Stillwater Mining Co. recently reported 2010 net income of $50.4 million on revenues of $555.9 million. Contributing to the net income in 2010 were higher PGM prices and a recovery in recycling volumes, along with continued focus on productivity and controlling costs.

The 2010 net income compares to a full-year 2009 net loss of $8.7 million on revenues of $394.4 million. In addition to other accounting related expenses, the results for 2009 also reflected significant operating losses incurred early as production costs at the company’s mines for a time exceeded average sales. However, restructuring efforts and a gradual increase in PGM prices had reversed this trend by the end of the first quarter of 2010.

“This past year or so has been an extraordinary time for Stillwater Mining,” said Francis R. McAllister, chairman and CEO, Stillwater. “After going through the pain of the economic recession and corporate restructuring in late 2008 and early 2009, it was refreshing to see the PGM markets gradually get back on their feet during 2009 and then move ahead dramatically in 2010. We observed as we issued our 2009 Annual Report in early 2010 that the economic stars seemed to be aligned in favor of the platinum-group metals, given the worldwide demand for automobiles—and therefore for catalytic converters—rebounding, constrained production of these metals and the apparent winding down of palladium exports from the old Russian government stockpiles. Not only did PGM prices increase during 2010 as we had predicted, but the market price of palladium, our principal product, doubled and converged upward toward the market price of platinum—advancing from 21% of the price of platinum at the bottom of the recession to 45% at the end of 2010. In view of the interchangeability of the two metals in many applications, this convergence simply makes economic sense.

Mine production decreased somewhat during 2010 at the Stillwater mine and the East Boulder mine, which extract ore containing palladium and platinum from a deposit in the Beartooth Mountains of south-central Montana. The two mines produced a total of 485,100 oz of palladium and platinum during 2010, a decrease of 8.5% from the 529,900 oz produced in 2009. Production at the Stillwater mine decreased to 351,700 oz from the 393,800 oz during 2009, while East Boulder mine production declined to 133,400 oz from 136,100 oz in 2009. The decrease in production reflects lower-than-planned ore grades in the lower off-shaft area at the Stillwater mine and a limitation on available mining areas at the East Boulder mine that had been recognized in their 2010 mine plan.

Mining costs, on a per-ounce basis, also increased in 2010 compared to the year earlier. Stillwater mine’s total cash costs averaged $380/oz in 2010 or 10.5% more than the $344/oz achieved in 2009. East Boulder mine costs averaged $442/oz in 2010, 8.6% more than $407/oz in 2009. Most of the increase in total cash costs per ounce was attributable to the lower ounce production in 2010.

Combined sales realizations improved through the year 2010 for mined palladium and platinum ounces and averaged $721/oz, up from $549/oz realized in 2009. Average metal prices increased throughout 2010. Fourth quarter 2010 sales realizations strengthened to average $844/oz, compared to $579/oz averaged during the fourth quarter of 2009.

“We find that our operations seem to function optimally with targeted mine production of approximately 500,000 oz/yr palladium and platinum,” McAllister said. “We have structured our mine plans toward achieving that level of production in 2011, assuming some continuation of the lower grades seen in the off-shaft at Stillwater last year, and resuming some production on the east side of the mine to offset that reduction.” The east side was shut down in 2008 when PGM prices dropped—grades on the east side tend to be higher than average, but mining efficiency there is hindered by poor ground conditions.

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