3SOF

Palladium getting HOT. See also PAL.

Palladium futures

PAL chart

Stillwater Added to Preferred Stock List
Monday February 4, 12:08 pm ET 
Stillwater Shares Rise After JPMorgan Adds Miner to Preferred List, Citing Supply Dip


NEW YORK (AP) -- Shares of Stillwater Mining Co. rose Monday after JPMorgan added the platinum and palladium miner to a list of preferred stocks, saying global supply problems should boost Stillwater's share price.
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The stock rose 59 cents, or 4.6 percent, to $13.36 in midday trading.

Analyst John Bridges placed Billings, Mont.-based Stillwater on his "Focus List" with a $16 price target.

Power outages in South Africa, where about 80 percent of the world's platinum and 35 percent of its palladium are mined, should constrict supply, he said.

Further, a glut of Russian metals that had flooded that market for years dipped in 2007 to 24 metric tons from 70 metric tons and still is falling, he said.

With the amount of available palladium and platinum dropping, Bridges said he "the potential for a perfect storm," especially for palladium prices.

Palladium, which is sometimes used as a lower-cost substitute for platinum, is a key component of auto parts, such as catalytic convertors.

Palladium prices jumped 5 percent last Friday, helping to boost Stillwater shares. Bridges said the stock should continue to rise to at least his $16 target.

"We are confident of this upside due to the way palladium has lagged the commodity sector during the recent bull-market," Bridges said in a note to clients.

And demand for palladium should only grow further, as advancements in technology and willingness to control carbon emissions means more of the precious metal is needed, he said.

chart updates SWC and PAL

It's the energizer bunny!

Overextended and overbought. (If you hold Long...Close.)
Overextended at +32% above its 50-day line, and overbought. Time to take interim profits and wait for a pullback.


52wk Range: 1.76 - 22.72
Volume: 1,103,484
Avg Vol (3m): 993,852
Market Cap: 512.46M
P/E (ttm): 24.95
EPS (ttm): 0.22
Div & Yield: N/A (N/A)

Technicals
Last Price Quote is:
22.32%above 13-day MA
34.39%above 50-day MA
RS Rating: 68 

Fundamentals
Key Data:
Market Cap (M): $504.07 
P/E Ratio: 25.03 
PEG Ratio: N/A 
Next Earnings: 02/23/2009
Last Analyst Rating: Buy

Updated chart scene...

US-based platinum miner. Recovered.
Fundamentals Favor Platinum, Palladium
Some investors have been reducing their exposure to platinum and palladium over the past few weeks after the launch of exchange-traded funds backed by the metals helped send prices to their highest levels in more than a year. But with a slew of potentially bullish supply-and-demand fundamentals behind the metals—which are used primarily by the auto industry for catalytic converters—as well as a new fund in the wings that would suck even more metal off the market, prices for platinum and palladium are likely headed higher in the longer term.

52wk Range: 2.66 - 14.30
Volume: 3,135,417
Avg Vol (3m): 1,523,690

Technicals
Percentage Gainer

Last Price Quote is:
12.42%above 13-day MA
17.25%above 50-day MA
RS Rating: 91 

Fundamentals
Earnings Expected on Mar 15

Key Data:
Market Cap (M): $1,096.21 
P/E Ratio: 14.19 
PEG Ratio: N/A 
Next Earnings: 05/05/2010
Last Analyst Rating: Neutral

updated chart scene...

Below the 2 year chart

Here's How Stillwater Mining Is Making You So Much Cash...
December 20, 2010

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow (FCF) once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That brings us to Stillwater Mining (NYSE: SWC), whose recent revenue and earnings are plotted below.



Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Stillwater Mining generated $60.5 million cash on net income of $27.5 million. That means it turned 11.8% of its revenue into FCF. That sounds pretty impressive. Still, it always pays to compare that figure to sector and industry peers and competitors, to see how your company stacks up.


Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. TTM = trailing 12 months.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash comes from high-quality sources. They need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much.

So how does the cash flow at Stillwater Mining look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar



Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 25.2% of operating cash flow coming from questionable sources, Stillwater Mining investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 12.4% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 41.4% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Just read the above post...

