Stillwater Mining Company
Consolidated Balance Sheets
(Unaudited)
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September 30,
|
|
December 31,
|
|
(In thousands, except share and per share data)
|
2016
|
|
2015
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
$
|
112,967
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|
|
$
|
147,336
|
|
|
Investments, at fair value (Note 12)
|
326,445
|
|
|
316,429
|
|
|
Inventories
|
140,781
|
|
|
102,072
|
|
|
Trade receivables
|
1,404
|
|
|
800
|
|
|
Prepaid expenses
|
4,626
|
|
|
2,821
|
|
|
Other current assets
|
21,240
|
|
|
21,628
|
|
|
Total current assets
|
607,463
|
|
|
591,086
|
|
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Mineral properties
|
112,480
|
|
|
112,480
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Mine development, net
|
480,266
|
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|
460,751
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Property, plant and equipment, net
|
103,223
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|
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109,957
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Other noncurrent assets
|
4,478
|
|
|
4,115
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Total assets
|
$
|
1,307,910
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|
|
$
|
1,278,389
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LIABILITIES AND EQUITY
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Current liabilities
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Accounts payable
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$
|
24,202
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|
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$
|
18,205
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Accrued compensation and benefits
|
30,431
|
|
|
30,046
|
|
|
Property, production and franchise taxes payable
|
12,406
|
|
|
13,907
|
|
|
Current portion of long-term debt and capital lease obligations
|
—
|
|
|
657
|
|
|
Income taxes payable
|
647
|
|
|
—
|
|
|
Other current liabilities
|
6,910
|
|
|
5,286
|
|
|
Total current liabilities
|
74,596
|
|
|
68,101
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Long-term debt
|
269,059
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|
255,099
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Deferred income taxes
|
19,390
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|
22,761
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Accrued workers compensation
|
6,420
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|
|
6,070
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Asset retirement obligation
|
11,376
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|
|
11,027
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Other noncurrent liabilities
|
11,351
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|
|
6,102
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|
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Total liabilities
|
392,192
|
|
|
369,160
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EQUITY
|
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Stockholders’ equity
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Preferred stock, $0.01 par value, 1,000,000 shares authorized; none issued
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—
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—
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Common stock, $0.01 par value, 200,000,000 shares authorized; 121,078,216 and 121,049,471 issued and outstanding at September 30, 2016 and December 31, 2015, respectively
|
1,211
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|
|
1,210
|
|
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Paid-in capital
|
1,101,982
|
|
|
1,099,283
|
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Accumulated deficit
|
(187,615
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)
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|
(191,067
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)
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Accumulated other comprehensive income (loss)
|
140
|
|
|
(197
|
)
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Total stockholders’ equity
|
915,718
|
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|
909,229
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Total liabilities and equity
|
$
|
1,307,910
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|
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$
|
1,278,389
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|
See accompanying notes to consolidated financial statements
Stillwater Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
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Nine Months Ended
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September 30,
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(In thousands)
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2016
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|
2015
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CASH FLOWS FROM OPERATING ACTIVITIES
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|
|
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Net income (loss)
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$
|
3,452
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$
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(28,160
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)
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Adjustments to reconcile net income (loss) to net cash provided by operating activities:
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Depletion, depreciation and amortization
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55,742
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|
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49,681
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|
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Gain on sale of long-term investments
|
|
(678
|
)
|
|
—
|
|
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Loss on long-term investments
|
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—
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204
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|
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Loss on extinguishment of debt, net
|
|
—
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4,010
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Impairment of non-producing mineral properties
|
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—
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46,772
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Amortization / accretion on investment premium / discount
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|
1,772
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1,688
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Gain on disposal of property, plant and equipment
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|
(72
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)
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|
(216
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)
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Foreign currency transaction gain, net
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(1,660
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)
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(149
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)
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Deferred income taxes
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|
(2,103
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)
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|
(12,192
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)
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Accretion of asset retirement obligation
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|
637
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|
589
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Amortization of deferred debt issuance costs
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|
662
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1,665
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Accretion of convertible debenture debt discount
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|
13,297
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12,985
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Share based compensation and other benefits
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|
2,744
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|
9,489
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Non-cash capitalized interest
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|
(4,334
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)
|
|
(2,809
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)
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|
Changes in operating assets and liabilities:
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|
|
|
|
|
Inventories
|
|
(39,067
|
)
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|
2,280
|
|
|
Trade receivables
|
|
(604
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)
|
|
554
|
|
|
Prepaid expenses
|
|
(1,805
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)
|
|
(1,674
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)
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Accounts payable
|
|
3,048
|
|
|
413
|
|
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Accrued compensation and benefits
|
|
385
|
|
|
(62
|
)
|
|
Property, production and franchise taxes payable
|
|
1,195
|
|
|
170
|
|
|
Income taxes payable
|
|
648
|
|
|
—
|
|
|
Accrued workers compensation
|
|
350
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|
|
32
|
|
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Other operating assets
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|
351
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|
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(7,607
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)
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Other operating liabilities
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4,196
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(1,982
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)
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NET CASH PROVIDED BY OPERATING ACTIVITIES
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|
38,156
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75,681
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CASH FLOWS FROM INVESTING ACTIVITIES
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Capital expenditures
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|
(61,980
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)
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|
(83,386
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)
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Proceeds from sale of long-term investments
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|
1,099
|
|
|
—
|
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Proceeds from disposal of property, plant and equipment
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|
162
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|
|
387
|
|
|
Purchases of investments
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|
(234,269
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)
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(230,392
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)
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Proceeds from maturities and sales of investments
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|
223,095
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153,902
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NET CASH USED IN INVESTING ACTIVITIES
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|
(71,893
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)
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(159,489
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)
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CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Payments on debt and capital lease obligations
|
|
(658
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)
|
|
(62,582
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)
|
|
Proceeds from issuance of common stock
|
|
26
|
|
|
60
|
|
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
(632
|
)
|
|
(62,522
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)
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CASH AND CASH EQUIVALENTS
|
|
|
|
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|
Net decrease
|
|
(34,369
|
)
|
|
(146,330
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)
|
|
Balance at beginning of period
|
|
147,336
|
|
|
280,286
|
|
|
BALANCE AT END OF PERIOD
|
|
$
|
112,967
|
|
|
$
|
133,956
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|
See accompanying notes to consolidated financial statements
Stillwater Mining Company
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1
GENERAL
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the financial position of Stillwater Mining Company (the Company) at
September 30, 2016
, and the results of its operations for the three and
nine
months ended
September 30, 2016
and 2015, and cash flows for the
nine
months ended
September 30, 2016
and
2015
. The results of operations for the first
nine
months of
2016
are not necessarily indicative of the results to be expected for the
2016
year. The accompanying consolidated financial statements in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's
2015
Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2016 (Form 10-K). All inter-company transactions and balances have been eliminated in consolidation.
The preparation of the Company’s consolidated financial statements in conformity with United States generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. The more significant areas requiring the use of management’s estimates relate to mineral reserves, reclamation and environmental obligations, valuation allowance for deferred tax assets, useful lives utilized for depreciation, amortization and accretion calculations, future cash flows from long-lived assets, and fair value of derivatives and other financial instruments. Actual results could differ from these estimates.
Developments in Accounting Pronouncements
On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with Customers
, which requires an entity to recognize the amount of revenue it expects to be entitled to for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU 2015-14,
Deferral of the Effective Date
, which defers the effective date of ASU 2014-09 by one year to January 1, 2018. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP. The standard permits the use of either the retrospective or cumulative effect transition method. The Company continues to evaluate the effect that ASU 2014-09 will have on its consolidated financial statements and disclosures and has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. Early adoption is not permitted.
On April 7, 2015, as part of its initiative to simplify and reduce complexity in financial statements, the FASB issued ASU 2015-03,
Interest - Imputation, (Subtopic 835-30): Simplifying the Presentation of Debt Issuance.
This ASU requires the debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. Also, it requires retrospective application for all prior periods presented in the financial statements and a disclosure of the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 31, 2015, and interim periods within those fiscal years. Early adoption was permitted for financial statements that had not been previously issued. The Company elected early adoption of ASU 2015-03 in the first quarter of 2016 and reclassified
Deferred debt issue costs
against the related liability for all periods presented. Prior to the adoption of ASU 2015-03, the balance reported at December 31, 2015 for total
Long-term debt and capital lease obligations
was
$258.9 million
, and after adoption and reclassification of
Deferred debt issue costs
of
$3.8 million
, the total balance reported at December 31, 2015 became
$255.1 million
.
On July 22, 2015, as part of its initiative to simplify and reduce complexity in financial statements, the FASB issued ASU 2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory.
ASU 2015-11, changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company is evaluating the effect that ASU 2015-11 will have on its consolidated financial statements and disclosures. The Company does not expect this initiative to have a significant impact on its ongoing financial reporting. The ASU requires prospective adoption and permits early adoption.
On February 25, 2016, the FASB issued ASU 2016-02,
Leases, (Topic 840)
, which requires an entity that leases assets, with terms of more than 12 months, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU 2016-02 is effective for financial statements issued for fiscal years beginning after December 31, 2018, and interim periods within those fiscal years. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and disclosures and has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. Early adoption is permitted.
On March 30, 2016, the FASB issued ASU 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employees Shared-Based Payment Accounting.
The ASU will change several aspects within share based payments: (1) accounting for income taxes, (2) classification of excess tax benefits, (3) forfeitures, (4) minimum statutory tax withholding requirements, (5) classification of employee taxes paid when an employer withholds shares for tax-withholding purposes, (6) practical expedient - expected term, (7) intrinsic value, and (8) eliminating the indefinite deferral. ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company is evaluating the effect that ASU 2016-09 will have on its consolidated financial statements and disclosures and has not yet quantified the effect of the standard on its ongoing financial reporting. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.
NOTE 2
SALES
MINE PRODUCTION
The Company mines and processes ores containing palladium, platinum, rhodium, gold, silver, copper and nickel into intermediate and final products for sale to customers. Palladium, platinum, rhodium, gold and silver are sent to a third-party refiner for final processing from which they are sold to customers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) in sponge form are transferred upon sale from the Company’s account at the third-party refiner to the account of the purchaser. By-product metals are normally sold at market price to customers, brokers or outside refiners. Copper and nickel by-products are typically sold at a discount to the quoted market prices. By-product sales (gold, nickel, mined rhodium, copper and silver) are included in revenues from Mine Production. During each of the three months ended
September 30, 2016
and
2015
, by-product sales totaled
$6.1 million
and
$5.0 million
, respectively. For the
nine
months ended
September 30, 2016
and
2015
, by-product sales totaled
$17.4 million
and
$18.7 million
, respectively.
In July 2014, the Company executed
five
-year supply and refining agreements with Johnson Matthey (JM). Under the terms of these agreements, JM has an exclusive
five
-year right to refine all of the PGM filter cake the Company produces at its Columbus, Montana facilities. JM also has the right to purchase all of the Company's mine production of palladium and platinum at competitive market prices (except for platinum sales under the Company's sales agreement with Tiffany & Co., which are specifically excluded from the JM agreements) and has the right to bid for any recycling volumes the Company has available. Other provisions of the agreements include a good-faith effort by JM to assist in growing the Company's recycling volumes and the sharing of market intelligence to the extent permitted by law. The Company has the right to exit the JM PGM supply arrangement in return for the payment of a nominal fee. In addition, the Company, in its sole discretion, may elect to terminate the refining arrangement after July 2018.
In accordance with the terms of the JM PGM supply agreement, all Company sales of mined PGMs, other than the platinum sales under the Company's sales agreement with Tiffany & Co., were to JM for the
nine
months ended
September 30, 2016
and 2015.
PGM RECYCLING
The Company purchases spent catalyst materials from third-parties for recycling and processes these materials within its facilities in Columbus, Montana to recover palladium, platinum and rhodium for sale. The Company has entered into sourcing arrangements for catalyst materials with various suppliers. Under these sourcing arrangements the Company may advance cash as general working capital or against a shipment of material shortly before actually receiving the physical shipment at the Company's processing facilities. These advances are included in
Other current assets
on the Company’s
Consolidated Balance Sheets
until such time as the materials have been physically received and title has transferred to the Company, at which time the advance is reclassified into
Inventories
. Finance charges collected on advances and inventories prior to being earned are included in
Other current liabilities
on the Company’s
Consolidated Balance Sheets
. Finance charges are reclassified from
Other current liabilities
to
Interest income
ratably from the time the cash advance was made until the out-turn date of the inventory from the final refiner.
The Company also accepts material supplied from third-parties on a tolling basis, processing it for a fee and returning the recovered metals to the supplier.
TOTAL SALES
Total sales to significant customers as a percentage of total revenues for the three and
nine
months ended
September 30, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2016
|
|
2015
(1)
|
|
2016
(1)
|
|
2015
(1)
|
|
Customer A
|
|
65
|
%
|
|
70
|
%
|
|
71
|
%
|
|
75
|
%
|
|
Customer B
|
|
11
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Customer C
|
|
10
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
86
|
%
|
|
70
|
%
|
|
71
|
%
|
|
75
|
%
|
(1) The "-" symbol represents less than 10% of total revenues.
NOTE 3
ASSET IMPAIRMENT
In accordance with the FASB Accounting Standards Codification 360,
Property Plant and Equipment, (ASC 360-10)
, the Company reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amounts of such assets may not be recoverable and may exceed their fair value. For purposes of determining impairment, assets are grouped at the lowest level for which identifiable cash flows (including estimated future cash flows from non-operating properties) are largely independent of the cash flows of other groups of assets and liabilities.
The Company determined there were no material events or circumstances requiring the Company to test long-lived assets for impairment at
September 30, 2016
. However, during the second quarter of 2015, the Company concluded that there was evidence to suggest that there had been a significant decrease in the fair value of the Marathon mineral properties. Accordingly, the Company performed an analysis that indicated the carrying value of the Marathon mineral properties exceeded its recoverable amount at June 30, 2015. The Company undertook an assessment of the fair value of its Marathon mineral properties, which included the examination of recent comparable transactions. At June 30, 2015, the Company recorded an impairment charge of
$46.8 million
(before-tax) against the carrying value of the Marathon mineral properties in Canada, reducing its carrying value to an estimated fair value of
$8.6 million
.
NOTE 4
NONCONTROLLING INTEREST
In the fourth quarter of 2015, the Company purchased the
25%
interest held by Mitsubishi Corporation (Mitsubishi) in Stillwater Canada Inc (SCI), the Company's subsidiary, which holds the Marathon PGM-copper assets. The Company paid total cash consideration of
$5.2 million
which equaled
$1.0 million
in cash and
25%
of the total cash and cash equivalents held by SCI.
Prior to the repurchase, Mitsubishi's
25%
interest in SCI's net loss for each period was shown as
Net loss attributable to noncontrolling interest
in the Company's
Consolidated Statements of Comprehensive Income (Loss)
. The amount of the loss was added back to the Company's reported
Net (loss) income
in each period in arriving at
Net (loss) income attributable to common stockholders
. The reported
Net loss attributable to noncontrolling interest
for the three and
nine months ended
September 30, 2015
was
$0.2 million
and
$11.8 million
, respectively.
NOTE 5
DERIVATIVE INSTRUMENTS
The Company uses various derivative financial instruments to manage its exposure to changes in PGM market commodity prices.
COMMODITY DERIVATIVES
PGM Recycling
The Company customarily enters into fixed forward sales contracts relating to PGM recycling of catalyst and other industrial sourced materials. Under these fixed forward transactions, the Company agrees to deliver a stated quantity of metal on a specific future date at a price stipulated in advance. The Company uses fixed forward transactions to set in advance the pricing for metals acquired and processed in its recycling segment. The metals from PGM recycled materials are sold forward at the time of purchase and delivered against the fixed forward contracts when the ounces are recovered. Because this forward price is also used to set the acquisition price the Company pays for recycling materials, this arrangement significantly reduces exposure to PGM price volatility. The Company believes such transactions qualify for the exception to hedge accounting treatment and has elected to account for these transactions as normal purchases and normal sales.
All of the Company's fixed forward sales contracts open at
September 30, 2016
, will settle at various periods through
March 2017
. The Company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for metals exceed the Company’s hedged prices by a predetermined margin limit. At
September 30, 2016
, and
December 31, 2015
, no margin deposits were outstanding or due.
The following is a summary of the Company's outstanding commodity derivatives in its Recycling Business Segment at
September 30, 2016
:
|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
|
|
|
PGM Recycling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Forward Contracts
|
|
Platinum
|
|
Palladium
|
|
Rhodium
|
|
Settlement Period
|
|
Ounces
|
|
Average
Price/Ounce
|
|
Ounces
|
|
Average
Price/Ounce
|
|
Ounces
|
|
Average
Price/Ounce
|
|
Fourth Quarter 2016
|
|
36,116
|
|
|
$
|
1,077
|
|
|
68,527
|
|
|
$
|
675
|
|
|
9,775
|
|
|
$
|
631
|
|
|
First Quarter 2017
|
|
3,988
|
|
|
$
|
1,063
|
|
|
6,091
|
|
|
$
|
698
|
|
|
1,483
|
|
|
$
|
651
|
|
NOTE 6
SHARE COMPENSATION PLANS
EQUITY PLANS
The Company sponsors equity plans (the Plans) that enable the Company to grant equity-based compensation to employees and non-employee directors. The Company currently issues restricted stock units as incentive compensation under the Plans. In total, approximately
11.6 million
shares of common stock have been authorized for issuance under the Plans, including approximately
5.0 million
,
5.2 million
, and
1.4 million
authorized shares under the 2012 Equity Incentive Plan, 2004 Equity Incentive Plan and the General Employee Plan, respectively. Approximately
3.8 million
shares were available and reserved for issuance under the 2012 Equity Incentive Plan at
September 30, 2016
.
The Compensation Committee of the Company's Board of Directors administers the Plans and determines the type of equity awards to be issued, the exercise period, vesting period and all other terms of instruments issued under the Plans.
NONVESTED SHARES
Time-Based Restricted Stock Unit Awards
Time-based restricted stock unit awards provide the participant with the right to receive a number of shares of the Company's common stock upon vesting of the awards provided the participant is employed by the Company on the vesting date. Time-based awards are valued using the Company's common stock price on the date of grant.
