface for processing.
To enlist backing from the company’s 1,600-person workforce, McMullen has instituted business education sessions to explain how Stillwater’s fortunes are shaped in large part by international economic forces.
“I try to get them to understand — ‘Guys, we’re not that competitive,”” he said.
Leaders of the local branch of the United Steelworkers Union have resisted.
They said McMullen is unfairly targeting the miners for management’s past mistakes — most notably the botched acquisitions of high-priced copper and palladium deposits in Canada and Argentina — even as the CEO’s compensation topped $3.5 million last year.
The foreign acquisitions were made by McMullen’s predecessor, and McMullen moved quickly to stop spending on those projects after taking control. But that hasn’t eased hard feelings that were further amplified in March, with the revelation that McMullen and other top executives would relocate their offices to Denver this summer.
President Scott McGinnis said they’ve done nothing but make the workforce angry. He said, “They want to pay shareholders a return, and they want it to come from us … If (McMullen) was really that concerned, he might put his timing off for a year and then worry about padding his own pockets.”
A recent company ad campaign promoted the high pay Stillwater’s workforce receives. The union dubbed the ads propaganda, saying they exaggerated workers’ salaries by lumping in health care costs and other benefits. With contract negotiations underway, McGinnis said the ads appeared designed to make the workers look bad if the deliberations deadlock.
Company representatives defended the advertisements as accurate and said Stillwater’s salaries are well above average for surrounding counties in south-central Montana.
John Tumazos, an independent investment adviser who tracks Stillwater, said the company to date has been somewhat shielded from the pain felt by others in the mining industry. That’s because Stillwater has large reserves of palladium, which has experienced a lesser price drop than platinum and other precious metals.
But that provides only a limited cushion, and the company remains exposed to lower prices, Tumazos added. If the union pushes too hard, he said, that could force the company to close less-productive mining areas and considerably reduce its workforce. He expressed sympathy for the miners but suggested the market forces were unavoidable.
“It’s not sitting around in an office. They go underground and they sweat,” Tumazos said. “The reality is the platinum price is extremely poor. I think they’re doing well to keep their doors open.”