The Long Case for Stillwater Mining...

Stillwater MIning Company (SWC) is a palladium, platinum, and associated metals (PGMs) producer. Stillwater is the only primary producer in the United States. Its primary mining area is located in the J-M reef. This area is the highest grade PGM ore body in the world. Stillwater has two Montana mines. The Stillwater mine is near Nye, and the East Boulder mine is near McLeod. Columbus, Montana currently houses a smelter and base metals refinery. These parts create an integrated miner, with the ability to mine, smelt, and refine. Stillwater also engages in a growing recycling business.

As with my article on North American Palladium, demand is driving palladium pricing. Automobiles are the story here. Not only has global demand increased, but countries are really cracking down on pollution. Both of these are bullish for palladium pricing. Fuel cells are also an increasing market. Platinum has become a favorite with respect to jewelry. ETFs are also involved in purchasing precious metals, and as they buy more, these prices will continue to rise.

PGMs have further issues, as South African production has been limited due to water and power limitations. South Africa also has rising production costs, safety concerns and political instabilities. It seems there are no reasons for supply growth with respect to PGMs. Lastly, the Russian governments strategic palladium reserves look to be depleted. With much of the world's supply inventory gone, prices should continue to go up from here.

Stillwater is well positioned here. As of 12/31/09 they had proven and probable reserves at 20.6 million ounces of platinum and palladium. There is an additional mineral resource estimated at 117.4 tons at grade of .46 ounces per ton. Stillwater is looking to diversify and expand its holdings. The company plans to increase its recycling facilities. Currently, Stillwater is considering expanding both mines. It is also considering acquiring Marathon PGM Corp. Even in the downturn, this company not only has decreased costs but also increased production.

Even though production in 2010 was lower than 2009, Stillwater increased net income. In 2009, Stillwater produced 391,600 ounces of metal. In 2010, they produced 364,000 ounces. Net income in 2009 was a loss of $2.9 million. In 2010, net income was $33.8 million. Cash and investments increased by almost $59.

In order to decrease costs during the downturn of 2008, SWC restructured operations. During this time miner were transferred from East Boulder to the Stillwater mine, In doing this production was increased from 2008 to 2009 by 13%. At the same time East Boulder's production only decrease 9%. After decreasing East Boulder's work force by half, costs were decreased from $451/oz to $409/oz. Mine developments from 2004-2008 have provided Stillwater the latitude to decrease cap ex in 2009 and 2010.

Stillwater has had a history of selling 70% of its platinum and 80% of its palladium in a long term contract to Ford Motor Company (F). This agreement included floors and ceilings that Stillwater has wanted removed. No matter what happens with this agreement there is still a very liquid market outside current contracts. It seems platinum and palladium miners have price advantage, and may be able to get even higher pricing going forward. Stillwater is also expanding its recycling business, and seems willing to continue doing so.

Since 2007 Stillwater has not seen much for sales increases per ounce, but they are seeing an ability to make a profit. As of the first nine months of last year Stillwater became profitable. It seems this will continue as the price of palladium and platinum are both beneficiaries of inflation. Increasing car build rates overseas, and domestically should continue to push prices higher. Also, increasing environmental controls increase need for platinum and palladium catalysts. Much of demand since 2004 with respect to palladium is coming from China. Platinum demand has been decreasing in Japan but that decrease has been substituted by demand in China.

It is also very important to discuss where platinum and palladium comes from. Many of the areas of production are in volatile areas prone to supply disruptions. This also creates large movements in price. Palladium production by location in 2009 was:

South Africa- 2.53 million ounces
Russia- 2.6 million ounces
Russian inventory- .96 million ounces
North America- .75 million ounces
Others- .335 million ounces
Recycling- .95 million ounces

Platinum production by location in 2009 was:

South Africa- 4.725 million ounces
Russia- .745 million ounces
North America- .255 million ounces
Others- .33 million ounces
Recycling- .8 million ounces

It is important to note that in 2009 world platinum production was a large decrease when compared to 2007. In 2007 there were 9.595 million ounces produced and 8.125 million ounces in 2009. Palladium has the same story unveiling, as 2007 world palladium production 7.535 million ounces and in 2009 6.855 million ounces were produced. South Africa controls a majority of production in both metals and any political issues would significantly increase prices.