Time-based awards are not entitled to any dividend equivalents with respect to the restricted stock units unless otherwise determined by the Board, nor any dividends on stock that may be delivered in settlement of the restricted stock units unless and until the stock is issued in settlement of the restricted stock units.
Nonvested time-based share activity during the
nine
months ended
September 30, 2016
, is detailed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested Shares
|
|
Weighted-Average Grant-Date Fair Value
|
|
Nonvested time-based shares at January 1, 2016
|
|
186,655
|
|
|
$
|
13.97
|
|
|
Granted
|
|
206,974
|
|
|
8.03
|
|
|
Vested
|
|
(33,080
|
)
|
|
13.88
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Nonvested time-based shares at March 31, 2016
|
|
360,549
|
|
|
$
|
10.68
|
|
|
Granted
|
|
2,652
|
|
|
10.13
|
|
|
Vested
|
|
(2,747
|
)
|
|
14.24
|
|
|
Forfeited
|
|
(565
|
)
|
|
13.02
|
|
|
Nonvested time-based shares at June 30, 2016
|
|
359,889
|
|
|
$
|
10.63
|
|
|
Granted
|
|
2,233
|
|
|
14.32
|
|
|
Vested
|
|
(1,919
|
)
|
|
13.18
|
|
|
Forfeited
|
|
(3,546
|
)
|
|
11.10
|
|
|
Nonvested time-based shares at September 30, 2016
|
|
356,657
|
|
|
$
|
10.63
|
|
Total compensation expense, included within
General and administrative
in the Company's
Consolidated Statements of Comprehensive Income (Loss)
related to grants of time-based nonvested shares was
$0.5 million
and
$0.4 million
, in the three months ended
September 30, 2016
and
2015
, respectively, and
$1.5 million
and
$1.2 million
, respectively, for the
nine
months ended
September 30, 2016
and
2015
.
Performance-Based Restricted Stock Unit Awards
The Company grants performance-based restricted stock unit awards under its Long Term Incentive Plan (LTIP). The payout of the awards is dependent upon distinct components with separate sub-targets. The sub-targets are either market-based or performance-based and classified as either equity or liability. The market-based sub-targets are valued using a Monte Carlo simulation valuation model on the date of grant. The fair value of the liability-classified sub-targets are re-measured each reporting period. The existence of a market condition requires recognition of compensation cost for the performance restricted stock unit awards over the requisite period regardless of whether the market condition is satisfied. Total compensation expense, included within
General and administrative
in the Company's
Consolidated Statements of Comprehensive Income (Loss)
, related to grants of performance-based restricted stock unit awards for the three months ended
September 30, 2016
and
2015
was
$0.5 million
and
$0.3 million
, respectively, and
$1.3 million
and
$1.0 million
, respectively, for each of the
nine
months ended
September 30, 2016
and
2015
.
A performance-based restricted stock unit award provides the participant with the right to receive a number of shares of the Company's common stock depending on achievement of specific measurable performance criteria. The number of shares earned is determined at the end of each performance period, generally
three years
, based on the actual performance criteria predetermined by the Compensation Committee at the time of grant. In the period when it becomes probable that the performance criteria will be achieved, the Company recognizes expense for the proportionate share of the total fair value of the grant related to the vesting period that has already lapsed. The remaining cost of the grant is expensed over the balance of the vesting period. For awards that contain performance-based conditions, and for which the Company determines it is no longer probable that it will achieve the minimum performance criteria specified in the Plan, the Company reverses all of the previously recognized compensation expense in the period when such a determination is made.
Performance-based restricted stock unit awards are not entitled to any dividend equivalents with respect to the restricted stock units unless otherwise determined by the Board, nor any dividends on stock that may be delivered in settlement of the restricted stock units unless and until the stock is issued in settlement of the restricted stock units.
Share activity under nonvested performance-based restricted stock unit awards activity during the first
nine
months of
2016
is detailed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
Shares
|
|
Weighted-Average Grant-Date Fair Value
|
|
Nonvested performance-based shares at January 1, 2016
|
|
379,277
|
|
|
$
|
15.34
|
|
|
Granted *
|
|
186,285
|
|
|
11.45
|
|
|
Vested
|
|
—
|
|
|
|
|
|
Forfeited
|
|
—
|
|
|
|
|
|
Nonvested performance-based shares at March 31, 2016
|
|
565,562
|
|
|
$
|
14.06
|
|
|
No activity
|
|
—
|
|
|
|
|
Nonvested performance-based shares at June 30, 2016
|
|
565,562
|
|
|
$
|
14.06
|
|
|
Forfeited
|
|
(2,695
|
)
|
|
|
|
|
Nonvested performance-based shares at September 30, 2016
|
|
562,867
|
|
|
$
|
12.28
|
|
* The number of performance-based shares granted is based on the target award amounts in the performance restricted stock unit award agreements.
The following table presents the compensation expense of the nonvested shares outstanding at
September 30, 2016
, to be recognized over the remaining vesting periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Time-based shares
|
|
Performance -based shares
|
|
Remaining 2016
|
|
$
|
548
|
|
|
$
|
611
|
|
|
2017
|
|
1,203
|
|
|
1,796
|
|
|
2018
|
|
587
|
|
|
933
|
|
|
2019
|
|
8
|
|
|
—
|
|
|
Total
|
|
$
|
2,346
|
|
|
$
|
3,340
|
|
NOTE 7
INCOME TAXES
The Company determines income taxes using the asset and liability method, which results in the recognition of deferred tax assets and liabilities. These assets and liabilities reflect the expected future tax consequences of temporary differences between the carrying amount and the tax basis of those assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets and liabilities are recorded on a jurisdictional basis.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has a valuation allowance in 2016 and 2015 to reflect the estimated amount of deferred tax assets which may not be realized, which principally relate to foreign and state net operating losses, capital losses, and certain tax credits.
The Company recognized an income tax provision for the three months ended
September 30, 2016
of
$3.1 million
and an income tax benefit of
$2.5 million
, for the three months ended September 30, 2015. The Company recognized an income tax provision for the
nine
months ended
September 30, 2016
of
$2.4 million
and an income tax benefit of
$8.1 million
, for the nine months ended September 30, 2015. The current year income and the discrete charge of
$3.5 million
for an increase in the provision for uncertain tax positions, are primarily responsible for the tax provision for the
nine
months ended
September 30, 2016
. The partial restructure of internal operations and the creation of a separate metal sales and trading subsidiary was responsible for
$8.3 million
of the total
$10.6 million
discrete income tax benefit recognized for the
nine
months ended September 30, 2015.
The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in
Income tax (provision) benefit
in the Company's
Consolidated Statements of Comprehensive Income (Loss)
. The Company had unrecognized tax benefits of
$3.7 million
at
September 30, 2016
. Interest and penalties of
$0.1 million
have been accrued at
September 30, 2016
. The Company anticipates there could be a change in uncertain tax positions during the next twelve months. The Company made income tax payments of
$0.3 million
and
$13.1 million
in the
nine
months ended
September 30, 2016
and
2015
, respectively. Tax years still open for examination by the taxing authorities are the years ended December 31, 2015, 2014, 2013, 2012 and 2011, although net operating loss and credit carryforwards from all years are subject to examination and adjustment for the three years following the year in which the carryforwards are utilized.
NOTE 8
DEBT AND CAPITAL LEASE OBLIGATIONS
1.75% CONVERTIBLE DEBENTURES
In October 2012, the Company issued
$396.75 million
aggregate principal amount of
1.75%
senior unsecured convertible debentures due October 15, 2032 (
1.75%
debentures). Each $1,000 principal amount of these
1.75%
debentures is initially convertible, under certain circumstances and during certain periods, into 60.4961 shares (subject to customary anti-dilution adjustments) of the Company's common stock, which represents an initial conversion price of
$16.53
per share. The
1.75%
debentures also include an embedded conversion enhancement feature that is equivalent to including each debenture with a warrant initially exercisable for
30.2481
shares at an exercise price of
$16.53
per share (also subject to customary anti-dilution adjustments). The Company, at its election, may settle conversions of the
1.75%
debentures in cash, shares of its common stock or any combination of cash and shares of its common stock.
Holders have the right to redeem their
1.75%
debentures at face value, plus accrued and unpaid interest, on October 15th, of each of 2019, 2024, 2029, and upon the occurrence of certain corporate events. The Company will have the right to call the
1.75%
debentures at any time on or after October 20, 2019.
The
1.75%
debentures were bifurcated under GAAP into separate debt and equity components, and reflect an effective maturity (to the first optional redemption date) of
seven years
. The residual amount of
$141.6 million
recorded in equity is treated for accounting purposes as additional debt discount and accreted as an additional non-cash interest charge to earnings over the expected life. Debt and equity issuance costs totaling approximately
$12.4 million
were deducted from the gross proceeds of the offering of the
1.75%
debentures, and the debt portion is being amortized ratably over
seven years
.
In the third quarter of 2015, the Company repurchased
$61.6 million
of outstanding principal under the
1.75%
debentures, paying cash of
$59.4 million
. The Company reduced the debt component by
$50.7 million
, which included a reduction of the debt discount by
$10.9 million
. The difference between the book value and the fair value (including
$0.7 million
of debt and equity issuance costs) of the debt component resulted in a
$4.2 million
loss.
The
1.75%
debentures have an effective interest rate of
8.50%
and a stated interest rate of
1.75%
, with interest paid semi-annually. The balance outstanding at
September 30, 2016
was approximately
$268.6 million
, which is net of unamortized discount of
$63.5 million
and
$3.2 million
deferred debt issue costs. The balance outstanding at
December 31, 2015
was
$254.6 million
, which was net of unamortized discount of
$76.8 million
and
$3.8 million
of deferred debt issue costs.
1.875% CONVERTIBLE DEBENTURES
Holders of the remaining
$0.5 million
of outstanding
1.875%
debentures may require the Company to redeem their
1.875%
debentures at face value on March 15, 2018 or March 15, 2023, or at any time before March 15, 2028 upon the occurrence of certain events including a change in control. Effective March 22, 2013, the Company has the right at its discretion to redeem the remaining
$0.5 million
of outstanding
1.875%
debentures for cash at any time prior to maturity. In the third quarter of 2015, the Company repurchased
$1.7 million
of the outstanding principal of the
1.875%
debentures, paying cash of
$1.6 million
and recording a gain of approximately
$0.1 million
. The outstanding balance at
September 30, 2016
and
December 31, 2015
, of
$0.5 million
aggregate principal amount, is reported as a long-term debt obligation.
ASSET-BACKED REVOLVING CREDIT FACILITY
In December 2011, the Company signed a
$100.0 million
asset-backed revolving credit agreement incurring debt issuance costs of
$1.1 million
. In January 2012, the Company completed the syndication of this facility and simultaneously expanded its maximum line of credit to
$125.0 million
, incurring additional debt issuance costs of
$0.2 million
. The Company also paid an unused line fee on the committed but unutilized balance under the facility at a rate per annum of
0.375%
or
0.5%
, depending on utilization of the facility.
The Company terminated this credit facility on December 31, 2015, incurring expenses and fees of approximately
$0.2 million
.
The following table reflects the amortization of debt issuance costs, interest expense and cash payments on the Company's outstanding debt for the three and
nine
months ended
September 30, 2016
and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
1.75% Convertible Debentures
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
$
|
225
|
|
|
$
|
240
|
|
|
$
|
662
|
|
|
$
|
714
|
|
|
Interest expense, net of capitalized interest
|
|
$
|
3,731
|
|
|
$
|
4,760
|
|
|
$
|
11,532
|
|
|
$
|
14,685
|
|
|
Cash payments for interest
|
|
$
|
—
|
|
|
$
|
423
|
|
|
$
|
2,933
|
|
|
$
|
3,894
|
|
|
|
|
|
|
|
|
|
|
|
|
1.875% Convertible Debentures
|
|
|
|
|
|
|
|
|
|
Interest expense, net of capitalized interest
|
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
23
|
|
|
Cash payments for interest
|
|
$
|
5
|
|
|
$
|
21
|
|
|
$
|
10
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Revolving Credit Facility
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
$
|
—
|
|
|
$
|
69
|
|
|
$
|
—
|
|
|
$
|
204
|
|
|
Fees
|
|
$
|
—
|
|
|
$
|
253
|
|
|
$
|
—
|
|
|
$
|
839
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Lease
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
8
|
|
|
$
|
87
|
|
|
Cash payments for interest
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
8
|
|
|
$
|
87
|
|
The Company's total current and long-term debt balances at
September 30, 2016
and December 31, 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
(In thousands)
|
|
Current
|
|
Long-Term
|
|
Current
|
|
Long-Term
|
|
1.75% Convertible Debentures
|
|
|
|
|
|
|
|
|
|
Aggregate principal
|
|
$
|
—
|
|
|
$
|
335,150
|
|
|
$
|
—
|
|
|
$
|
335,150
|
|
|
Debt discount
|
|
—
|
|
|
(63,456
|
)
|
|
—
|
|
|
(76,754
|
)
|
|
Deferred debt issue costs
|
|
—
|
|
|
(3,159
|
)
|
|
—
|
|
|
(3,821
|
)
|
|
Debt balance
|
|
—
|
|
|
268,535
|
|
|
—
|
|
|
254,575
|
|
|
1.875% Convertible Debentures
|
|
—
|
|
|
524
|
|
|
—
|
|
|
524
|
|
|
Capital lease obligation
|
|
—
|
|
|
—
|
|
|
580
|
|
|
—
|
|
|
Small land purchase
|
|
—
|
|
|
—
|
|
|
77
|
|
|
—
|
|
|
Total debt balances
|
|
$
|
—
|
|
|
$
|
269,059
|
|
|
$
|
657
|
|
|
$
|
255,099
|
|
CAPITALIZED INTEREST
The Company capitalizes interest incurred on its various debt instruments as a cost of specific and identified areas under development. For the three months ended
September 30, 2016
and
2015
, the Company capitalized interest of
$2.3 million
and
$1.5 million
, respectively. For the
nine
months ended
September 30, 2016
and
2015
, the Company capitalized interest of
$6.2 million
and
$4.2 million
, respectively. Capitalized interest is recorded as a reduction to
Interest expense
in the Company's
Consolidated Statements of Comprehensive Income (Loss)
.
NOTE 9
MINERAL PROPERTIES AND MINE DEVELOPMENT
Mineral properties and mine development reflected in the accompanying balance sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
Mineral Properties:
|
|
|
|
|
|
Montana, United States of America
|
|
|
|
|
|
Stillwater Mine
|
|
$
|
1,950
|
|
|
$
|
1,950
|
|
|
Ontario, Canada
|
|
|
|
|
|
Marathon properties
|
|
8,560
|
|
|
8,560
|
|
|
San Juan, Argentina
|
|
|
|
|
|
Altar property
|
|
101,970
|
|
|
101,970
|
|
|
Mine Development:
|
|
|
|
|
|
Montana, United States of America
|
|
|
|
|
|
Stillwater Mine
|
|
751,630
|
|
|
697,781
|
|
|
East Boulder Mine
|
|
231,251
|
|
|
220,281
|
|
|
|
|
1,095,361
|
|
|
1,030,542
|
|
|
Accumulated depletion and amortization
|
|
(502,615
|
)
|
|
(457,311
|
)
|
|
Total mineral properties and mine development, net
|
|
$
|
592,746
|
|
|
$
|
573,231
|
|
NOTE 10
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment reflected in the accompanying consolidated balance sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
Machinery and equipment
|
|
$
|
163,297
|
|
|
$
|
161,292
|
|
|
Buildings and structural components
|
|
174,279
|
|
|
173,580
|
|
|
Land
|
|
11,740
|
|
|
11,740
|
|
|
Construction-in-progress:
|
|
|
|
|
|
Stillwater Mine
|
|
6,666
|
|
|
2,615
|
|
|
East Boulder Mine
|
|
513
|
|
|
435
|
|
|
Marathon
|
|
148
|
|
|
148
|
|
|
Processing facilities and other
|
|
1,376
|
|
|
1,982
|
|
|
|
|
358,019
|
|
|
351,792
|
|
|
Accumulated depreciation
|
|
(254,796
|
)
|
|
(241,835
|
)
|
|
Total property, plant, and equipment, net
|
|
$
|
103,223
|
|
|
$
|
109,957
|
|
The Company's total capital outlay for mine development and property, plant and equipment for the
nine
months ended
September 30, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
Stillwater Mine
|
|
$
|
60,345
|
|
|
$
|
70,172
|
|
|
East Boulder Mine
|
|
11,508
|
|
|
13,548
|
|
|
Other
|
|
642
|
|
|
4,599
|
|
|
Total U.S. capital expenditures
|
|
72,495
|
|
|
88,319
|
|
|
Foreign capital expenditures
|
|
—
|
|
|
46
|
|
|
Non-cash capitalized interest and depreciation
|
|
(7,551
|
)
|
|
(6,756
|
)
|
|
Change in accounts payables for capital expenditures
|
|
(2,964
|
)
|
|
1,777
|
|
|
Cash capital spend for the period
|
|
$
|
61,980
|
|
|
$
|
83,386
|
|
NOTE 11
SEGMENT INFORMATION
The Company operates
five
reportable business segments: Mine Production, PGM Recycling, Canadian Properties, South American Properties and All Other. These segments are managed separately based on fundamental differences in their operations and geographic separation.
The Mine Production segment consists of
two
business components: the Stillwater Mine and the East Boulder Mine. The Mine Production segment is engaged in the development, extraction, processing and refining of PGMs. The Company has agreements in place to sell its PGMs from mine production. The financial results for the Stillwater Mine and the East Boulder Mine have been aggregated, as both have similar products, processes, customers, distribution methods and economic characteristics.
The PGM Recycling segment is engaged in the recycling of spent catalyst materials to recover the PGMs contained in the materials. The Company purchases catalyst materials processed by the PGM Recycling segment from third-party suppliers for its own account and sells the recovered metals directly, and it also accepts catalyst materials from third-parties on a tolling basis, processing it for a fee and returning the recovered metals to the supplier. The Company allocates costs of the Company's smelting and base metal refining facilities to both the Mine Production segment and to the PGM Recycling segment for internal and segment reporting purposes because these facilities support the PGM extraction requirements of both business segments.
