Stillwater Mining Company 2008 Annual Report Financial Highlights
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Stillwater Mining Company 2008 Annual Report Financial Highlights December 31, 2008 2007 2006 FINANCIAL Total revenues (millions) $ 855.7 $ 673.0 $ 655.8 Operating income (loss) (millions) $ (114.3 ) $ (16.2 ) $ 7.2 Net income (loss) (millions) $ (112.7 ) $ (15.5 ) $ 7.2 Net income (loss) per share Basic earnings (loss) per share $ (1.21 ) $ (0.17 ) $ 0.08 Diluted earnings (loss) per share $ (1.21 ) $ (0.17 ) $ 0.08 Operating cash flow (millions) $ 114.2 $ 56.4 $ 97.0 Stockholders’ equity (millions) $ 422.5 $ 515.4 $ 511.7 Weighted average common shares outstanding (millions) Basic 93.0 92.0 91.3 Diluted 93.0 92.0 91.6 Outstanding common shares (millions) 93.7 92.4 91.5 PALLADIUM & PLATINUM MINE PRODUCTION (ounces) Stillwater Mine 349,000 359,000 409,000 East Boulder Mine 150,000 178,000 192,000 Total 499,000 537,000 601,000 Palladium 384,000 413,000 463,000 Platinum 115,000 124,000 138,000 Total 499,000 537,000 601,000 OPERATIONS Total ore tons milled 1,060,000 1,169,000 1,289,000 Total tons milled (includes sub-grade) 1,206,000 1,244,000 1,351,000 Combined mill head grade (ounce per ton) 0.46 0.48 0.49 Mill recovery 91% 91% 91% CONSOLIDATED PRODUCTION COSTS (per ounce) Total cash costs $ 396 $ 331 $ 296 Depreciation & amortization $ 165 $ 157 $ 137 Total production costs $ 561 $ 488 $ 433 METAL PRICES Mine Production Average realized price per palladium ounce $ 410 $ 384 $ 370 Average realized price per platinum ounce $ 1,387 $ 953 $ 868 Combined average realized price per ounce $ 630 $ 509 $ 484 Other PGM Activities Average realized price per palladium ounce $ 401 $ 352 $ 306 Average realized price per platinum ounce $ 1,735 $ 1,247 $ 1,122 Average realized price per rhodium ounce $ 7,807 $ 5,732 $ 4,111 Market Average realized price per palladium ounce $ 352 $ 355 $ 320 Average realized price per platinum ounce $ 1,578 $ 1,303 $ 1,143 Combined average market price per ounce $ 628 $ 564 $ 508 PRIVATE SECURITIES LITIGATION REfORm ACT Of 1995 Some statements contained in this annual report contain forward- expectations are set forth in the section entitled “Risk Factors” in the looking information, which involves expressions of management’s Company’s Annual Report on Form 10-K included herein and may current expectations. All forward-looking information is subject to be discussed in subsequent filings with the Securities and Exchange various risks and uncertainties that may be beyond the Company’s Commission. Descriptions of palladium and platinum markets are control and may cause results to differ materially from management’s not intended to be complete and readers are advised to obtain their current expectations. Information concerning factors that could own information on these markets. The Company disclaims any cause actual results to differ materially from management’s current obligation to update forward-looking statements. “2008 WILL BE REMEMBERED as a YEAR of EXCEPTIONAL HIGHS and LOWS.” Frank McAllister, Chairman and CEO 2008 Chairman’s Letter TO OUR SHAREHOLDERS: For Stillwater Mining Company, along with much began a sharp decline on reports of a weakening global of the rest of the mining industry (and the world, for economy and declining auto sales. Late October saw that matter), 2008 will be remembered as a year of platinum bottom out at $756 per ounce, palladium at exceptional highs and lows. $168 per ounce, and rhodium at $1,000 per ounce. In the years leading up to 2008, metal prices in Although the price for each recovered a bit by year general had appreciated steadily, responding as growth end, if we measure the price change between their 2008 in worldwide demand outpaced supply. Then in early highs and lows, platinum dropped by 67%, palladium by 2008, this pricing trend accelerated sharply as investors 71% and rhodium by 90%. (Note on rhodium: Stillwater shifted into commodities, seeking outsized returns in these produces about 3,000 ounces of rhodium per year from markets based upon the surging global demand story. For its mines and in 2008 processed on average just over precious metals, the price acceleration was accentuated 2,000 ounces per month in its recycling operations, both even further when, in late January 2008, shortages of of which had significant value at the 2008 price highs.) electrical power to the gold and platinum-group metal While the strong PGM prices in the year’s first half (PGM) mines in South Africa constrained output. resulted in our reporting comparatively strong earnings As a result, in March 2008 platinum prices reached through the first six months of 2008, the implications record levels, peaking on the LME at $2,276 per ounce, of the sharply lower prices later in the year were up from $1,529 per ounce at the end of 2007. Palladium sobering for our Company. Our mining costs per ounce likewise increased to $579 per ounce at its