Stillwater Mining had some joint venture suitors for the East Boulder mine, but turned them down, the company stated in its earning report issued Monday.
The company “concluded that this (joint ventures) would eliminate important upside potential for the company and shareholders,” CEO Frank McAllister said.
Instead, the company concentrated on its recovery plan and production efforts and was pleased with both, according to McAllister.
In November, the company put the brakes to expansion plans at its Nye and East Boulder mines, noting that depressed metals prices and the events of Sept. 11 created a “downdraft” for the company.
Instead of ramping up production to 3,000 tons per day at Nye the company stated it would maintain a 2,500-tons-per-day level. At its East Boulder mine, production was pegged at 1,000 tons per day instead of the 2,000 planned earlier for 2002.
Production actually exceeded the target level at Nye, McAllister said, but the company still expected to keep a steady production level based on the budget that was calculated at the 2,500-tons-per-day figure.
McAllister said that during the year, the company hit record production for platinum and palladium, producing 504,000 ounces of pgm (precious group metals). It also hit a record in the fourth quarter, producing 134,000 ounces of pgm. Neither amount included between 13,000-22,000 ounces recovered from development and construction activities at the East Boulder mine.
While Stillwater did not find a suitable strategic partner, it did find a way to raise $60 million by selling 4.3 million shares of stock discounted 10 percent from its Jan. 29 price.
“We’re pleased to have it done, pleased to have it behind us, pleased that it is minimal dilution to provide us with financial flexibility,” McAllister said.
The stock was sold to fund buyers, not corporate buyers, he said in response to questions during the Monday earnings report teleconference. It will be used to cushion the company for any further decline in the economy, he said.
McAllister also projected lower costs for the coming year. Part of the increased spending, particularly with administration, was due to the relocation of corporate offices, restructuring of management and significant consulting expenses. The administrative costs had increased from $9.7 million in 2000 to $22.7 million in 2001, but the company expects spending will be reduced to $13.5 million in 2002.
There were several questions during the teleconference related to the demand for platinum and palladium by the automobile industry, especially with a downturn in that segment of the economy. McAllister was asked if the mine, which has contracts with several major auto manufacturers, has had any of those companies want to renegotiate prices.
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“None whatsoever, at this time,” he responded.
There has been some reduction in demand because auto companies were “thrifting down” the amount of pgm used in catalytic converters, but over the long haul companies would still need the metals, a company official said.
A reduction in demand in the electronics industry was expected, the company stated.
The company’s new management team now includes board member Steve Kearney, who has agreed to serve one-year helping with oversight of production and spending.
Kearney said Stillwater Mining holds a “world class ore body … the highest grade in the world.” He said he felt the management teams in place needed to be left to do their jobs while he focused on reducing costs.
“That’s my role to tackle and I think it can be done,” he said.
While the East Boulder mine will produce at a lower level, progress in developing underground tunnels “looked great,” McAllister said.
Two tunnels, with rails, are complete and can be used full time.
One of the parties interested in Stillwater Mining – Impala Platinum – ended “long standing speculation it may be interested in buying Stillwater,” according to a Reuters report.
According to Reuters, “Impala chief executive Keith Rumble said Stillwater was a business that was being offered up to anyone else in the business but he did not see any value in the acquisition.”
“It will have to paddle its own boat and follow its own destiny,” Rumble said during Impala’s interim earnings report Friday.