The Canadian Properties segment consists of the Marathon mineral property assets. The exploration-stage Marathon mineral properties include a large PGM and copper deposit located near the town of Marathon, Ontario, Canada as well as additional mineral properties located adjacent to the Marathon properties.
The South American Properties segment consists of the Peregrine Metals Ltd. assets. The principal Peregrine property is the Altar property, an exploration-stage copper-gold resource located in the San Juan province of Argentina.
The All Other group primarily consists of assets, including cash and cash equivalents, investments, revenues, and expenses of various corporate and support functions.
The Company evaluates performance and allocates resources based on income or loss before income taxes.
The following financial information relates to the Company’s business segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
South American Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
Mine
Production
|
|
PGM
Recycling
|
|
Canadian
Properties
|
|
|
All Other
|
|
Total
|
|
Revenues
|
|
$
|
106,926
|
|
|
$
|
89,591
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
196,617
|
|
|
Costs of metals sold
|
|
$
|
65,580
|
|
|
$
|
86,178
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
151,758
|
|
|
Depletion, depreciation and amortization
|
|
$
|
17,587
|
|
|
$
|
184
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,771
|
|
|
General and administrative expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
204
|
|
|
$
|
381
|
|
|
$
|
8,107
|
|
|
$
|
8,692
|
|
|
Interest income
|
|
$
|
—
|
|
|
$
|
617
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
595
|
|
|
$
|
1,213
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,958
|
|
|
$
|
3,958
|
|
|
Income (loss) before income taxes
|
|
$
|
23,759
|
|
|
$
|
3,876
|
|
|
$
|
(353
|
)
|
|
$
|
(258
|
)
|
|
$
|
(11,283
|
)
|
|
$
|
15,741
|
|
|
Capital expenditures
|
|
$
|
23,557
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
23,554
|
|
|
Total assets
|
|
$
|
624,814
|
|
|
$
|
88,153
|
|
|
$
|
25,549
|
|
|
$
|
103,351
|
|
|
$
|
466,043
|
|
|
$
|
1,307,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
South American Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2015
|
|
Mine
Production
|
|
PGM
Recycling
|
|
Canadian
Properties *
|
|
|
All Other
|
|
Total
|
|
Revenues
|
|
$
|
86,359
|
|
|
$
|
81,982
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
168,441
|
|
|
Costs of metals sold
|
|
$
|
69,004
|
|
|
$
|
78,928
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
147,932
|
|
|
Depletion, depreciation and amortization
|
|
$
|
15,132
|
|
|
$
|
230
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,362
|
|
|
General and administrative expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
275
|
|
|
$
|
100
|
|
|
$
|
8,536
|
|
|
$
|
8,911
|
|
|
Interest income
|
|
$
|
—
|
|
|
$
|
437
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
324
|
|
|
$
|
766
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,097
|
|
|
$
|
5,097
|
|
|
Income (loss) before income taxes
|
|
$
|
2,224
|
|
|
$
|
3,261
|
|
|
$
|
(577
|
)
|
|
$
|
(339
|
)
|
|
$
|
(19,062
|
)
|
|
$
|
(14,493
|
)
|
|
Capital expenditures
|
|
$
|
24,661
|
|
|
$
|
57
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
450
|
|
|
$
|
25,168
|
|
|
Total assets
|
|
$
|
608,198
|
|
|
$
|
70,113
|
|
|
$
|
27,078
|
|
|
$
|
104,265
|
|
|
$
|
507,533
|
|
|
$
|
1,317,187
|
|
* Total assets includes cash and cash equivalents of
$17.1 million
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
South
American
Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
|
Mine
Production
|
|
PGM
Recycling
|
|
Canadian
Properties
|
|
|
All Other
|
|
Total
|
|
Revenues
|
|
$
|
299,123
|
|
|
$
|
196,515
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300
|
|
|
$
|
495,938
|
|
|
Costs of metals sold
|
|
$
|
208,612
|
|
|
$
|
188,712
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
397,324
|
|
|
Depletion, depreciation and amortization
|
|
$
|
55,173
|
|
|
$
|
569
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
55,742
|
|
|
General and administrative expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
543
|
|
|
$
|
1,064
|
|
|
$
|
23,693
|
|
|
$
|
25,300
|
|
|
Interest income
|
|
$
|
—
|
|
|
$
|
1,376
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
1,504
|
|
|
$
|
2,883
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,207
|
|
|
$
|
12,207
|
|
|
Income (loss) before income taxes
|
|
$
|
35,338
|
|
|
$
|
8,611
|
|
|
$
|
(740
|
)
|
|
$
|
(2,886
|
)
|
|
$
|
(34,504
|
)
|
|
$
|
5,819
|
|
|
Capital expenditures
|
|
$
|
61,410
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
556
|
|
|
$
|
61,980
|
|
|
Total assets
|
|
$
|
624,814
|
|
|
$
|
88,153
|
|
|
$
|
25,549
|
|
|
$
|
103,351
|
|
|
$
|
466,043
|
|
|
$
|
1,307,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
South
American
Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015
|
|
Mine
Production
|
|
PGM
Recycling
|
|
Canadian
Properties *
|
|
|
All Other
|
|
Total
|
|
Revenues
|
|
$
|
331,065
|
|
|
$
|
222,980
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300
|
|
|
$
|
554,345
|
|
|
Costs of metals sold
|
|
$
|
229,676
|
|
|
$
|
216,074
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
445,750
|
|
|
Depletion, depreciation and amortization
|
|
$
|
48,943
|
|
|
$
|
738
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
49,681
|
|
|
General and administrative expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
790
|
|
|
$
|
454
|
|
|
$
|
26,408
|
|
|
$
|
27,652
|
|
|
Interest income
|
|
$
|
—
|
|
|
$
|
1,256
|
|
|
$
|
7
|
|
|
$
|
23
|
|
|
$
|
906
|
|
|
$
|
2,192
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,713
|
|
|
$
|
15,713
|
|
|
Income (loss) before impairment charge and income tax provision
|
|
$
|
52,446
|
|
|
$
|
7,424
|
|
|
$
|
(1,364
|
)
|
|
$
|
(1,216
|
)
|
|
$
|
(46,805
|
)
|
|
$
|
10,485
|
|
|
Impairment charge
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,772
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,772
|
|
|
Income (loss) after impairment charge and income tax provision
|
|
$
|
52,446
|
|
|
$
|
7,424
|
|
|
$
|
(48,136
|
)
|
|
$
|
(1,216
|
)
|
|
$
|
(46,805
|
)
|
|
$
|
(36,287
|
)
|
|
Capital expenditures
|
|
$
|
77,370
|
|
|
$
|
221
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
5,749
|
|
|
$
|
83,386
|
|
|
Total assets
|
|
$
|
608,198
|
|
|
$
|
70,113
|
|
|
$
|
27,078
|
|
|
$
|
104,265
|
|
|
$
|
507,533
|
|
|
$
|
1,317,187
|
|
* Total assets includes cash and cash equivalents of
$17.1 million
.
NOTE 12
INVESTMENTS
The Company classifies the marketable securities in which it invests as available-for-sale securities. These securities are measured at fair value in the financial statements with unrealized gains or losses recorded in
Other comprehensive income
in the Company's
Consolidated Statements of Comprehensive Income (Loss)
. At the time the securities are sold or otherwise disposed of, gross realized gains and losses are included in
Net income (loss).
Gross realized gains and losses are based on the carrying value (cost, net of discounts or premiums) of the sold investment. The amounts reclassified out of
Other comprehensive income
during the three and
nine
months ended
September 30, 2016
and
2015
were insignificant.
The amortized cost, gross unrealized gains, gross unrealized losses, and fair value of available-for-sale investment securities by major security type and class of security at
September 30, 2016
and
December 31, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
(In thousands)
|
|
Amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Fair value
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal agency notes
|
|
$
|
290,279
|
|
|
$
|
73
|
|
|
$
|
(85
|
)
|
|
$
|
290,267
|
|
|
|
Commercial paper
|
|
36,130
|
|
|
48
|
|
|
—
|
|
|
36,178
|
|
|
|
Subtotal
|
|
326,409
|
|
|
121
|
|
|
(85
|
)
|
|
326,445
|
|
|
|
Mutual funds
|
|
757
|
|
|
189
|
|
|
—
|
|
|
946
|
|
|
|
Total
|
|
$
|
327,166
|
|
|
$
|
310
|
|
|
$
|
(85
|
)
|
|
$
|
327,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal agency notes
|
|
$
|
285,276
|
|
|
$
|
—
|
|
|
$
|
(519
|
)
|
|
$
|
284,757
|
|
|
|
Commercial paper
|
|
31,730
|
|
|
—
|
|
|
(58
|
)
|
|
31,672
|
|
|
|
Subtotal
|
|
317,006
|
|
|
—
|
|
|
(577
|
)
|
|
316,429
|
|
|
|
Mutual funds
|
|
482
|
|
|
261
|
|
|
—
|
|
|
743
|
|
|
|
Total
|
|
$
|
317,488
|
|
|
$
|
261
|
|
|
$
|
(577
|
)
|
|
$
|
317,172
|
|
The mutual funds included in the investment table above are included in
Other noncurrent assets
on the Company's
Consolidated Balance Sheets
. Included in the investments balance at
September 30, 2016
and
December 31, 2015
is
$18.5 million
which has been reserved as collateral on the Company's undrawn letters of credit of approximately
$17.5 million
.
The maturities of available-for-sale securities at
September 30, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Amortized cost
|
|
Fair value
|
|
Federal agency notes
|
|
|
|
|
|
Due in one year or less
|
|
$
|
223,442
|
|
|
$
|
223,423
|
|
|
Due after one year through two years
|
|
66,837
|
|
|
66,844
|
|
|
Total
|
|
$
|
290,279
|
|
|
$
|
290,267
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
|
|
|
Due in one year or less
|
|
$
|
14,235
|
|
|
$
|
14,242
|
|
|
Due after one year through three years
|
|
21,895
|
|
|
21,936
|
|
|
Total
|
|
$
|
36,130
|
|
|
$
|
36,178
|
|
The Company has long-term investments in various Canadian junior exploration companies, recorded on the Company's
Consolidated Balance Sheets
at cost. The Company sold its investment in Coro Mining and completed a partial sale of its investment in Benton Resources in the third quarter of 2016 and recorded a combined gain of
$0.2 million
. For the nine months ended
September 30, 2016
, the Company recorded gains on sale of its long-term investments of approximately
$0.7 million
. The Company determined there was
no
impairment for the remaining long-term investments for the three and nine months ended
September 30, 2016
. For the three and nine months ended September 30, 2015, the Company determined that certain of its remaining long-term investments were other than temporarily impaired and recorded a loss of approximately
$0.2 million
. These long-term investments totaled less than
$0.1 million
at
September 30, 2016
and
$0.5 million
at
December 31, 2015
, and are recorded in
Other noncurrent assets
on the Company's
Consolidated Balance Sheets
.
NOTE 13
INVENTORIES
The Company carries items in its inventories at the lower of cost or market value. If the market value in any period falls below the carrying value, the carrying value of the inventory item is reduced to its market value.
For purposes of inventory accounting, the market value of inventory is generally deemed equal to the Company’s current cost of replacing the inventory, provided that: (1) the market value of the inventory may not exceed the estimated selling price of such inventory in the ordinary course of business less reasonably predictable costs of completion and disposal, and (2) the market value may not be less than net realizable value reduced by an allowance for a normal profit margin.
No
reduction to inventory value was necessary in the first
nine
months of
2016
or
2015
.
The costs of PGM mined inventories as of any date are determined based on combined production costs per ounce and include all inventoriable production costs, including direct labor, direct materials, depletion, depreciation and amortization and other overhead costs relating to mining and processing activities incurred as of such date. Costs are aggregated and averaged for mined material carried in inventory.
The costs of PGM recycling inventories as of any date are determined based on the acquisition cost of the recycled material and include all inventoriable processing costs, including direct labor, direct materials, depreciation and third-party refining costs which relate to the processing activities incurred as of such date. Costs incurred are allocated and tracked separately for each specific lot of recycling material (including material tolled on behalf of others).
Inventories reflected in the accompanying balance sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
Metals inventory
|
|
|
|
|
|
Raw ore
|
|
$
|
4,753
|
|
|
$
|
4,234
|
|
|
Concentrate and in-process
|
|
71,495
|
|
|
43,727
|
|
|
Finished goods
|
|
46,057
|
|
|
32,618
|
|
|
Total metals inventory
|
|
122,305
|
|
|
80,579
|
|
|
Materials and supplies
|
|
18,476
|
|
|
21,493
|
|
|
Total inventories
|
|
$
|
140,781
|
|
|
$
|
102,072
|
|
NOTE 14
EARNINGS PER SHARE
Basic earnings per share attributable to common stockholders is computed by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share attributable to common stockholders reflects the potential dilution that could occur if the Company’s dilutive outstanding stock options or nonvested shares were exercised or vested, the contingently issuable shares were issued and the Company’s convertible debt was converted. In calculating earnings per share attributable to common stockholders for the third quarter of 2016, reported consolidated net income attributable to common stockholders was adjusted for the interest expense, net of capitalized interest (including amortization expense of deferred debt fees associated with the convertible debentures), and the related income tax effect. The Company currently has only one class of shares of capital stock outstanding.
The following table shows the reconciliation of the computation of basic and diluted shares and the related impact on income for the three and nine months ended
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30, 2016
|
|
September 30, 2016
|
|
(In thousands, except per share amounts)
|
|
Income
(Numerator)
|
|
Weighted
Average
Shares
(Denominator)
|
|
Per Share
Amount
|
|
Income
(Numerator)
|
|
Weighted
Average
Shares
(Denominator)
|
|
Per Share
Amount
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
12,599
|
|
|
121,077
|
|
|
$
|
0.10
|
|
|
$
|
3,452
|
|
|
121,069
|
|
|
$
|
0.03
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
—
|
|
|
1
|
|
|
|
|
—
|
|
|
1
|
|
|
|
|
Nonvested time-based shares
|
|
—
|
|
|
166
|
|
|
|
|
—
|
|
|
68
|
|
|
|
|
Contingently issuable shares
|
|
—
|
|
|
368
|
|
|
|
|
—
|
|
|
300
|
|
|
|
|
1.875% Convertible debentures, net of tax
|
|
1
|
|
|
22
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
12,600
|
|
|
121,634
|
|
|
$
|
0.10
|
|
|
$
|
3,452
|
|
|
121,438
|
|
|
$
|
0.03
|
|
No adjustment was made to the reported net loss attributable to common stockholders when calculating diluted loss per share attributable to common stockholders for the three and
nine
months ended
September 30, 2015
because the Company reported a consolidated net loss attributable to common stockholders and inclusion of these shares would have been anti-dilutive. Potential dilutive common shares include those associated with outstanding stock options, restricted stock units, contingently issuable shares and convertible debentures.
The following table shows the shares that were excluded from the computation of diluted earnings per share for the three months and nine months ended September 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Stock options
|
|
3
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
Nonvested time-based shares
|
|
1
|
|
|
44
|
|
|
10
|
|
|
50
|
|
|
Contingently issuable shares
|
|
222
|
|
|
218
|
|
|
234
|
|
|
218
|
|
|
1.875% Convertible debentures, net of tax
|
|
—
|
|
|
22
|
|
|
22
|
|
|
22
|
|
|
1.75% Convertible debentures, net of tax
|
|
30,413
|
|
|
30,413
|
|
|
30,413
|
|
|
30,413
|
|
NOTE 15
FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of each financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels of inputs used to measure fair value are as follows:
|
|
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
|
|
|
|
•
|
Level 2 - Observable inputs other than quoted prices included in Level 1 such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or inputs that are observable or can be corroborated by observable market data.
|
|
|
|
|
•
|
Level 3 - Unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Financial assets and liabilities measured at fair value on a recurring basis at
September 30, 2016
and
December 31, 2015
, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair Value Measurements
|
|
At September 30, 2016
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Money market fund
|
|
$
|
35,863
|
|
|
$
|
35,863
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mutual funds
|
|
$
|
946
|
|
|
$
|
946
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Federal agency notes
|
|
$
|
290,267
|
|
|
$
|
—
|
|
|
$
|
290,267
|
|
|
$
|
—
|
|
|
Commercial paper
|
|
$
|
36,178
|
|
|
$
|
—
|
|
|
$
|
36,178
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair Value Measurements
|
|
At December 31, 2015
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Money market fund
|
|
$
|
54,761
|
|
|
$
|
54,761
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mutual funds
|
|
$
|
743
|
|
|
$
|
743
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
Federal agency notes
|
|
$
|
284,757
|
|
|
$
|
—
|
|
|
$
|
284,757
|
|
|
$
|
—
|
|
|
Commercial paper
|
|
$
|
31,672
|
|
|
$
|
—
|
|
|
$
|
31,672
|
|
|
$
|
—
|
|
The money market funds are recorded in
Cash and cash equivalents
on the Company's
Consolidated Balance Sheets
. The fair value of the mutual funds is based on market prices that are readily available and are recorded in
Other noncurrent assets
on the Company's
Consolidated Balance Sheets
. The fair value of the investments is valued indirectly using observable data, quoted prices for similar assets or liabilities in active markets. Unrealized gains or losses on mutual funds and investments are recorded in
Accumulated other comprehensive income (loss)
on the Company's
Consolidated Balance Sheets
.
Assets and liabilities measured at fair value on a nonrecurring basis at
September 30, 2016
and
December 31, 2015
, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair Value Measurements
|
|
At September 30, 2016
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
1.875% Convertible debentures
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
1.75% Convertible debentures
|
|
$
|
316,170
|
|
|
$
|
—
|
|
|
$
|
316,170
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fair Value Measurements
|
|
At December 31, 2015
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
1.875% Convertible Debentures
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
1.75% Convertible Debentures
|
|
$
|
285,446
|
|
|
$
|
—
|
|
|
$
|
285,446
|
|
|
$
|
—
|
|
|
Long-term investments
|
|
$
|
524
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company determined the fair value of the liability component of its outstanding
1.75%
convertible debentures at
September 30, 2016
and
December 31, 2015
by using observable market based information for debt instruments of similar amounts and duration. The Company used the book value of its outstanding
1.875%
convertible debentures to represent the fair value at
September 30, 2016
and
December 31, 2015
. The fair value of the Company's long-term investments in certain Canadian junior exploration companies at
December 31, 2015
is based on quoted market prices which are readily available.