peak, from had drifted upward over the previous several years, $365 at the end of 2007. And in June rhodium peaked reflecting lower average ore grades in some of our at just over $10,000 per ounce. Then, beginning in late mining areas, higher prices for critical mine supplies July 2008, following these lofty price peaks and as the like steel and energy, and some stubbornly persistent deterioration in financial and credit markets was rapidly manpower challenges. Then, as PGM prices fell, we turning into a full blown crisis, the commodity markets saw first our operating margins and then our corporate 1 176971_Stillwater.indd 3 4/6/09 10:29 AM cash flow turn negative, offsetting the positive financial optimistic about the results of these efforts, encouraged results from earlier quarters and eroding our available by reconfigured processes that are working well. At cash balances. At the same time, we also were seeing the East Boulder Mine, employees have helped us a steady decline in the volumes of recycling material achieve a substantial reduction in costs per ton mined received for processing in our smelting and refining and a marked increase in mining productivity. Mining facilities, as the recycling industry struggled with falling activities at East Boulder Mine have been restructured, PGM prices and in some cases significant inventory losses. moving to a decentralized, team-based approach where each team is responsible not only for its own mining performance, but also for most of its own support. “...our corporate financial focus must be on Stillwater Mine operations have achieved a more maintaining neutral to positive net cash flow than 20% reduction in per-ton cash mining costs while to ensure the Company’s long-term ability to realizing higher mining efficiencies and improved ore continue operating.” grade. Some of this performance at both mines is the result of lower supply costs; the Stillwater Mine has benefited from the influx of experienced East Boulder As described in detail in the accompanying Form miners; and both sites are enjoying the renewed 10-K, we have responded to this situation aggressively, engagement and focus of our employees. Our goal is to adjusting our operating plan to preserve cash. retain as much of our experienced miner workforce as We briefly suspended operations at the higher-cost possible and to engage their considerable experience East Boulder Mine, reopening it with a much reduced to help us eliminate inefficiencies in our operations. workforce and a more focused operating plan, We believe their involvement is critical if we are to targeting only those specific mining areas with positive successfully weather this low price environment and cash flow potential at current prices. Further, mine bring our cost profile into line. development at East Boulder was cut back sharply and Consequently, out of necessity and so long as PGM about one-quarter of the East Boulder miner workforce prices remain low, we have concluded that our corporate transferred to the Stillwater Mine, replacing higher-cost financial focus must be on maintaining neutral to positive mining contractors there. At both operations our miner net cash flow to ensure the Company’s long-term ability to workforce has now assumed a larger share of the mining support functions. At year end, we wrote down continue operating. Our planning reflects the possibility the carrying value of the East Boulder Mine by about of a protracted downturn before prices recover. If the $67 million, as it was deemed impaired at the lower measures implemented to date should prove to be PGM prices and its higher costs. insufficient or if prices were to deteriorate further, the Company may be driven toward additional cutbacks or We trimmed back capital expenditures corporate- suspension of some or all of its mining, processing and wide for 2009 to a level that just sustains operating exploration activities. capacity. And, we addressed corporate overheads by cutting back staff, curtailing non-essential services and At year-end 2008’s PGM price levels, the operating slashing marketing and exploration budgets. plan we have put in place indicates that the Company will To some extent these adjustments were facilitated be able to maintain marginally positive net cash flow in by a change in management approach beginning 2009, although non-cash depreciation and amortization early in 2008 in which we determined to involve the expenses will result in significant reported book losses. broader workforce more in streamlining our mining The Company’s cash position is comparatively strong, with processes, benefiting from their practical expertise and about $181 million of cash and short-term investments on hands-on experience. This approach also means that our hand at the end of 2008. The Company’s debt mostly workforce is more fully informed of our circumstances as carries a very low rate of interest, and no material debt we move forward.