Russian inventory drawdowns of palladium are a large part of palladium pricing. It is estimated that over the last 20 years Russian inventories have accounted for 27% of overall production as stated by Stillwater management. Russian management has stated that inventories are now depleted, and thus creating an uptrend in pricing. Although there has been increasing inventory from recycling, it does not seem to be enough to replace Russian inventory. Market balance with respect to palladium and platinum also seems to show an increased move upward with respect to pricing. In 2007, palladium saw a global surplus of 1.745 million ounces. This number decreased significantly to .535 million in 2008, and an increase to .655 in 2009. Stillwater estimates a negative draw down to surpluses in upcoming years. In 2007 and 2008 platinum saw demand outpace production with draw downs of .08 and .24 million ounces. In 2009, production increases and consumption decreases created a surplus of .14 million ounces.

Stillwater believes that palladium will be used more in upcoming years based on ratios tightening when comparing platinum, palladium and rhodium. This seems to be coming from cost constraints, and a price comparison shows:

Rhodium- $2275/oz.
Platinum- $1715/oz.
Palladium- $644/oz.
*2010 pricing used as of 3rd quarter

It seems that since these metals are interchangeable, a push for palladium use would be seen. Although, in diesel applications platinum is beginning to be used more as the ratio shows increased platinum usage from 6:1 to 2:1. The ratio of rhodium to palladium has shown an increase in rhodium usage from 16:1 to 8:1. It is Stillwater's belief that palladium demand will increase and its ratio to both platinum and rhodium is bullish palladium. This thought process motivated Stillwater to purchase Marathon PGM. This purchase stands to increase production by 40%. Measured and indicated resources show mine life of 12 years at 200000 ounces of PGM and 39 million pounds of copper per year.


In summary, Stillwater is a buy on current market conditions present in platinum and palladium. At current emerging market automobile purchases, these metals will become increasingly difficult to obtain. Those already in the market stand to see large profit increases until other projects can come on line. As with North American Palladium (PAL), this company is a buy as long as current market demand continues.

Stillwater Mining Swings to Q4 Profit on High PGM Prices...

swung to a profit in the fourth quarter as the company benefited from higher platinum group metal (PGM) prices and a recovery in recycling volumes.

For the fourth quarter, the company reported $16.5 million in net income, compared to a $5.8 million loss in the prior year period. Stillwater said the fourth quarter 2009 results included an $8.1 million loss relating to the retirement of debt.

Besides processing PGM and palladium mine concentrates from its operations in south central Montana, Stillwater also recycles spent catalyst material to recover the contained PGMs.

Revenues during the period totaled $144.7 million, up 42.1% from a year earlier. Sales from mined PGMs rose 31% to $105.1 million, reflecting higher prices as the global auto industry recovered and exchange traded funds sparked investor interest.

Sales from mine production totaled 117,100 ounces in the fourth quarter at an overall average realization of $844 per ounce, compared to 128,000 ounces at $579 per ounce in the year-ago period. Average realization for palladium also rocketed to $619 per ounce from $374 per ounce.

"Not only did PGM prices increase during 2010 as we had predicted, but the market price of palladium, our principal product, doubled and converged upward toward the market price of platinum -- advancing from 21% of the price of platinum at the bottom of the recession to 45% at the end of 2010," said chairman and CEO Francis R. McAllistair.

Recycling revenues jumped by 76% to $38.0 million during the most recent quarter, due to greater volumes of processing materials. Volumes of recycling materials available for processing had fallen off in 2009, as the steep drop in PGM prices reduced the incentive to recycle and fewer cars were scrapped.

Total cash costs, after by-product and recycling credits, were $432 per ounce, a 22.7% year-over-year increase. The company said this was due to lower overall ounce production in 2010, as mine ouput from the Stillwater mine in south central Montana suffered because of operational and ore grade problems.

For the full year 2010, the company reported a profit of $50.4 million, or $0.51 per diluted share, versus a 2009 net loss of $8.7 million, or $0.09 per share. Revenues rose to $555.9 million from $394.4 million in 2009.