NOTE 16
RELATED PARTIES
The Company purchased Mitsubishi's
25%
ownership interest in SCI, the Company's subsidiary, in the fourth quarter of 2015. The Company made PGM sales of
$15.2 million
to Mitsubishi in the three months ended September 30,
2015
, and
$38.7 million
, for the nine months ended September 30,
2015
.
ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The commentary that follows should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with the information provided in the Company's 2015 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 22, 2016.
OVERVIEW
Stillwater Mining Company (the Company) is a Delaware corporation that has its shares of common stock listed on the New York Stock Exchange under the symbol "SWC". The Company extracts and processes ores containing palladium and platinum (along with by-product metals) from two underground mines situated within the J-M Reef, a geological formation of platinum group metal (PGM) mineralization, which is located in Stillwater and Sweet Grass Counties in south-central Montana. Ore produced from the mines is crushed and concentrated in mills located at each mine site. Mine concentrates are then trucked to the Company’s processing complex in Columbus, Montana, where they are smelted and partially refined. In addition to the mine concentrates, the Company also recycles spent automotive catalyst and other materials containing PGMs it receives from third parties at the processing complex. A portion of this recycling activity is material the Company purchases for its own account; while the remainder is toll processed on behalf of others for a fee. After being processed through the Company's facilities in Columbus, the final product, a PGM-rich filter cake, is shipped to Johnson Matthey (JM) in New Jersey for final refining before it is then delivered as finished metal.
THIRD QUARTER 2016
SUMMARY RESULTS
For the
third
quarter of
2016
, the Company reported
consolidated net income attributable to common stockholders
of
$12.6 million
, or
$0.10
per diluted share, compared to a consolidated net loss attributable to common stockholders of
$11.9 million
, or
$0.10
per diluted share, for the
third
quarter of
2015
. The operating results in the third quarter of 2016 were driven by an increase in average combined realized price per mined ounce, which increased to
$764
per ounce in the
third
quarter of
2016
over the
$693
per ounce in the
third
quarter of 2015. During the third quarter of 2015, the Company repurchased $1.7 million in principal amount of its 1.875% convertible debentures due 2028 in open market transactions for cash of $1.6 million, and $61.6 million in principal amount of its 1.75% convertible debentures due 2032 in open market transactions for cash of $59.4 million. The repurchases resulted in a net pre-tax loss of $4.0 million. Refer to "
Note 8 - Debt and Capital Lease Obligations",
in the consolidated financial statements for a more complete discussion on the repurchase of a portion of the Company's convertible debentures.
Segment earnings from the Company's mining operations totaled
$23.8 million
(before income taxes) for the
third
quarter of
2016
, compared to
$2.2 million
(before income taxes) for the same period in
2015
. Volumes of mined palladium and platinum sold in the
third
quarter of 2016
increased
12.4%
to
131,800
ounces from
117,300
ounces in the
third
quarter of
2015
. The average combined realized price per ounce on sales of mined palladium and platinum in the
third
quarter of 2016 was
10.2%
higher at
$764
per ounce than the
$693
per ounce realized in the
third
quarter of
2015
.
Costs of metals sold per PGM mined ounce is the Company's most directly comparable GAAP financial measure to total cash costs, net of credits, per PGM mined ounce, a non-GAAP financial measure. The Company's consolidated costs of metals sold per mined ounce of palladium and platinum was
$498
per ounce in the
third
quarter of 2016 compared to
$588
per ounce in the
third
quarter of 2015, a
15.3%
decrease, as a result of a
12.4%
increase in mined ounces sold. Consolidated total cash costs, net of credits, per PGM mined ounce for the Company's mining operations averaged
$434
per ounce in the
third
quarter of
2016
, which was
6.7%
lower than the
$465
per ounce in the
third
quarter of
2015
, resulting from higher production rates at both mines, labor force reductions as well as higher grades and mill recoveries at the Stillwater Mine, and a continuation of various cost improvement initiatives at both mines. (See "
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
"
).
Segment earnings from the Company's recycling activities (before income taxes) were
$3.9 million
in the
third
quarter of
2016
, an increase over the
$3.3 million
in the
third
quarter of
2015
. Earnings in the recycling segment typically lag corresponding volumes processed by approximately two to three months. Total recycling ounces of palladium, platinum and rhodium fed to the smelter, including both purchased ounces and ounces processed on a toll basis, increased
8.7%
to
175,000
ounces in the
third
quarter of
2016
from
161,000
ounces in the
third
quarter of
2015
. Recycling volumes sold increased
32.4%
during the
third
quarter of
2016
totaling
117,600
ounces (including palladium, platinum and rhodium) at an average realization of
$742
per ounce, compared to
88,800
ounces sold during the
third
quarter of
2015
at an average realization of
$881
per ounce. The Company delivered
49,900
recycled tolled ounces during the
third
quarter of
2016
,
a decrease
of
32.3%
from
73,700
recycled tolled ounces delivered in the
third
quarter of
2015
.
The Company's cash and cash equivalents balance was
$113.0 million
at
September 30, 2016
, compared to
$147.3 million
at
December 31, 2015
. Total outstanding liquidity, which includes highly liquid investments as well as available cash and cash equivalents, was
$439.4 million
at
September 30, 2016
, compared to
$463.8 million
at
December 31, 2015
. See
"Note 12 - Investments"
, in the notes to the consolidated financial statements for more information related to the Company's investments. Net working capital increased to
$532.9 million
at
September 30, 2016
, from
$523.0 million
at
December 31, 2015
. Working capital associated with the recycling activities was
$85.5 million
at
September 30, 2016
compared to
$37.4 million
at
December 31, 2015
as a result of both higher throughput volumes and higher metal prices.
MINING OPERATIONS
Mine production of palladium and platinum totaled
138,800
ounces for the
third
quarter of
2016
,
an increase
of
8.4%
from the
128,100
ounces produced in the
third
quarter of
2015
.
Costs of metals sold per PGM mined ounce is the Company's most directly comparable GAAP financial measure to total cash costs, net of credits, per PGM mined ounce, and All-in Sustaining Costs (AISC) per PGM mined ounce produced, both non-GAAP financial measures. The Company's consolidated costs of metals sold per mined ounce of palladium and platinum was
$498
per ounce in the
third
quarter of 2016 compared to
$588
per ounce in the
third
quarter of 2015, a
15.3%
decrease. The measurement of total cash costs per PGM mined ounce includes the benefit of credits for by-product sales and PGM Recycling segment income (before income taxes). The table below illustrates the effect of applying these credits to the combined cash costs per PGM mined ounce, (net of credits) for the combined Montana mining operations. Total cash costs per PGM mined ounce, net of by-product and recycling credits decreased by
6.7%
mainly due to an
8.4%
increase in production in the
third
quarter of
2016
when compared to
third
quarter of
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
Combined Montana Mining Operations
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
498
|
|
|
$
|
588
|
|
|
$
|
503
|
|
|
$
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
Total combined cash costs per PGM mined ounce, before by-product and recycling credits *
|
|
$
|
506
|
|
|
$
|
529
|
|
|
$
|
496
|
|
|
$
|
578
|
|
|
Less: By-product revenue credit per mined ounce
|
|
44
|
|
|
39
|
|
|
42
|
|
|
48
|
|
|
Less: PGM Recycling income credit per mined ounce
|
|
28
|
|
|
25
|
|
|
21
|
|
|
19
|
|
|
Total combined cash costs per PGM mined ounce, net of by-product and recycling credits *
|
|
$
|
434
|
|
|
$
|
465
|
|
|
$
|
433
|
|
|
$
|
511
|
|
* These are non-GAAP financial measures. For a full description and reconciliation of these and other non-GAAP financial measures to GAAP financial measures, see
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
below.
The Company utilizes AISC
(a non-GAAP financial measure) to assess the overall operating efficiency of the Company's Montana operations. This metric is an indication of the total cash capital and operating costs per PGM mined ounce (including corporate general and administrative costs) required to sustain the Company's current level of mining activities. For the
third
quarter of
2016
, AISC averaged
$624
per PGM mined ounce,
7.8%
lower than the AISC of
$677
per PGM mined ounce achieved in the
third
quarter of
2015
. This was driven by an increase in production volumes and lower capital spending incurred to sustain operations during the
third
quarter of
2016
. For a more complete discussion of this measure, refer to "
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
."
Stillwater Mine
At the Stillwater Mine, combined palladium and platinum production increased
9.1%
in the
third
quarter of
2016
to
84,000
ounces, compared to
77,000
ounces produced in the
third
quarter of
2015
. Ore grade averaged approximately
0.52
combined ounces of palladium and platinum per ton in the quarter ended
September 30, 2016
, compared to
0.46
ounces per ton in the quarter ended
September 30, 2015
. Mined volumes fed to the Stillwater Mine concentrator during the
third
quarter of
2016
totaled
174,300
tons, a decrease of
4.2%
from the
181,900
tons fed in the same quarter of
2015
.
Costs of metals sold per PGM mined ounce is Stillwater Mine's most directly comparable GAAP financial measure to total cash costs, net of credits, per PGM mined ounce, a non-GAAP financial measure. Costs of metals sold per PGM mined ounce was
$468
per ounce in the
third
quarter of 2016 compared to
$559
per ounce in the
third
quarter of
2015
. Total cash costs per PGM mined ounce, net of credits, decreased by
1.6%
in the
third
quarter of
2016
compared with the same period in
2015
. The lower costs for the
third
quarter of
2016
are principally the result of a reduced labor force at the Stillwater Mine, higher production volumes, which resulted from improved mining practices, higher grades and higher mill recoveries as well as the implementation of various cost reduction initiatives.
The following table illustrates the effect of applying the by-product and PGM Recycling segment credits to the total cash costs per PGM mined ounce at the Stillwater Mine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
Stillwater Mine
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
468
|
|
|
$
|
559
|
|
|
$
|
478
|
|
|
$
|
572
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs per PGM mined ounce, before by-product and recycling credits *
|
|
$
|
500
|
|
|
$
|
500
|
|
|
$
|
486
|
|
|
$
|
569
|
|
|
Less: By-product revenue credit per mined ounce
|
|
38
|
|
|
34
|
|
|
37
|
|
|
43
|
|
|
Less: PGM Recycling income credit per mined ounce
|
|
28
|
|
|
25
|
|
|
21
|
|
|
19
|
|
|
Total cash costs per PGM mined ounce, net of by-product and recycling credits *
|
|
$
|
434
|
|
|
$
|
441
|
|
|
$
|
428
|
|
|
$
|
507
|
|
* These are non-GAAP financial measures. For a full description and reconciliation of these and other non-GAAP financial measures to GAAP financial measures, see
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
below.
Capital expenditures at the Stillwater Mine totaled
$22.3 million
for the
third
quarter of
2016
, including
$12.1 million
for Blitz development, of which
$2.2 million
was non-cash capitalized interest / depreciation. This compares to the
$22.6 million
of capital expenditures at the Stillwater Mine during the
third
quarter of
2015
, of which
$8.3 million
was for Blitz development including $2.3 million of non-cash capitalized interest / depreciation. Primary and secondary development for the
third
quarter of
2016
totaled
10,900
, including
3,800
for the Blitz development, this compares to
12,200
of primary and secondary development during the
third
quarter of
2015
, of which
4,000
was for the Blitz Development. Diamond drilling footage for the
third
quarter of
2016
, totaled
95,800
feet, including
26,500
for the Blitz project. This compares to
85,600
of diamond drill footage during the
third
quarter of
2015
, of which
6,500
was for the Blitz project. Ongoing mine development efforts, including diamond drilling, are part of the continuing effort to maintain the developed state of the mine and bringing production forward in the Blitz project.
East Boulder Mine
Mine production of palladium and platinum totaled
54,800
ounces for the
third
quarter of
2016
,
an increase
of
7.2%
from
51,100
ounces produced in the
third
quarter of
2015
. Ore grade averaged approximately
0.36
combined ounces of palladium and platinum per ton in the quarter ended
September 30, 2016
, compared to
0.38
ounces per ton in the quarter ended
September 30, 2015
. Mined ore and sub-grade volumes fed to the East Boulder Mine concentrator during the
third
quarter of
2016
increased
13.4%
to
171,500
tons from
151,200
tons in the
third
quarter of
2015
. This increase is due to additional plant run days and a higher feed rate to accommodate the increased mine production and the drawdown of the mined ore stockpile that more than offset the slightly lower grade year on year.
Costs of metals sold per PGM mined ounce is East Boulder Mine's most directly comparable GAAP financial measure to total cash costs, net of credits, per PGM mined ounce, a non-GAAP financial measure. Costs of metals sold per mined ounce of palladium and platinum was
$544
per ounce in the
third
quarter of 2016 compared to
$635
per ounce in the
third
quarter of
2015
. Total cash costs per PGM mined ounce, net of credits, for the
third
quarter of
2016
decreased approximately
13.4%
from the same period in
2015
. The improvement in cash costs per ounce reflects the increased mine output and continuing cost reduction and productivity improvement initiatives.
The following table illustrates the effect of applying the by-product and PGM Recycling segment credits to the total cash costs per PGM mined ounce at the East Boulder Mine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
East Boulder Mine
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
544
|
|
|
$
|
635
|
|
|
$
|
542
|
|
|
$
|
630
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs per PGM mined ounce, before by-product and recycling credits *
|
|
$
|
515
|
|
|
$
|
573
|
|
|
$
|
512
|
|
|
$
|
594
|
|
|
Less: By-product revenue credit per mined ounce
|
|
54
|
|
|
47
|
|
|
50
|
|
|
57
|
|
|
Less: PGM Recycling income credit per mined ounce
|
|
28
|
|
|
26
|
|
|
21
|
|
|
20
|
|
|
Total cash costs per PGM mined ounce, net of by-product and recycling credits *
|
|
$
|
433
|
|
|
$
|
500
|
|
|
$
|
441
|
|
|
$
|
517
|
|
* These are non-GAAP financial measures. For a full description and reconciliation of these and other non-GAAP financial measures to GAAP financial measures, see
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
below.
Capital expenditures at the East Boulder Mine totaled
$4.3 million
in the
third
quarter of
2016
, compared to
$3.1 million
in the
third
quarter of
2015
. Actual primary and secondary development advanced approximately
5,600
feet during the
third
quarter of
2016
compared to
5,100
feet in the
third
quarter of
2015
. Diamond drilling footage for the
third
quarter of
2016
totaled approximately
25,100
feet compared to the
47,700
feet drilled in the
third
quarter of
2015
when there was a dedicated campaign of drilling at Graham Creek to prepare for the development of the second ore block.
PGM RECYCLING SEGMENT
The volume of recycling materials processed through the smelter during the
third
quarter of
2016
was
25.1
tons per day of furnace feed compared to
22.7
tons per day in the
third
quarter of
2015
. PGM loadings in the fed material in the
third
quarter of
2016
increased
8.7%
to
175,000
ounces of palladium, platinum and rhodium compared to
161,000
ounces in the
third
quarter of
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Average tons of catalyst fed per day
|
|
25.1
|
|
|
22.7
|
|
|
24.8
|
|
|
21.9
|
|
|
Total tons processed
|
|
2,308
|
|
|
2,087
|
|
|
6,760
|
|
|
5,987
|
|
|
Tolled tons
|
|
546
|
|
|
794
|
|
|
2,241
|
|
|
2,420
|
|
|
Purchased tons
|
|
1,762
|
|
|
1,293
|
|
|
4,519
|
|
|
3,567
|
|
|
PGM ounces fed
|
|
175,000
|
|
|
161,000
|
|
|
499,100
|
|
|
421,300
|
|
|
PGM ounces sold
|
|
117,600
|
|
|
88,800
|
|
|
266,200
|
|
|
231,500
|
|
|
PGM tolled ounces returned
|
|
49,900
|
|
|
73,700
|
|
|
196,500
|
|
|
150,300
|
|
During the
third
quarter of
2016
, the Company earned
$3.9 million
in income (before income taxes) from its PGM Recycling operations on revenues of
$89.6 million
. For the
third
quarter of
2015
, the recycling operations earned
$3.3 million
in income (before income taxes) on revenues of
$82.0 million
.
For the
third
quarter of
2016
, PGM Recycling revenues increased by
9.3%
compared to the same period in
2015
. The third quarter of 2016 was impacted by a 15.8% decrease in realized prices which was more than offset by the 32.4 % increase in ounces sold. The costs of metals sold from the PGM Recycling segment was
$86.2 million
in the
third
quarter of
2016
, compared to
$78.9 million
in the
third
quarter of
2015
,
an increase
of
9.3%
. A majority of the costs of metals sold from recycling in each period is attributable to the acquisition cost of purchasing recyclable materials for the Company's own account; therefore, the aggregate costs of metals sold from the PGM Recycling segment is driven mostly by the volume and the value of the PGMs in the materials purchased by the Company. Tolling revenues decreased by approximately
40.9%
in the
third
quarter of
2016
to
$1.3 million
, compared to approximately
$2.2 million
in the
third
quarter of
2015
, reflecting a
32.3%
decrease in recycled tolled ounces,
49,900
during the
third
quarter of
2016
compared to
73,700
in the
third
quarter of
2015
.
Sold ounces of recycled PGMs
increased
by
32.4%
to
117,600
ounces in the
third
quarter of
2016
from
88,800
ounces in the
third
quarter of
2015
. The combined average recycling sales realization (including palladium, platinum and rhodium) was
$742
per sold ounce in the
third
quarter of
2016
, down from
$881
per sold ounce in the same quarter of
2015
. A total of
167,500
combined ounces were delivered to customers in the
third
quarter of
2016
, compared to
162,500
ounces delivered in the
third
quarter of
2015
.
For its PGM Recycling segment, the Company customarily enters into fixed forward sales contracts that set the selling price for most of the PGMs recovered from recycled materials. Because the selling price of recycling materials held by the Company is fixed up front by these forward sales contracts, day-to-day changes in the market price of palladium and platinum have little effect on the percentage margins earned from processing these materials or on cash flow from recycling operations. However, as PGM prices rise or fall over time, the total volume of materials available in the market may also rise or fall and the selling price of recycling materials in the forward sales contracts may also change, which can affect the total profitability of the Company's recycling activities. On average, it takes two to three months from the date of receipt to process and deliver metal from purchased lots of recycling materials.
The Company has arrangements in place with many of its recycling suppliers to provide advance payments to the suppliers prior to the release of finished metal from the final refiner. These advances may include general working capital advances, advances against materials in transit to the Company's processing facilities, and payments for materials in process. Outstanding advances for general working capital and materials in transit not backed up by inventory physically in the Company’s possession totaled
$7.5 million
at
September 30, 2016
, compared to
$4.4 million
at
December 31, 2015
. In addition, recycling segment materials physically in inventory totaled
$78.0 million
at
September 30, 2016
, compared to
$33.0 million
at
December 31, 2015
. Working capital associated with the recycling activities was
$85.5 million
and
$37.4 million
at
September 30, 2016
and
December 31, 2015
, respectively.
EXPLORATION AND DEVELOPMENT
The Company is continuing to develop the Blitz area, which is expected to provide extensive new mining infrastructure along the J-M Reef. This development includes constructing underground and surface access to an area extending approximately 23,000 feet to the east from the existing Stillwater Mine operations on two separate levels. The lower of these underground development headings, on the 50 East, is being driven with a tunnel-boring machine (TBM) and to date has advanced approximately
11,300
feet.
A second, parallel underground heading at Blitz, the 56 East, is being driven approximately 600 feet above the TBM using conventional drill and blast methods. Approximately
20,200
feet of ramp and infrastructure development has been completed along the 56 East heading to date. Development continues ahead of schedule along this heading. In the 50 East TBM drive, water inflows have been higher than anticipated which have slowed advance rates. A dewatering program is being implemented to enable a higher rate of advance to be achieved. The TBM drive is not on the critical path for first production and efforts are being directed to the 56 East drive and the Benbow decline, which are on the critical path for the project.
Approximately
3,800
feet of Blitz primary development was completed in the
third
quarter of
2016
compared to
4,000
feet in the
third
quarter of
2015
. Approximately
26,500
feet of diamond drilling for Blitz was completed in the
third
quarter of
2016
, compared to
6,500
feet drilled in the
third
quarter of
2015
.
The permitting process for the Benbow access portal was completed in the third quarter of 2015. The Benbow access portal which is being developed at the far end of the two primary Blitz tunnels is designed to intersect the two tunnels from the surface, and will provide ventilation and emergency egress for the Blitz development area. The construction of the surface facilities is nearing completion and work started on the excavation of the Benbow decline in the
third
quarter of
2016
using a contractor.
The Blitz development began in late 2010, and to date, the Company has spent approximately
$100.9 million
(excluding capitalized interest and capitalized depreciation). The Company remains focused on the Blitz development and progress on the two critical path items to first production, the 56 East development heading and the 53 East decline is ahead of plan. In addition, considerable engineering work has been updated on the Blitz project. This new work has driven a substantial increase to the scope of the project with relatively minimal additional costs. As a result of the new work performed, the project now incorporates the lower Blitz area. Costs for the project are expected to increase to approximately $250 million from the previous $205 million estimate. The Company considers this increase to be a small escalation given the much expanded scope of the project and the acceleration of the production profile. Additional capital will be required for expansion of the Stillwater Mine concentrator to treat the increased ore tonnage and the related work is currently underway. The Company anticipates first production to occur in late 2017 or early 2018.
While a modest exploration program continues at the Marathon project in Canada, development plans remain suspended until the project can demonstrate an economic return greater than the returns available on the Company's other assets.
Cash carrying costs at the Altar project in Argentina totaled approximately
$0.7 million
in the
third
quarter of
2016
, consisting of administrative costs of
$0.4 million
and exploration expense of approximately $0.3 million. For the
third
quarter of
2015
, cash carrying costs totaled
$0.3 million
, consisting of less than
$0.1 million
administrative costs and approximately
$0.2 million
of exploration expense.
CAPITAL EXPENDITURES
The Company incurred cash capital expenditures of
$23.6 million
during the
third quarter
of
2016
compared to cash capital expenditures of
$25.2 million
in the
third quarter
of
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Sustaining capital:
|
|
|
|
|
|
|
|
|
|
Stillwater Mine
|
|
$
|
10,161
|
|
|
$
|
11,978
|
|
|
$
|
28,436
|
|
|
$
|
43,560
|
|
|
East Boulder Mine
|
|
4,249
|
|
|
3,121
|
|
|
11,507
|
|
|
11,115
|
|
|
Processing and Other
|
|
122
|
|
|
433
|
|
|
643
|
|
|
1,691
|
|
|
Total sustaining capital
|
|
$
|
14,532
|
|
|
$
|
15,532
|
|
|
$
|
40,586
|
|
|
$
|
56,366
|
|
|
Project capital:
|
|
|
|
|
|
|
|
|
|
Blitz
|
|
$
|
12,036
|
|
|
$
|
8,338
|
|
|
$
|
31,650
|
|
|
$
|
18,931
|
|
|
Hertzler Tailings Expansion
|
|
162
|
|
|
2,322
|
|
|
259
|
|
|
5,940
|
|
|
Other
|
|
—
|
|
|
950
|
|
|
—
|
|
|
7,082
|
|
|
Total project capital
|
|
$
|
12,198
|
|
|
$
|
11,610
|
|
|
$
|
31,909
|
|
|
$
|
31,953
|
|
|
Total U.S. capital expenditures
|
|
$
|
26,730
|
|
|
$
|
27,142
|
|
|
$
|
72,495
|
|
|
$
|
88,319
|
|
|
Foreign capital expenditures
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
Non-cash capitalized interest / depreciation
|
|
(2,190
|
)
|
|
(2,360
|
)
|
|
(7,551
|
)
|
|
(6,756
|
)
|
|
Change in accounts payable for capital expenditures
|
|
(986
|
)
|
|
386
|
|
|
(2,964
|
)
|
|
1,777
|
|
|
Cash capital spend for the period
|
|
$
|
23,554
|
|
|
$
|
25,168
|
|
|
$
|
61,980
|
|
|
$
|
83,386
|
|
SUPPLY AND DEMAND COMMENTARY FOR PGM MARKETS
The following discussion reflects management’s assessment of the recent state of the PGM markets, based on discussions with industry analysts and the Company’s own observations of market dynamics. There can be no assurance that the Company’s conclusions reflect a complete or accurate picture of supply and demand trends or other market considerations. However, management’s view of market conditions and the outlook for PGM supply and demand may influence its decisions on mining activities, future acquisitions, expansions or divestitures, capital investment, financing, hiring and various other factors.
The primary suppliers of PGMs worldwide are limited to a few large producers in South Africa and Zimbabwe, significant PGM by-product output from Norilsk Nickel in Russia, plus output from the Company’s operations in Montana and a few (mostly by-product producers) in Canada.
Johnson Matthey (JM) estimated that 79% of palladium demand and 40% of platinum demand will come from the automotive catalyst market in 2016 (net of investment supply and demand), a percentage that has steadily grown over recent years for both metals. During the first nine months of 2016, the automotive market was strong across all major regions.
Both the U.S. and European car markets remained strong during the first nine months of 2016. U.S. auto sales through September 2016 continue on pace with 2015's record of 17.5 million deliveries at a seasonally adjusted annual rate of 17.8 million according to Autodata Corp. Automobile sales in Europe through September 2016 were also up 8.0% to 11.2 million units from the same period in 2015 and forecasted to reach approximately 14 million by year end according to the European Automobile Manufacturers Association.
Overall sales of passenger and commercial vehicles in China rose by 13.2% to 19.3 million units in the first nine months of 2016 compared with the same period in 2015, according to the China Association of Automobile Manufacturers. Vehicle sales were boosted by strong demand for sport utility vehicles and continued stimulus measures that are scheduled to potentially expire at the end of 2016.
During the first nine months of 2016, the price for platinum increased 19%, finishing the quarter at
$1,034
per ounce. The strong price movement is predicated upon another annual market deficit as supply from South Africa is expected to be impacted from under-investment in the mines due to cost pressures, closing of unprofitable shafts and the recent shutdown and rebuild of a smelter furnace.
The price of palladium increased 30% during the first nine months to close at
$722
on September 30, 2016. The overall market fundamentals for palladium continue to be strong. The use of palladium in the automotive, industrial and jewelry industries is expected to rise from 8.6 million ounces in 2010 to 10.1 million ounces in 2016 according to JM. Since 2012, this has significantly outpaced the level of supply from producers and recycling sources.
Palladium and Platinum Market Price History
Annual world-wide palladium and platinum supply is driven by a combination of current mine production, recycling and draw-down of existing palladium and platinum inventories held by governments and financial investors. The prices of these metals are volatile and are affected by numerous factors including, but not limited to, the sale or purchase of the metals by various central banks and financial institutions, inflation, recession, fluctuation in the relative values of the U.S. dollar and foreign currencies (particularly the South African rand and Russian ruble), changes in global and regional demand and political and economic conditions throughout the world. The price of palladium is thought to be more closely tied to industrial demand and the rate of underlying world economic growth, particularly in automotive production.
STRATEGIC CONSIDERATIONS
The following discussion of corporate strategic efforts is intended to update matters discussed in previous filings. For a discussion of the Company's strategic decisions regarding exploration and development and capital expenditures, see the previous sections of this
Item 2
entitled
Exploration and Development
and
Capital Expenditures
.
The Company's safety performance is of paramount importance to every employee of the Company and is the Company's primary consideration in all aspects of its operations. The Company normally assesses its safety performance using two broad sets of measures - incidence rates and regulatory compliance. Incidence rates in the U.S. usually are measured as the number of medically reportable events per 200,000 man hours. Regulatory compliance is measured in terms of the number and severity of citations issued to the Company and its contractors on site by Mine Safety and Health Administration (MSHA) inspectors.
The Company’s overall incidence rate per 200,000 man hours in its Montana operations for the first
nine
months of
2016
was 2.41. This represents over a 27% improvement in the incidence rate compared to the same period in 2015. For further detail, see
Exhibit 95 - Mine Safety Disclosures
, which is included as an exhibit to this filing.
The Company continues to focus on environmental excellence and works closely with governmental agencies and the local communities to ensure its compliance with environmental regulations and address its neighbors' environmental concerns. Based on the success of the installed underdrain system at the East Boulder Mine, the Company has commenced work on the installation of an underdrain system within the waste rock storage area at the Stillwater Mine. The purpose of this underdrain system is to capture and treat meteorological water that is currently infiltrating through the embankment and increasing the nitrate levels observed in the adjacent groundwater. The elevated groundwater nitrate levels are the result of explosives residue containing nitrogen, within the waste rock from the mines, which is being solubilized and mobilized via the meteorological water. As part of the effort to reduce the groundwater nitrate levels and due to lower solubility levels, the Company switched its blasting agent from ammonium nitrate-fuel oil (ANFO) to stick powder, at substantial additional consumable costs, when the conditions were initially observed. Following installation of this underdrain system, it is anticipated that the Stillwater Mine will switch back to ANFO as its primary blasting agent later this year, at expected substantial consumable cost savings and the potential for higher productivities. The Stillwater Mine is currently on-schedule to complete Stage 1, Phase 1 of the waste dump lining system this year allowing for the immediate collection and management of meteorological waters from “new” waste rock along with the opportunity to convert to ANFO as a primary blasting agent. Stage 1, Phase 2 of the lining system is currently scheduled for completion in the summer of 2017, with Stage 2 planned for 2018. Additionally, increasing water treatment and management capacities at the Stillwater Mine, expanding permitted tailings and waste rock storage at East Boulder, and developing long-term gypsum management options at the smelter in Columbus remain strategic considerations and priorities for the Company in the near term.
Cost containment remains key throughout the Company's operations. Costs of metals sold per PGM mined ounce is the Company's most directly comparable GAAP financial measure to AISC
,
a non-GAAP financial measure, of overall cost efficiency of the Company's Montana operations. (See the later section of this
Item 2
entitled
All-in Sustaining Costs (A Non-GAAP Financial Measure)
for a more detailed explanation of AISC). For the three months ended
September 30, 2016
, the Company's AISC averaged
$624
per PGM mined ounce,
7.8%
lower than the AISC of
$677
per PGM mined ounce achieved in the
third
quarter of 2015.
The Company's total workforce at
September 30, 2016
, was comprised of
1,422
employees, including
1,413
employees in Montana and Colorado; and
nine
employees in Canada and South America. This compares to
1,442
employees at
September 30, 2015
, of which
1,432
were located in Montana and Colorado; and
10
were in Canada and South America.
The Company seeks to maintain significant balance-sheet liquidity in order to manage against cyclical price risk in the mining industry and against downturns in the broader economy. When combining highly-liquid investments with cash and cash equivalents, the Company's liquidity at
September 30, 2016
and December 31, 2015 totaled
$439.4 million
and
$463.8 million
, respectively. See
"Note 12 - Investments"
, in the notes to the consolidated financial statements for more information related to the Company's investments. Total principal outstanding (before discounts and deferred debt issuance costs) under the Company's long-term convertible debt obligations at
September 30, 2016
and December 31, 2015 totaled
$335.7 million
.
The Company continues to evaluate options to maximize stockholder value and the long-term health of its business, particularly in light of volatility in commodity prices. The Company regularly considers the deployment of cash for acquisitions, internal growth projects, dividends, buyback of outstanding convertible debentures and share repurchases.
The Company currently has available capacity in its mine concentrators and in its Columbus processing facilities. The Company has been exploring various opportunities to increase throughput at its processing facilities, primarily through growing its recycling business segment and potentially through other processing arrangements with third parties. The auto catalyst recycling business is very competitive and, following the significant increase in volumes fed in 2015, attaining further significant growth while maintaining margins may prove to be challenging.
RESULTS OF OPERATIONS
Comparison of Three Months Ended
September 30, 2016
and
2015
The Company’s total revenues
increased
by
16.7%
to
$196.6 million
in the
third
quarter of
2016
compared to
$168.4 million
for the
third
quarter of
2015
. The following analysis provides comparative detail for key factors contributing to this increase in revenues:
SALES AND PRICE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
Increase
|
|
Percentage
|
|
(In thousands, except for average prices)
|
|
2016
|
|
2015
|
|
(Decrease)
|
|
Change
|
|
Revenues
|
|
$
|
196,617
|
|
|
$
|
168,441
|
|
|
$
|
28,176
|
|
|
16.7
|
%
|
|
Ounces Sold:
|
|
|
|
|
|
|
|
|
|
Mine Production:
|
|
|
|
|
|
|
|
|
|
Palladium (oz.)
|
|
103.6
|
|
|
91.7
|
|
|
11.9
|
|
|
13.0
|
%
|
|
Platinum (oz.)
|
|
28.2
|
|
|
25.6
|
|
|
2.6
|
|
|
10.2
|
%
|
|
Total
|
|
131.8
|
|
|
117.3
|
|
|
14.5
|
|
|
12.4
|
%
|
|
PGM Recycling:
(1)
|
|
|
|
|
|
|
|
|
|
Palladium (oz.)
|
|
69.2
|
|
|
53.2
|
|
|
16.0
|
|
|
30.1
|
%
|
|
Platinum (oz.)
|
|
40.6
|
|
|
29.6
|
|
|
11.0
|
|
|
37.2
|
%
|
|
Rhodium (oz.)
|
|
7.8
|
|
|
6.0
|
|
|
1.8
|
|
|
30.0
|
%
|
|
Total
|
|
117.6
|
|
|
88.8
|
|
|
28.8
|
|
|
32.4
|
%
|
|
By-products from Mine Production:
(2)
|
|
|
|
|
|
|
|
|
|
Rhodium (oz.)
|
|
0.9
|
|
|
0.8
|
|
|
0.1
|
|
|
12.5
|
%
|
|
Gold (oz.)
|
|
2.6
|
|
|
2.5
|
|
|
0.1
|
|
|
4.0
|
%
|
|
Silver (oz.)
|
|
2.0
|
|
|
1.7
|
|
|
0.3
|
|
|
17.6
|
%
|
|
Copper (lb.)
|
|
262.3
|
|
|
221.0
|
|
|
41.3
|
|
|
18.7
|
%
|
|
Nickel (lb.)
|
|
387.8
|
|
|
342.0
|
|
|
45.8
|
|
|
13.4
|
%
|
|
Average realized price per ounce
(3)
|
|
|
|
|
|
|
|
|
|
Mine Production:
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
679
|
|
|
$
|
611
|
|
|
$
|
68
|
|
|
11.1
|
%
|
|
Platinum ($/oz.)
|
|
$
|
1,076
|
|
|
$
|
987
|
|
|
$
|
89
|
|
|
9.0
|
%
|
|
Combined ($/oz.)
(5)
|
|
$
|
764
|
|
|
$
|
693
|
|
|
$
|
71
|
|
|
10.2
|
%
|
|
PGM Recycling:
(1)
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
587
|
|
|
$
|
737
|
|
|
$
|
(150
|
)
|
|
(20.4
|
)%
|
|
Platinum ($/oz.)
|
|
$
|
1,019
|
|
|
$
|
1,111
|
|
|
$
|
(92
|
)
|
|
(8.3
|
)%
|
|
Rhodium ($/oz.)
|
|
$
|
671
|
|
|
$
|
1,027
|
|
|
$
|
(356
|
)
|
|
(34.7
|
)%
|
|
Combined ($/oz.)