In November last year, Stillwater completed the $173 million acquisition of Marathon's platinum group metal assets, consisting of a PGM-copper project near the town of Marathon, Ontario - expected to begin construction in 2013. A feasibility study of the project indicated a 12 year mine life, with annual production of approximately 200,000 palladium and platinum ounces, along with 37 million pounds of copper per year.

At year-end, Stillwater had available cash and equivalents of $208.4 million.

Above the 50-day...Oversold!
Stillwater - US-based platinum miner.
25-Feb-11 09:09 ET In Play Stillwater Mining added to U.S. Focus List at Credit Suisse
Production cost now about $430/oz.

Day's Range: 22.64 - 23.91
52wk Range: 10.52 - 25.57
Volume: 3,364,322
Avg Vol (3m): 3,785,170
Market Cap: 2.34B
P/E (ttm): 87.23
EPS (ttm): 0.27
Div & Yield: N/A (N/A)

Technicals
Close Above the 50-day EMA
Close Above the 13-day EMA
Percentage Gainer

Last Price Quote is:
1.97%above 13-day EMA
7.35%above 50-day EMA
RS Rating: 75 

Stillwater Mining Reports Highest Earnings in a Decade...

-- Earnings of $50.4 million for 2010
-- PGM prices increased throughout 2010 as global auto demand built and new ETFs sparked investor interest
-- Shares available for trading doubled as Norilsk Nickel, the Company's former majority shareholder, exited via a secondary offering in December
-- Acquisition of the PGM assets of Marathon PGM Corporation was completed in November
-- Recycling volumes rebounded in 2010 from their steep decline in 2009
-- Mine production  at Stillwater Mine suffered from operational and ore grade challenges

Stillwater Mining Company today reported 2010 net income of $50.4 million, or $0.51 per diluted share, on revenues of $555.9 million. Contributing to the net income in 2010 were higher PGM prices and a recovery in recycling volumes, along with continued focus on productivity and controlling costs.

The 2010 net income compares to a full-year 2009 net loss of $8.7 million, or $0.09 per share, on revenues of $394.4 million. Factoring into the net loss in 2009 was an $8.1 million non-cash charge related to the issuance during the fourth quarter of approximately 1.8 million common shares to retire $15 million principal amount of the Company's outstanding 1.875% convertible debentures. Results for the year 2009 also reflected significant operating losses incurred early in the year as production costs in the Company's mines for a time exceeded the Company's average sales realizations. However, restructuring efforts and a gradual increase in PGM prices had reversed this trend by the end of the first quarter of 2010.

The Company's reported net income for the fourth quarter of 2010 was $16.5 million, or $0.16 per diluted share, on revenues of $144.7 million. For the fourth quarter of 2009, the Company reported a net loss of $5.8 million, or $0.06 per share, on revenues of $101.8 million. The 2009 fourth quarter included the effect of the 2009 loss on the partial retirement of the convertible debentures noted above.

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

"With the recovery of the PGM markets, we were able to refocus some of our attention in 2010 on growth opportunities, allowing us to diversify our operations with the goal of building value for our shareholders. In November, we closed the acquisition of the PGM assets of Marathon PGM Corporation, a Canadian exploration company with an attractive PGM-copper project situated near the town of Marathon, Ontario on the north shore of Lake Superior. The transaction was valued at US$173.4 million (which included $36.0 million of deferred income tax liability assumed). The Marathon project is currently in the permitting phase, with construction hopefully to begin in 2013 and mining the following year. The feasibility study on the project, based upon currently completed drilling, indicates about a 12-year mine life, with annual production of approximately 200,000 palladium and platinum ounces, along with about 37 million pounds of copper per year. Construction cost is projected to fall between $400 million and $450 million, to be firmed up by a detailed engineering study to be conducted over the next 18 months or so.

"The Marathon project in our view not only brings us a financially attractive growth opportunity, but it also advances our diversification efforts on several fronts. With most of the world's PGM production coming from Russia and South Africa, we view the acquisition of a Canadian PGM property as offering us operating and geographic diversity within another very stable political environment. While the Marathon project certainly falls within our core focus of palladium and platinum, it also offers us involvement in the copper market, which has strong fundamentals of its own at this time and is an area where our management group has substantial experience. The PGM cost structure of the Marathon project, with the potential for copper credits, at recent metal prices would reduce our average corporate PGM cash cost per ounce.