(5)
|
|
$
|
742
|
|
|
$
|
881
|
|
|
$
|
(139
|
)
|
|
(15.8
|
)%
|
|
By-products from Mine Production:
(2)
|
|
|
|
|
|
|
|
|
|
Rhodium ($/oz.)
|
|
$
|
648
|
|
|
$
|
808
|
|
|
$
|
(160
|
)
|
|
(19.8
|
)%
|
|
Gold ($/oz.)
|
|
$
|
1,328
|
|
|
$
|
1,136
|
|
|
$
|
192
|
|
|
16.9
|
%
|
|
Silver ($/oz.)
|
|
$
|
19
|
|
|
$
|
15
|
|
|
$
|
4
|
|
|
26.7
|
%
|
|
Copper ($/lb.)
|
|
$
|
1.95
|
|
|
$
|
2.20
|
|
|
$
|
(0.25
|
)
|
|
(11.4
|
)%
|
|
Nickel ($/lb.)
|
|
$
|
3.86
|
|
|
$
|
2.92
|
|
|
$
|
0.94
|
|
|
32.2
|
%
|
|
Average market price per ounce
(4)
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
677
|
|
|
$
|
617
|
|
|
$
|
60
|
|
|
9.7
|
%
|
|
Platinum ($/oz.)
|
|
$
|
1,085
|
|
|
$
|
987
|
|
|
$
|
98
|
|
|
9.9
|
%
|
|
Combined ($/oz.)
(5)
|
|
$
|
764
|
|
|
$
|
698
|
|
|
$
|
66
|
|
|
9.5
|
%
|
|
|
|
|
(1)
|
Ounces sold and average realized price per ounce from
PGM Recycling
relate to ounces produced from processing of spent catalyst from catalytic converters and other industrial sources.
|
|
|
|
|
(2)
|
By-product metals sold reflect net values of realized prices (discounted due to product form) per unit sold.
|
|
|
|
|
(3)
|
The Company’s average realized price represents revenues, which include the effect of hedging gains and losses realized on commodity instruments and agreement discounts, divided by ounces sold.
|
|
|
|
|
(4)
|
The average market price represents the average London market for the actual months of the period.
|
|
|
|
|
(5)
|
The Company reports a combined average realized and market price of palladium and platinum at the same ratio as ounces that are produced from the base metal refinery.
|
Net revenues from sales of Mine Production (including proceeds from the sale of by-products) were
$106.9 million
and
$86.4 million
during the
third
quarters of
2016
and
2015
, respectively. The higher volumes of mined ounces sold in the third quarter of 2016 compared to the third quarter of 2015 contributed to the 23.7 % increase, accompanied by the increase in average combined realized price per mined ounce in the
third
quarter of
2016
, compared to the
third
quarter of
2015
.
The costs of metals sold from Mine Production totaled
$65.6 million
for the
third
quarter of
2016
, compared to
$69.0 million
for the
third
quarter of
2015
,
a decrease
of 4.9%. The decrease in costs is the result of higher production rates and a number of cost improvement initiatives at both mines as well as labor force reductions, higher grades and higher mill recoveries at the Stillwater Mine.
Total recycling ounces of palladium, platinum and rhodium fed to the smelter, including both purchased ounces and ounces processed on a toll basis, increased to
175,000
ounces in the
third
quarter of
2016
from
161,000
ounces in the
third
quarter of
2015
, an increase of
8.7%
. Total sales revenues from PGM Recycling of
$89.6 million
in the
third
quarter of
2016
increased
9.3%
over the
$82.0 million
reported for the
third
quarter of
2015
. Tolling revenues in the
third
quarter of
2016
declined to
$1.3 million
on
49,900
tolled ounces of palladium, platinum and rhodium processed and returned to customers, compared to
$2.2 million
on
73,700
ounces processed and returned to customers in the
third
quarter of
2015
. However, revenues from sales of purchased recycling materials increased 11.4% in the
third
quarter of
2016
to
$87.2 million
on
117,600
ounces of palladium, platinum and rhodium sold, from
$78.3 million
on
88,800
ounces sold in the
third
quarter of
2015
. The Company’s combined average realization on recycling sales of palladium, platinum and rhodium
decreased
to
$742
per ounce in the
third
quarter of
2016
, compared to
$881
per ounce realized in the
third
quarter of
2015
.
The costs of metals sold from PGM Recycling totaled
$86.2 million
in the
third
quarter of
2016
, compared to
$78.9 million
in the
third
quarter of
2015
,
an increase
of
9.3%
. This increase was mainly due to a
32.4%
increase in volumes of purchased recycled material sold; offset somewhat by the decrease in acquisition costs.
The mining operations PGM ounce production for the
third
quarters of
2016
and
2015
is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
September 30,
|
|
Mined PGM Ounces Produced
|
|
Platinum
|
|
Palladium
|
|
Total
|
|
Stillwater Mine
|
|
|
|
|
|
|
|
2016
|
|
19,700
|
|
|
64,300
|
|
|
84,000
|
|
|
2015
|
|
17,700
|
|
|
59,300
|
|
|
77,000
|
|
|
Percentage change
|
|
11.3
|
%
|
|
8.4
|
%
|
|
9.1
|
%
|
|
East Boulder Mine
|
|
|
|
|
|
|
|
2016
|
|
12,200
|
|
|
42,600
|
|
|
54,800
|
|
|
2015
|
|
11,400
|
|
|
39,700
|
|
|
51,100
|
|
|
Percentage change
|
|
7.0
|
%
|
|
7.3
|
%
|
|
7.2
|
%
|
|
Totals
|
|
|
|
|
|
|
|
2016
|
|
31,900
|
|
|
106,900
|
|
|
138,800
|
|
|
2015
|
|
29,100
|
|
|
99,000
|
|
|
128,100
|
|
|
Percentage change
|
|
9.6
|
%
|
|
8.0
|
%
|
|
8.4
|
%
|
The Company's corporate general and administrative costs for the
third
quarters of
2016
and
2015
were
$8.7 million
and
$8.9 million
, respectively.
Total interest income for the
third
quarters of
2016
and
2015
was
$1.2 million
and
$0.8 million
, respectively. Interest expense in the
third
quarters of
2016
and
2015
was
$4.0 million
and
$5.1 million
, respectively, net of capitalized interest of
$2.3 million
and
$1.5 million
, respectively.
Comparison of Nine Month Periods Ended
September 30, 2016
and
2015
The Company’s total revenues decreased by
10.5%
to
$495.9 million
in the first
nine
months of
2016
compared to
$554.3 million
in the first
nine
months of
2015
. The following analysis covers key factors contributing to this decrease in revenues:
SALES AND PRICE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
September 30,
|
|
Increase
|
|
Percentage
|
|
(In thousands, except for average prices)
|
|
2016
|
|
2015
|
|
(Decrease)
|
|
Change
|
|
Revenues
|
|
$
|
495,938
|
|
|
$
|
554,345
|
|
|
$
|
(58,407
|
)
|
|
(10.5
|
)%
|
|
Ounces Sold:
|
|
|
|
|
|
|
|
|
|
Mine Production:
|
|
|
|
|
|
|
|
|
|
Palladium (oz.)
|
|
325.2
|
|
|
302.1
|
|
23.1
|
|
|
7.6
|
%
|
|
Platinum (oz.)
|
|
89.5
|
|
|
84.9
|
|
4.6
|
|
|
5.4
|
%
|
|
Total
|
|
414.7
|
|
|
387.0
|
|
27.7
|
|
|
7.2
|
%
|
|
PGM Recycling:
(1)
|
|
|
|
|
|
|
|
|
|
Palladium (oz.)
|
|
160.4
|
|
|
136.9
|
|
23.5
|
|
|
17.2
|
%
|
|
Platinum (oz.)
|
|
87.5
|
|
|
78.1
|
|
9.4
|
|
|
12.0
|
%
|
|
Rhodium (oz.)
|
|
18.3
|
|
|
16.5
|
|
1.8
|
|
|
10.9
|
%
|
|
Total
|
|
266.2
|
|
|
231.5
|
|
34.7
|
|
|
15.0
|
%
|
|
By-products from Mine Production:
(2)
|
|
|
|
|
|
|
|
|
|
Rhodium (oz.)
|
|
2.5
|
|
|
2.7
|
|
(0.2)
|
|
|
(7.4
|
)%
|
|
Gold (oz.)
|
|
8.1
|
|
|
7.9
|
|
0.2
|
|
|
2.5
|
%
|
|
Silver (oz.)
|
|
5.0
|
|
|
5.0
|
|
—
|
|
|
—
|
|
|
Copper (lb.)
|
|
830.3
|
|
|
744.1
|
|
86.2
|
|
|
11.6
|
%
|
|
Nickel (lb.)
|
|
1,184.9
|
|
|
1,130.5
|
|
54.4
|
|
|
4.8
|
%
|
|
Average realized price per ounce
(3)
|
|
|
|
|
|
|
|
|
|
Mine Production:
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
591
|
|
|
$
|
723
|
|
|
$
|
(132
|
)
|
|
(18.3
|
)%
|
|
Platinum ($/oz.)
|
|
$
|
1,001
|
|
|
$
|
1,107
|
|
|
$
|
(106
|
)
|
|
(9.6
|
)%
|
|
Combined ($/oz.)
(5)
|
|
$
|
679
|
|
|
$
|
807
|
|
|
$
|
(128
|
)
|
|
(15.9
|
)%
|
|
PGM Recycling:
(1)
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
569
|
|
|
$
|
771
|
|
|
$
|
(202
|
)
|
|
(26.2
|
)%
|
|
Platinum ($/oz.)
|
|
$
|
967
|
|
|
$
|
1,181
|
|
|
$
|
(214
|
)
|
|
(18.1
|
)%
|
|
Rhodium ($/oz.)
|
|
$
|
680
|
|
|
$
|
1,130
|
|
|
$
|
(450
|
)
|
|
(39.8
|
)%
|
|
Combined ($/oz.)
(5)
|
|
$
|
708
|
|
|
$
|
935
|
|
|
$
|
(227
|
)
|
|
(24.3
|
)%
|
|
By-products from Mine Production:
(2)
|
|
|
|
|
|
|
|
|
|
Rhodium ($/oz.)
|
|
$
|
669
|
|
|
$
|
1,020
|
|
|
$
|
(351
|
)
|
|
(34.4
|
)%
|
|
Gold ($/oz.)
|
|
$
|
1,261
|
|
|
$
|
1,181
|
|
|
$
|
80
|
|
|
6.8
|
%
|
|
Silver ($/oz.)
|
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
1
|
|
|
6.3
|
%
|
|
Copper ($/lb.)
|
|
$
|
1.93
|
|
|
$
|
2.42
|
|
|
$
|
(0.49
|
)
|
|
(20.2
|
)%
|
|
Nickel ($/lb.)
|
|
$
|
3.23
|
|
|
$
|
4.20
|
|
|
$
|
(0.97
|
)
|
|
(23.1
|
)%
|
|
Average market price per ounce
(4)
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
591
|
|
|
$
|
719
|
|
|
$
|
(128
|
)
|
|
(17.8
|
)%
|
|
Platinum ($/oz.)
|
|
$
|
1,003
|
|
|
$
|
1,100
|
|
|
$
|
(97
|
)
|
|
(8.8
|
)%
|
|
Combined ($/oz.)
(5)
|
|
$
|
679
|
|
|
$
|
802
|
|
|
$
|
(123
|
)
|
|
(15.3
|
)%
|
|
|
|
|
(1)
|
Ounces sold and average realized price per ounce from
PGM Recycling
relate to ounces produced from processing of spent catalyst from catalytic converters and other industrial sources.
|
|
|
|
|
(2)
|
By-product metals sold reflect net values of realized prices (discounted due to product form) per unit sold.
|
|
|
|
|
(3)
|
The Company’s average realized price represents revenues, which include the effect of hedging gains and losses realized on commodity instruments and agreement discounts, divided by ounces sold.
|
|
|
|
|
(4)
|
The average market price represents the average London market for the actual months of the period.
|
|
|
|
|
(5)
|
The Company reports a combined average realized and market price of palladium and platinum at the same ratio as ounces that are produced from the base metal refinery.
|
For the first
nine
months of
2016
, net revenues from sales of Mine Production (including proceeds from the sale of by-products) totaled
$299.1 million
,
a decrease
of 9.7% compared from
$331.1 million
in the first
nine
months of
2015
. The higher volumes of mined ounces sold in the first
nine
months of 2016 was not enough to offset the significantly lower realized PGM prices in the first
nine
months of
2016
compared to the first
nine
months of
2015
.
The costs of metals sold from Mine Production totaled
$208.6 million
in the first
nine
months of
2016
, compared to
$229.7 million
in the first
nine
months of
2015
,
a decrease
of
9.2%
. The decrease in costs is the result of higher production rates and a number of cost improvement initiatives at both mines as well as labor force reductions and higher grades at the Stillwater Mine.
Revenues from PGM Recycling reflected
a decrease
of
11.9%
during the first
nine
months of
2016
, to
$196.5 million
from
$223.0 million
in the first
nine
months of
2015
. Recycling ounces sold during the first
nine
months of
2016
totaled
266,200
ounces,
an increase
of
15.0%
compared to the
231,500
ounces sold in the first
nine
months of
2015
. The Company’s combined average realization on recycling sales (which include palladium, platinum and rhodium) decreased to
$708
per ounce in the first
nine
months of
2016
from
$935
per ounce in the first
nine
months of
2015
. The increase in recycling earnings during the first
nine
months of
2016
is attributable to several factors, including an increase in ounces sold.
Overall, recycling costs of metals sold
decreased
by
12.7%
to
$188.7 million
in the first
nine
months of
2016
from
$216.1 million
in the first
nine
months of
2015
, mostly as the result of lower PGM prices.
During the first
nine
months of
2016
, the Company’s mining operations produced
413,200
ounces of PGMs, compared to
388,400
ounces in
2015
as shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
Mined PGM Ounces Produced
|
|
Platinum
|
|
Palladium
|
|
Total
|
|
Stillwater Mine
|
|
|
|
|
|
|
|
2016
|
|
58,100
|
|
|
189,900
|
|
|
248,000
|
|
|
2015
|
|
54,500
|
|
|
183,000
|
|
|
237,500
|
|
|
Percentage change
|
|
6.6
|
%
|
|
3.8
|
%
|
|
4.4
|
%
|
|
East Boulder Mine
|
|
|
|
|
|
|
|
2016
|
|
36,700
|
|
|
128,500
|
|
|
165,200
|
|
|
2015
|
|
33,400
|
|
|
117,500
|
|
|
150,900
|
|
|
Percentage change
|
|
9.9
|
%
|
|
9.4
|
%
|
|
9.5
|
%
|
|
Totals
|
|
|
|
|
|
|
|
2016
|
|
94,800
|
|
|
318,400
|
|
|
413,200
|
|
|
2015
|
|
87,900
|
|
|
300,500
|
|
|
388,400
|
|
|
Percentage change
|
|
7.8
|
%
|
|
6.0
|
%
|
|
6.4
|
%
|
General and administrative costs decreased to
$25.3 million
in the first
nine
months of
2016
, from
$27.7 million
in the first
nine
months of
2015
, a decrease of approximately 8.7%. The Company recognized
$4.9 million
of exploration expense in the first
nine
months of
2016
, consisting of $1.2 million related to lower East Boulder in Montana and $3.7 million related to exploration activities in Canada and South America, compared to the
$2.7 million
in the first
nine
months of
2015
, all related to Canada and South America exploration activities.
During the first
nine
months of
2016
, the Company recorded a net foreign currency transaction gain of
$1.7 million
, compared to a gain of
$0.1 million
in the first
nine
months of
2015
. Essentially all of these net gains related to the re-measurement into U.S. dollars of the deferred taxes recorded in association with the acquisition of Peregrine Metals Ltd. The gains reflect the impact of a volatile inflation rate in Argentina as the deferred tax obligation is re-measured from Argentine pesos into U.S. dollars.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities (which includes changes in working capital) was
$38.2 million
and
$75.7 million
for the
nine
months ended
September 30, 2016
and
2015
, respectively. The Company’s net cash flow from operating activities is affected by several key factors, including net realized prices for its products, the level of PGM production from its mines, cash operating costs, the volume of activity in its PGM Recycling segment, changes in inventory balances and the timing of cash receipts from final customers. Mining productivity rates and ore grades affect both PGM production and cash costs of production. The reported net cash provided by operating activities for the first
nine
months of
2016
reflected primarily lower realized PGM prices from mining activity along with higher recycling working capital balances, which was partially offset by higher recycling earnings and decreased cash costs.
Changes in the cash costs and revenues per ounce of Mine Production generally flow through dollar-for-dollar into cash flow from operations. Using metals market prices at
September 30, 2016
, a 10% reduction in annual PGM mined production would reduce annual cash flow from operations by an estimated $34.5 million.
Net cash used in investing activities for the
nine
months ended
September 30, 2016
, was approximately
$71.9 million
, comprised of
$11.2 million
of net purchases of short-term investments,
$62.0 million
of cash capital expenditures and offset by approximately
$1.3 million
in proceeds from the sale of long-term investments and the disposal of property, plant and equipment. For the
nine
months ended
September 30, 2015
, net cash used in investing activities was
$159.5 million
, comprised of
$83.4 million
of cash capital expenditures and approximately
$76.5 million
of net purchases of short-term investments.
Net cash used in financing activities in the
nine
months ended
September 30, 2016
was
$0.6 million
, consisting primarily of principal payments on capital leases. For the nine months ended September 30, 2015, the net cash associated with financing activities was
$62.5 million
, mostly comprised of repurchasing portions of the Company's convertible debt and principal payments on the capital leases. Financing activities in 2015 included the repurchase of $61.6 million principal amount of the 1.75% Senior notes due 2032 and $1.7 million of the 1.875% Senior notes due 2028 for total consideration of $61.0 million. Refer to
"Note 8 - Debt and Capital Lease Obligations"
, in the consolidated financial statements for a more complete discussion on the repurchase of a portion of the Company's convertible debentures.
At
September 30, 2016
, the Company’s cash and cash equivalents balance was
$113.0 million
, compared to
$147.3 million
at
December 31, 2015
. When combining highly liquid investments with available cash and cash equivalents, the Company’s balance sheet liquidity was
$439.4 million
at
September 30, 2016
compared to
$463.8 million
at
December 31, 2015
. See
"Note 12 - Investments"
, in the notes to the consolidated financial statements for more information related to the Company's investments. Net working capital was
$532.9 million
at
September 30, 2016
compared to
$523.0 million
at
December 31, 2015
.
Outstanding balance sheet debt (current and long-term) reported at
September 30, 2016
, was approximately
$269.1 million
, up from the
$255.8 million
at
December 31, 2015
. The Company’s total principal debt includes approximately
$268.6 million
of 1.75% convertible debentures and
$0.5 million
of 1.875% convertible debentures. The
$268.6 million
of 1.75% convertible debentures represents the net discounted value of the 1.75% notes, first redeemable in 2019, valued against a borrowing rate of 8.5%, as the gross principal amount originally borrowed was
$396.75 million
. The total gross principal outstanding (before discounts and debt issuance costs) under the Company's long-term convertible debt obligations was
$335.7 million
at
September 30, 2016
.
The Company expects to make cash payments of
$2.9 million
for interest during the remaining three months of
2016
related to its outstanding debt obligations. The Company made cash payments for interest of $2.9 million for the
nine
months ended
September 30, 2016
, compared to $4.0 million for the same period of
2015
.
CONTRACTUAL OBLIGATIONS
The Company's contractual obligations at
December 31, 2015
, are summarized in Item 7,
"Management's Discussion and Analysis - Contractual Obligations"
of the Company's Form 10-K, which was filed with the Securities and Exchange Commission on February 22, 2016. In the first
nine
months of
2016
, there were no material changes in the Company's contractual obligations outside the ordinary course of business.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
Some statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and, therefore, involve uncertainties or risks that could cause actual results to differ materially from management's expectations. These statements may contain words such as “believes,” “anticipates,” “plans,” “expects,” “intends,” “hopes,” “estimates,” “forecasts,” “predicts,” “projects,” “future,” “opportunity,” “likely,” “should,” “will,” “will continue,” “may” or similar expressions. Such statements also include, but are not limited to, comments regarding growing profitability; controlling costs; improving the efficiency of the Company's operations; strengthening the Company's financial and operating performance; managing the business through volatile metal prices; cash costs per PGM mined ounce, AISC, general and administrative expenses, exploration expense and capital expenditures; potential liabilities and the usefulness of non-GAAP financial measures. The forward-looking statements in this Quarterly Report on Form 10-Q are based on assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments, and other factors that are deemed appropriate. These statements are not guarantees of the Company’s future performance and are subject to risks, uncertainties and other important factors that could cause its actual performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Additional information regarding factors that could cause results to differ materially from management’s expectations is found in the Company’s Form 10-K, which was filed with the Securities and Exchange Commission on February 22, 2016 and is available on the Company’s website at www.stillwatermining.com.
The Company intends that the forward-looking statements contained in this Quarterly Report on Form 10-Q be subject to the above-mentioned statutory safe harbors. Investors are cautioned that actual results of performance may be materially different from those expressed or implied in the forward-looking statements. Investors should not rely on forward-looking statements. The forward-looking statements contained herein speak only as of the filing date of this Quarterly Report on Form 10-Q. Although the Company may from time to time voluntarily update its forward-looking statements, the Company disclaims any obligation to update forward-looking statements,
except as required by applicable securities laws.
CRITICAL ACCOUNTING POLICIES
The Company’s critical accounting policies are discussed in detail in the Company’s on Form 10-K.
KEY OPERATING FACTORS
Stillwater Mining Company
Key Operating Factors
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except where noted)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
OPERATING AND COST DATA FOR PGM MINE PRODUCTION
|
|
|
|
|
|
|
|
|
|
Consolidated
:
|
|
|
|
|
|
|
|
|
|
Ounces produced
|
|
|
|
|
|
|
|
|
|
Palladium
|
|
106.9
|
|
|
99.0
|
|
|
318.4
|
|
|
300.5
|
|
|
Platinum
|
|
31.9
|
|
|
29.1
|
|
|
94.8
|
|
|
87.9
|
|
|
Total
|
|
138.8
|
|
|
128.1
|
|
|
413.2
|
|
|
388.4
|
|
|
Tons milled
|
|
321.9
|
|
|
299.5
|
|
|
963.0
|
|
|
906.9
|
|
|
Mill head grade (ounce per ton)
|
|
0.46
|
|
|
0.45
|
|
|
0.46
|
|
|
0.45
|
|
|
Sub-grade tons milled
(1)
|
|
23.9
|
|
|
33.6
|
|
|
66.6
|
|
|
88.5
|
|
|
Sub-grade tons mill head grade (ounce per ton)
|
|
0.15
|
|
|
0.14
|
|
|
0.15
|
|
|
0.15
|
|
|
Total tons milled
(1)
|
|
345.8
|
|
|
333.1
|
|
|
1,029.6
|
|
|
995.4
|
|
|
Combined mill head grade (ounce per ton)
|
|
0.44
|
|
|
0.42
|
|
|
0.44
|
|
|
0.43
|
|
|
Total mill recovery (%)
|
|
92
|
|
|
92
|
|
|
92
|
|
|
92
|
|
|
Total mine concentrate shipped (tons)
(3)
|
|
8,107
|
|
|
7,716
|
|
|
24,169
|
|
|
23,738
|
|
|
Platinum grade in concentrate (ounce per ton)
(3)
|
|
4.19
|
|
|
3.93
|
|
|
4.19
|
|
|
3.89
|
|
|
Palladium grade in concentrate (ounce per ton)
(3)
|
|
13.61
|
|
|
13.18
|
|
|
13.60
|
|
|
13.05
|
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
498
|
|
|
$
|
588
|
|
|
$
|
503
|
|
|
$
|
593
|
|
|
Total cash costs per PGM mined ounce - net of credits (Non-GAAP)
(2)
|
|
$
|
434
|
|
|
$
|
465
|
|
|
$
|
433
|
|
|
$
|
511
|
|
|
Total cash costs per ore ton milled - net of credits (Non-GAAP)
(2)
|
|
$
|
174
|
|
|
$
|
179
|
|
|
$
|
174
|
|
|
$
|
199
|
|
|
Stillwater Mine
:
|
|
|
|
|
|
|
|
|
|
Ounces produced
|
|
|
|
|
|
|
|
|
|
Palladium
|
|
64.3
|
|
|
59.3
|
|
|
189.9
|
|
|
183.0
|
|
|
Platinum
|
|
19.7
|
|
|
17.7
|
|
|
58.1
|
|
|
54.5
|
|
|
Total
|
|
84.0
|
|
|
77.0
|
|
|
248.0
|
|
|
237.5
|
|
|
Tons milled
|
|
165.1
|
|
|
159.8
|
|
|
507.0
|
|
|
499.7
|
|
|
Mill head grade (ounce per ton)
|
|
0.54
|
|
|
0.50
|
|
|
0.52
|
|
|
0.49
|
|
|
Sub-grade tons milled
(1)
|
|
9.2
|
|
|
22.1
|
|
|
26.0
|
|
|
57.1
|
|
|
Sub-grade tons mill head grade (ounce per ton)
|
|
0.22
|
|
|
0.16
|
|
|
0.23
|
|
|
0.18
|
|
|
Total tons milled
(1)
|
|
174.3
|
|
|
181.9
|
|
|
533.0
|
|
|
556.8
|
|
|
Combined mill head grade (ounce per ton)
|
|
0.52
|
|
|
0.46
|
|
|
0.50
|
|
|
0.46
|
|
|
Total mill recovery (%)
|
|
93
|
|
|
92
|
|
|
93
|
|
|
93
|
|
|
Total mine concentrate shipped (tons)
(3)
|
|
4,323
|
|
|
3,858
|
|
|
12,775
|
|
|
12,563
|
|
|
Platinum grade in concentrate (ounce per ton)
(3)
|
|
5.03
|
|
|
4.91
|
|
|
5.04
|
|
|
4.68
|
|
|
Palladium grade in concentrate (ounce per ton)
(3)
|
|
15.59
|
|
|
16.00
|
|
|
15.60
|
|
|
15.23
|
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
468
|
|
|
$
|
559
|
|
|
$
|
478
|
|
|
$
|
572
|
|
|
Total cash costs per PGM mined ounce - net of credits (Non-GAAP)
(2)
|
|
$
|
434
|
|
|
$
|
441
|
|
|
$
|
428
|
|
|
$
|
507
|
|
|
Total cash costs per ore ton milled - net of credits (Non-GAAP)
(2)
|
|
$
|
209
|
|
|
$
|
187
|
|
|
$
|
199
|
|
|
$
|
216
|
|
Stillwater Mining Company
Key Operating Factors (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except where noted)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
OPERATING AND COST DATA FOR PGM MINE PRODUCTION
|
|
|
|
|
|
|
|
|
|
East Boulder Mine
:
|
|
|
|
|
|
|
|
|
|
Ounces produced
|
|
|
|
|
|
|
|
|
|
Palladium
|
|
42.6
|
|
|
39.7
|
|
|
128.5
|
|
|
117.5
|
|
|
Platinum
|
|
12.2
|
|
|
11.4
|
|
|
36.7
|
|
|
33.4
|
|
|
Total
|
|
54.8
|
|
|
51.1
|
|
|
165.2
|
|
|
150.9
|
|
|
Tons milled
|
|
156.8
|
|
|
139.7
|
|
|
456.0
|
|
|
407.2
|
|
|
Mill head grade (ounce per ton)
|
|
0.38
|
|
|
0.40
|
|
|
0.39
|
|
|
0.40
|
|
|
Sub-grade tons milled
(1)
|
|
14.7
|
|
|
11.5
|
|
|
40.7
|
|
|
31.4
|
|
|
Sub-grade tons mill head grade (ounce per ton)
|
|
0.10
|
|
|
0.10
|
|
|
0.10
|
|
|
0.10
|
|
|
Total tons milled
(1)
|
|
171.5
|
|
|
151.2
|
|
|
496.7
|
|
|
438.6
|
|
|
Combined mill head grade (ounce per ton)
|
|
0.36
|
|
|
0.38
|
|
|
0.37
|
|
|
0.38
|
|
|
Total mill recovery (%)
|
|
90
|
|
|
91
|
|
|
90
|
|
|
91
|
|
|
Total mine concentrate shipped (tons)
(3)
|
|
3,784
|
|
|
3,858
|
|
|
11,394
|
|
|
11,175
|
|
|
Platinum grade in concentrate (ounce per ton)
(3)
|
|
3.23
|
|
|
2.96
|
|
|
3.24
|
|
|
3.01
|
|
|
Palladium grade in concentrate (ounce per ton)
(3)
|
|
11.35
|
|
|
10.36
|
|
|
11.36
|
|
|
10.59
|
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
544
|
|
|
$
|
635
|
|
|
$
|
542
|
|
|
$
|
630
|
|
|
Total cash costs per PGM mined ounce - net of credits (Non-GAAP)
(2)
|
|
$
|
433
|
|
|
$
|
500
|
|
|
$
|
441
|
|
|
$
|
517
|
|
|
Total cash costs per ore ton milled - net of credits (Non-GAAP)
(2)
|
|
$
|
138
|
|
|
$
|
169
|
|
|
$
|
147
|
|
|
$
|
178
|
|
|
|
|
|
(1)
|
Sub-grade tons milled includes reef waste material only. Reef waste material is PGM-bearing mined material below the cutoff grade for proven and probable reserves but with sufficient economic value to justify processing it through the concentrator along with the mined ore. Total tons milled includes ore tons and sub-grade tons only. See
“Proven and Probable Ore Reserves – Discussion
” in the Company’s Form 10-K for further information.
|
|
|
|
|
(2)
|
Total cash costs include total operating costs plus royalties, insurance and taxes other than income taxes.
Total cash costs per PGM mined ounce, net of credits,
is a non-GAAP financial measure that management uses to monitor and evaluate the efficiency of its mining operations. This measure of cost is not defined under U.S. Generally Accepted Accounting Principles (GAAP). Please see “
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
” and the accompanying discussion for additional detail.
|
|
|
|
|
(3)
|
The concentrate tonnage and grade values are inclusive of periodic re-processing of smelter slag and internal furnace brick PGM bearing materials.
|
Stillwater Mining Company
Key Operating Factors (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except for average prices)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
SALES AND PRICE DATA
|
|
|
|
|
|
|
|
|
|
Ounces sold
|
|
|
|
|
|
|
|
|
|
PGM Mine Production:
|
|
|
|
|
|
|
|
|
|
Palladium (oz.)
|
|
103.6
|
|
|
91.7
|
|
|
325.2
|
|
|
302.1
|
|
|
Platinum (oz.)
|
|
28.2
|
|
|
25.6
|
|
|
89.5
|
|
|
84.9
|
|
|
Total
|
|
131.8
|
|
|
117.3
|
|
|
414.7
|
|
|
387.0
|
|
|
PGM Recycling:
(1)
|
|
|
|
|
|
|
|
|
|
Palladium (oz.)
|
|
69.2
|
|
|
53.2
|
|
|
160.4
|
|
|
136.9
|
|
|
Platinum (oz.)
|
|
40.6
|
|
|
29.6
|
|
|
87.5
|
|
|
78.1
|
|
|
Rhodium (oz.)
|
|
7.8
|
|
|
6.0
|
|
|
18.3
|
|
|
16.5
|
|
|
Total
|
|
117.6
|
|
|
88.8
|
|
|
266.2
|
|
|
231.5
|
|
|
By-products from Mine Production:
(2)
|
|
|
|
|
|
|
|
|
|
Rhodium (oz.)
|
|
0.9
|
|
|
0.8
|
|
|
2.5
|
|
|
2.7
|
|
|
Gold (oz.)
|
|
2.6
|
|
|
2.5
|
|
|
8.1
|
|
|
7.9
|
|
|
Silver (oz.)
|
|
2.0
|
|
|
1.7
|
|
|
5.0
|
|
|
5.0
|
|
|
Copper (lb.)
|
|
262.3
|
|
|
221.0
|
|
|
830.3
|
|
|
744.1
|
|
|
Nickel (lb.)
|
|
387.8
|
|
|
342.0
|
|
|
1,184.9
|
|
|
1,130.5
|
|
|
Average realized price per ounce
(3)
|
|
|
|
|
|
|
|
|
|
PGM Mine Production:
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
679
|
|
|
$
|
611
|
|
|
$
|
591
|
|
|
$
|
723
|
|
|
Platinum ($/oz.)
|
|
$
|
1,076
|
|
|
$
|
987
|
|
|
$
|
1,001
|
|
|
$
|
1,107
|
|
|
Combined ($/oz)
(5)
|
|
$
|
764
|
|
|
$
|
693
|
|
|
$
|
679
|
|
|
$
|
807
|
|
|
PGM Recycling:
(1)
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
587
|
|
|
$
|
737
|
|
|
$
|
569
|
|
|
$
|
771
|
|
|
Platinum ($/oz.)
|
|
$
|
1,019
|
|
|
$
|
1,111
|
|
|
$
|
967
|
|
|
$
|
1,181
|
|
|
Rhodium ($/oz)
|
|
$
|
671
|
|
|
$
|
1,027
|
|
|
$
|
680
|
|
|
$
|
1,130
|
|
|
Combined ($/oz)
(5)
|
|
$
|
742
|
|
|
$
|
881
|
|
|
$
|
708
|
|
|
$
|
935
|
|
|
By-products from Mine Production:
(2)
|
|
|
|
|
|
|
|
|
|
Rhodium ($/oz.)
|
|
$
|
648
|
|
|
$
|
808
|
|
|
$
|
669
|
|
|
$
|
1,020
|
|
|
Gold ($/oz.)
|
|
$
|
1,328
|
|
|
$
|
1,136
|
|
|
$
|
1,261
|
|
|
$
|
1,181
|
|
|
Silver ($/oz.)
|
|
$
|
19
|
|
|
$
|
15
|
|
|
$
|
17
|
|
|
$
|
16
|
|
|
Copper ($/lb.)
|
|
$
|
1.95
|
|
|
$
|
2.20
|
|
|
$
|
1.93
|
|
|
$
|
2.42
|
|
|
Nickel ($/lb.)
|
|
$
|
3.86
|
|
|
$
|
2.92
|
|
|
$
|
3.23
|
|
|
$
|
4.20
|
|
|
Average market price per ounce
(4)
|
|
|
|
|
|
|
|
|
|
Palladium ($/oz.)
|
|
$
|
677
|
|
|
$
|
617
|
|
|
$
|
591
|
|
|
$
|
719
|
|
|
Platinum ($/oz.)
|
|
$
|
1,085
|
|
|
$
|
987
|
|
|
$
|
1,003
|
|
|
$
|
1,100
|
|
|
Combined ($/oz)
(5)
|
|
$
|
764
|
|
|
$
|
698
|
|
|
$
|
679
|
|
|
$
|
802
|
|
|
|
|
|
(1)
|
Ounces sold and average realized price per ounce from
PGM Recycling
relate to ounces produced from processing of spent catalyst from catalytic converters and other industrial sources.
|
|
|
|
|
(2)
|
By-product metals sold reflect net values of realized prices (discounted due to product form) per unit sold.
|
|
|
|
|
(3)
|
The Company’s average realized price represents revenues, hedging gains and losses realized on commodity instruments and agreement discounts, divided by ounces sold.
|
|
|
|
|
(4)
|
The average market price represents the average London market for the actual months of the period.
|
|
|
|
|
(5)
|
The Company reports a combined average realized and market price of palladium and platinum at the same ratio as ounces that are produced from the base metal refinery.
|
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
The Company utilizes certain non-GAAP financial measures as indicators in assessing the performance of its mining and processing operations during any period. Because of the processing time required to complete the extraction of finished PGM products, there are typically lags of one to three months between ore production and sale of the finished product. Costs of metals sold - Mine Production, the Company's most directly comparable GAAP financial measure, in any period includes some portion of material mined and processed from prior periods as the process is completed. Consequently, while costs of metals sold - Mine Production (a GAAP measure included in the Company’s
Consolidated Statements of Comprehensive Income (Loss)
) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP financial measures to assess the costs associated with its producing and processing activities in a particular period and to compare those costs between periods.
While the Company believes that these non-GAAP financial measures may also be of value to outside readers, both as general indicators of the Company’s mining efficiency from period to period and as insight into how the Company internally measures its operating performance, these non-GAAP financial measures are not standardized across the mining industry and in most cases will not be directly comparable to similar measures that may be provided by other companies. These non-GAAP financial measures are only useful as indicators of relative operational performance in any period, and because they do not take into account the inventory timing differences that are included in costs of metals sold - Mine Production, they cannot meaningfully be used to develop measures of earnings or profitability. A reconciliation of these measures to costs of metals sold - Mine Production, the most directly comparable GAAP financial measure, for each period shown is provided as part of the following tables, and a description of each non-GAAP financial measure is provided below.
Costs of Metals Sold - Mine Production
: For the Company as a whole, this measure is equal to total costs of metals sold - Mine Production, as reported in the Company's
Consolidated Statements of Comprehensive Income (Loss)
. For the Stillwater Mine and the East Boulder Mine, the Company segregates the expenses within total costs of metals sold - Mine Production that are directly associated with each of these activities and then allocates the remaining facility costs included in total cost of revenues in proportion to the monthly volumes from each activity. The resulting total costs of metals sold - Mine Production measures for the Stillwater Mine, and the East Boulder Mine are equal, in the aggregate, to total consolidated costs of metals sold - Mine Production as reported in the Company’s
Consolidated Statements of Comprehensive Income (Loss)
.
When divided by the total PGM mined ounces sold in the respective period, Costs of metals sold - Mine Production, measured for each mine or combined, provides an indication of the level of combined cash costs incurred per PGM mined ounce sold in that period. Consequently, Total Combined Cash Costs per PGM mined ounce sold (Non-GAAP) is a general measure of operating efficiency, and is affected both by the level of Total Combined Cash Costs (Non-GAAP) and by the total of PGM mined ounces sold.
Total Combined Cash Costs (Non-GAAP)
: This non-GAAP financial measure is calculated as total costs of metals sold - Mine Production adjusted for the change in mined inventories to calculate Total Combined Cash Costs before by-product and recycling income credits, (Non-GAAP). From this calculation, the Company deducts by-product and recycling income credits to arrive at Total Combined Cash Costs, net of by-product and recycling income credits. Total Combined Cash Costs is a measure of extraction efficiency. The Company uses this measure as a comparative indication of the cash costs related to production and processing in its mining operations in any period. When divided by PGM ounces produced in the respective period, Total Combined Cash Costs, net of by-products and recycling income credits (Non-GAAP), measured for each mine or combined, provides an indication of the level of combined cash costs incurred per PGM ounce produced in that period.
When divided by the total ore tons milled in the respective period, Total Combined Cash Costs per PGM mined ounce, net of by-product and recycling income credits (Non-GAAP), measured for each mine or combined, provides an indication of the level of combined cash costs incurred per ton milled in that period. Because of variability of ore grade in the Company’s mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. Because ore tons are first weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Combined Cash Costs per Ore Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Combined Cash Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.
Stillwater Mining Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except per ounce and per ton data)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of metals sold - Mine Production
|
|
$
|
65,580
|
|
|
$
|
69,004
|
|
|
$
|
208,612
|
|
|
$
|
229,676
|
|
|
Change in mined inventories (palladium and platinum)
|
|
4,652
|
|
|
(1,256
|
)
|
|
(3,568
|
)
|
|
(5,261
|
)
|
|
Total combined cash costs, before by-product and recycling credits (Non-GAAP)
|
|
$
|
70,232
|
|
|
$
|
67,748
|
|
|
$
|
205,044
|
|
|
$
|
224,415
|
|
|
By-product revenue credit
|
|
(6,116
|
)
|
|
(5,004
|
)
|
|
(17,378
|
)
|
|
(18,663
|
)
|
|
PGM Recycling income credit
|
|
(3,876
|
)
|
|
(3,261
|
)
|
|
(8,611
|
)
|
|
(7,424
|
)
|
|
Total combined cash costs, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
60,240
|
|
|
$
|
59,483
|
|
|
$
|
179,055
|
|
|
$
|
198,328
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces sold
|
|
131.8
|
|
|
117.3
|
|
414.7
|
|
|
387.0
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
498
|
|
|
$
|
588
|
|
|
$
|
503
|
|
|
$
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces produced
|
|
138.8
|
|
|
128.1
|
|
|
413.2
|
|
|
388.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total combined cash costs per PGM mined ounce, before by-product and recycling credits (Non-GAAP)
|
|
$
|
506
|
|
|
$
|
529
|
|
|
$
|
496
|
|
|
$
|
578
|
|
|
By-product credit per mined ounce
|
|
(44
|
)
|
|
(39
|
)
|
|
(42
|
)
|
|
(48
|
)
|
|
Recycling income credit per mined ounce
|
|
(28
|
)
|
|
(25
|
)
|
|
(21
|
)
|
|
(19
|
)
|
|
Total combined cash costs PGM per mined ounce, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
434
|
|
|
$
|
465
|
|
|
$
|
433
|
|
|
$
|
511
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore tons milled
|
|
345.8
|
|
|
333.1
|
|
|
1,029.6
|
|
|
995.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total combined cash costs per ore ton milled, before by-product and recycling credits (Non-GAAP)
|
|
$
|
203
|
|
|
$
|
204
|
|
|
$
|
199
|
|
|
$
|
225
|
|
|
By-product credit per ore ton milled
|
|
(18
|
)
|
|
(15
|
)
|
|
(17
|
)
|
|
(19
|
)
|
|
Recycling income credit per ore ton milled
|
|
(11
|
)
|
|
(10
|
)
|
|
(8
|
)
|
|
(7
|
)
|
|
Total combined cash costs per ore ton milled, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
174
|
|
|
$
|
179
|
|
|
$
|
174
|
|
|
$
|
199
|
|
Stillwater Mining Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except per ounce and per ton data)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Stillwater Mine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of metals sold - Mine Production
|
|
$
|
37,943
|
|
|
$
|
40,290
|
|
|
$
|
122,002
|
|
|
$
|
140,053
|
|
|
Change in mined inventories (palladium and platinum)
|
|
4,057
|
|
|
(1,770
|
)
|
|
(1,608
|
)
|
|
(5,068
|
)
|
|
Total cash costs, before by-product and recycling credits (Non-GAAP)
|
|
$
|
42,000
|
|
|
$
|
38,520
|
|
|
$
|
120,394
|
|
|
$
|
134,985
|
|
|
By-product revenue credit
|
|
(3,166
|
)
|
|
(2,599
|
)
|
|
(9,054
|
)
|
|
(10,131
|
)
|
|
PGM Recycling income credit
|
|
(2,342
|
)
|
|
(1,939
|
)
|
|
(5,160
|
)
|
|
(4,479
|
)
|
|
Total cash costs, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
36,492
|
|
|
$
|
33,982
|
|
|
$
|
106,180
|
|
|
$
|
120,375
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces sold
|
|
81.1
|
|
72.1
|
|
255.0
|
|
244.8
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
468
|
|
|
$
|
559
|
|
|
$
|
478
|
|
|
$
|
572
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces produced
|
|
84.0
|
|
|
77.0
|
|
|
248.0
|
|
|
237.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs per PGM mined ounce, before by-product and recycling credits (Non-GAAP)
|
|
$
|
500
|
|
|
$
|
500
|
|
|
$
|
486
|
|
|
$
|
569
|
|
|
By-product credit per mined ounce
|
|
(38
|
)
|
|
(34
|
)
|
|
(37
|
)
|
|
(43
|
)
|
|
Recycling income credit per mined ounce
|
|
(28
|
)
|
|
(25
|
)
|
|
(21
|
)
|
|
(19
|
)
|
|
Total cash costs per PGM mined ounce, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
434
|
|
|
$
|
441
|
|
|
$
|
428
|
|
|
$
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore tons milled
|
|
174.3
|
|
|
181.9
|
|
|
533.0
|
|
|
556.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs per ore ton milled, before by-product and recycling credits (Non-GAAP)
|
|
$
|
240
|
|
|
$
|
212
|
|
|
$
|
226
|
|
|
$
|
242
|
|
|
By-product credit per ore ton milled
|
|
(18
|
)
|
|
(14
|
)
|
|
(17
|
)
|
|
(18
|
)
|
|
Recycling income credit per ore ton milled
|
|
(13
|
)
|
|
(11
|
)
|
|
(10
|
)
|
|
(8
|
)
|
|
Total cash costs per ore ton milled, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
209
|
|
|
$
|
187
|
|
|
$
|
199
|
|
|
$
|
216
|
|
Stillwater Mining Company
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except per ounce and per ton data)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
East Boulder Mine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of metals sold - Mine Production
|
|
$
|
27,637
|
|
|
$
|
28,714
|
|
|
$
|
86,610
|
|
|
$
|
89,623
|
|
|
Change in mined inventories (palladium and platinum)
|
|
595
|
|
|
514
|
|
|
(1,960
|
)
|
|
(193
|
)
|
|
Total cash costs, before by-product and recycling credits (Non-GAAP)
|
|
$
|
28,232
|
|
|
$
|
29,228
|
|
|
$
|
84,650
|
|
|
$
|
89,430
|
|
|
By-product revenue credit
|
|
(2,950
|
)
|
|
(2,405
|
)
|
|
(8,324
|
)
|
|
(8,532
|
)
|
|
PGM Recycling income credit
|
|
(1,534
|
)
|
|
(1,322
|
)
|
|
(3,451
|
)
|
|
(2,945
|
)
|
|
Total cash costs, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
23,748
|
|
|
$
|
25,501
|
|
|
$
|
72,875
|
|
|
$
|
77,953
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces sold
|
|
50.8
|
|
45.2
|
|
159.7
|
|
142.2
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
544
|
|
|
$
|
635
|
|
|
$
|
542
|
|
|
$
|
630
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces produced
|
|
54.8
|
|
|
51.1
|
|
|
165.2
|
|
|
150.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs per PGM mined ounce, before by-product and recycling credits (Non-GAAP)
|
|
$
|
515
|
|
|
$
|
573
|
|
|
$
|
512
|
|
|
$
|
594
|
|
|
By-product credit per mined ounce
|
|
(54
|
)
|
|
(47
|
)
|
|
(50
|
)
|
|
(57
|
)
|
|
Recycling income credit per mined ounce
|
|
(28
|
)
|
|
(26
|
)
|
|
(21
|
)
|
|
(20
|
)
|
|
Total cash cost, per PGM mined ounce, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
433
|
|
|
$
|
500
|
|
|
$
|
441
|
|
|
$
|
517
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore tons milled
|
|
171.5
|
|
|
151.2
|
|
|
496.7
|
|
|
438.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs per ore ton milled, before by-product and recycling credits (Non-GAAP)
|
|
$
|
164
|
|
|
$
|
194
|
|
|
$
|
171
|
|
|
$
|
204
|
|
|
By-product credit per ore ton milled
|
|
(17
|
)
|
|
(16
|
)
|
|
(17
|
)
|
|
(19
|
)
|
|
Recycling income credit per ore ton milled
|
|
(9
|
)
|
|
(9
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|
Total cash costs per ore ton milled, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
138
|
|
|
$
|
169
|
|
|
$
|
147
|
|
|
$
|
178
|
|
Stillwater Mining Company
All-In Sustaining Costs
(Non-GAAP Financial Measure)
(Unaudited)
All-In Sustaining Costs (Non-GAAP):
This non-GAAP financial measure is used as an indicator from period to period of the level of total cash required by the Company to maintain and operate the existing mines, including corporate administrative costs and replacement capital. The measure is calculated beginning with Costs of metal sold - Mine Production, the Company's most directly comparable GAAP financial measure and adding to it the change in mined inventories, and adjusting for the by-product and recycling income credits, domestic corporate general and administrative costs (excluding any depreciation and general and administrative costs of foreign subsidiaries) and that portion of total capital expenditures associated with sustaining the current level of mining operations. Capital expenditures, however, for Blitz and certain other one-time projects are not included in the calculation.
When divided by the total recoverable PGM mined ounces produced in the respective period, All-In Sustaining Costs per PGM Mined Ounce Produced (Non-GAAP) provides an indication of the level of total cash required to maintain and operate the mines per PGM ounce produced in the period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because the objective of PGM mining activity is to extract PGM material, the all-in cash costs per PGM mined ounce to produce PGM material, administer the business and sustain the operating capacity of the mines is a useful measure for comparing overall extraction efficiency between periods. This measure is affected by the total level of spending in the period and by the grade and volume of mined ore produced.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands, except $/oz.)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
All-In Sustaining Costs
|
|
|
|
|
|
|
|
|
|
Costs of metals sold - Mine Production
|
|
$
|
65,580
|
|
|
$
|
69,004
|
|
|
$
|
208,612
|
|
|
$
|
229,676
|
|
|
Change in mined inventories (palladium and platinum)
|
|
4,652
|
|
|
(1,256
|
)
|
|
(3,568
|
)
|
|
(5,261
|
)
|
|
Total combined cash costs, before by-product and recycling credits (Non-GAAP)
|
|
$
|
70,232
|
|
|
$
|
67,748
|
|
|
$
|
205,044
|
|
|
$
|
224,415
|
|
|
By-product revenue credit
|
|
(6,116
|
)
|
|
(5,004
|
)
|
|
(17,378
|
)
|
|
(18,663
|
)
|
|
PGM Recycling income credit
|
|
(3,876
|
)
|
|
(3,261
|
)
|
|
(8,611
|
)
|
|
(7,424
|
)
|
|
Total combined cash costs, net of by-product and recycling credits (Non-GAAP)
|
|
$
|
60,240
|
|
|
$
|
59,483
|
|
|
$
|
179,055
|
|
|
$
|
198,328
|
|
|
PGM Recycling income credit
|
|
3,876
|
|
|
3,261
|
|
|
8,611
|
|
|
7,424
|
|
|
Total combined cash costs, net of by-product credit (Non-GAAP)
|
|
$
|
64,116
|
|
|
$
|
62,744
|
|
|
$
|
187,666
|
|
|
$
|
205,752
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated corporate general and administrative costs
|
|
$
|
8,692
|
|
|
$
|
8,911
|
|
|
$
|
25,300
|
|
|
$
|
27,652
|
|
|
Corporate depreciation included in consolidated corporate general and administrative costs
|
|
(93
|
)
|
|
(125
|
)
|
|
(303
|
)
|
|
(377
|
)
|
|
General and administrative costs - foreign subsidiaries
|
|
(585
|
)
|
|
(375
|
)
|
|
(1,607
|
)
|
|
(1,244
|
)
|
|
Total general and administrative costs
|
|
$
|
8,014
|
|
|
$
|
8,411
|
|
|
$
|
23,390
|
|
|
$
|
26,031
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalized costs
|
|
$
|
26,730
|
|
|
$
|
27,142
|
|
|
$
|
72,495
|
|
|
$
|
88,319
|
|
|
Capital associated with expansion
|
|
(12,198
|
)
|
|
(11,610
|
)
|
|
(31,909
|
)
|
|
(31,953
|
)
|
|
Total Capital incurred to sustain existing operations
|
|
$
|
14,532
|
|
|
$
|
15,532
|
|
|
$
|
40,586
|
|
|
$
|
56,366
|
|
|
|
|
|
|
|
|
|
|
|
|
All-In Sustaining Costs (Non-GAAP)
|
|
$
|
86,662
|
|
|
$
|
86,687
|
|
|
$
|
251,642
|
|
|
$
|
288,149
|
|
|
|
|
|
|
|
|
|
|
|
|
PGM mined ounces sold
|
|
131.8
|
|
|
117.3
|
|
|
414.7
|
|
|
387.0
|
|
|
PGM mined ounces produced
|
|
138.8
|
|
|
128.1
|
|
|
413.2
|
|
|
388.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of metals sold per PGM mined ounce
|
|
$
|
498
|
|
|
$
|
588
|
|
|
$
|
503
|
|
|
$
|
593
|
|
|
All-In Sustaining Costs per PGM Mined Ounce Produced (Non-GAAP)
|
|
$
|
624
|
|
|
$
|
677
|
|
|
$
|
609
|
|
|
$
|
742
|
|
For a full description and reconciliation of this non-GAAP financial measure to a GAAP financial measure, see
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
section
.
Stillwater Mining Company
Underlying Earnings (Loss)
(Non-GAAP Financial Measure)
(Unaudited)
Underlying Earnings (Loss) (Non-GAAP):
This non-GAAP financial measure is considered by the Company to be reflective of the actual income / loss position. This non-GAAP financial measure provides to investors and analysts the ability to understand the results of the continuing operations of the Company relating to the production, processing and sale of PGMs, by excluding certain items that have a disproportionate impact on the results for the reported periods. The measure is calculated beginning with
Net income (loss) attributable to common stockholders
and adding back impairment charges, one-time event charges and charges infrequent to the Company's continuing operations and the income tax effect of such adjustments. Net loss attributable to noncontrolling interest has been adjusted for the noncontrolling interest's ownership percentage of any applicable impairment charges to which the noncontrolling interest has an ownership. The Company's determination of the components of
Underlying earnings
(loss)
are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts.
Net income (loss) attributable to common stockholders
is reconciled to Adjusted net income (loss) attributable to common stockholders and Underlying earnings (loss) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
12,599
|
|
|
$
|
(11,878
|
)
|
|
$
|
3,452
|
|
|
$
|
(16,352
|
)
|
|
Impairment of property, plant and equipment and non-producing mineral properties
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,772
|
|
|
Income tax effect of adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(997
|
)
|
|
Reorganization, net of tax
|
|
—
|
|
|
1,078
|
|
|
—
|
|
|
1,078
|
|
|
Loss on extinguishment of debt, net of tax
|
|
—
|
|
|
2,606
|
|
|
—
|
|
|
2,606
|
|
|
Adjusted net income (loss) attributable to common stockholders (Non-GAAP)
|
|
$
|
12,599
|
|
|
$
|
(8,194
|
)
|
|
$
|
3,452
|
|
|
$
|
33,107
|
|
|
Impairment loss attributable to noncontrolling interest
|
|
—
|
|
|
151
|
|
|
—
|
|
|
11,808
|
|
|
Underlying earnings (loss) (Non-GAAP)
|
|
$
|
12,599
|
|
|
$
|
(8,043
|
)
|
|
$
|
3,452
|
|
|
$
|
44,915
|
|
ITEM 3