"Along with the Marathon project, the Company also acquired from Marathon PGM Corporation the Geordie Lake property, a promising, partially explored PGM prospect about eight kilometers to the west of Marathon, and an interest in an exploration property in Manitoba known as Bird River. Following the completion of the Marathon transaction, we announced our intent to also acquire other exploration properties between Marathon and Geordie Lake from Benton Resources Corp. To facilitate exploration of all these properties, we recently organized a dedicated exploration team, comprised of geologists from our own operations and from Marathon. We expect to spend between $4 and $5 million in 2011 on exploring these Canadian properties and perhaps others. During 2010, the Company also exercised an option to purchase a 15% interest in Marathon Gold Corporation, successor to the non-PGM assets that Marathon PGM held prior to the acquisition which includes an attractive gold discovery in Newfoundland that they have announced.

"In mid-December we also announced that our former controlling shareholder, an affiliate of the large Russian mining company MMC Norilsk Nickel, had completed a secondary offering, selling all their Stillwater common shares. In June of 2003, Norilsk Nickel acquired a 55% equity interest in Stillwater paying $100 million in cash and about 877,000 ounces in palladium metal, valued at that time at about $179 per ounce, as the balance of their purchase price. The 2003 acquisition was a strategic marketing investment by Norilsk Nickel to provide the U.S. auto industry with assurance that there would be adequate supplies of palladium to meet their catalytic converter requirements. By 2010 the objectives of their marketing strategy had been met and Norilsk Nickel determined that they would dispose of their Stillwater interest along with certain other assets in order to better focus on their core business. Although Stillwater did not receive any of the proceeds of the Norilsk Nickel secondary offering, we do benefit by virtually doubling the number of our shares trading without diluting any of our other shareholders. The oversubscribed offering closed at $19.50 per share, a small discount to the share price at the time of announcement."

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

Mining costs, on a per-ounce basis, also increased in 2010 compared to the year earlier. Total cash costs per ounce, after by-product and recycling credits, averaged $397 in 2010, 10.3% above 2009 total cash costs per ounce of $360. By-product and recycling credits increased in 2010 as a result of stronger PGM prices and recycling volumes. If total cash costs are considered before the benefit of by-product and recycling credits, 2010 total cash costs as adjusted would be $480 per ounce, or 13.1% above the comparable $417 per ounce for 2009. Stillwater Mine's total cash costs (with the benefit of credits) averaged $380 per ounce in 2010 or 10.5% more than the $344 per ounce achieved in 2009. East Boulder mine costs (with the benefit of credits) averaged $442 per ounce in 2010, 8.6% more than $407 per ounce in 2009. Most of the increase in total cash costs per ounce was attributable to the lower ounce production in 2010.

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

The Company's smelting and refining complex in Columbus, Montana processes mine concentrates and recycles spent catalyst materials received from third parties. A portion of the recycling material is purchased for the Company's own account and the balance is toll processed on behalf of others for a fee. Volumes of recycling materials available for processing had fallen off in late 2008 and in 2009, as the steep drop in PGM prices reduced the incentive to collect and recycle spent automotive catalysts and fewer cars were scrapped. However, the recycling market recovered substantially during 2010. In total, the Company processed recycling material containing 399,400 ounces of platinum, palladium and rhodium through the smelter and refinery during 2010, up 59.1% from the 251,000 ounces recycled during 2009 and essentially equal to the 398,000 ounces processed in 2008. In the fourth quarter of 2010, the Company fed 102,400 recycling ounces to the smelter, compared to 90,900 ounces fed in the same period of 2009. The Company's recycling business had net income for the year 2010 of $11.5 million (including associated financing income), compared to earnings of $5.9 million in 2009.

Commenting on the performance of Stillwater's existing operations, Mr. McAllister observed, "Despite a few challenges with production at the Stillwater Mine in 2010, overall we are extremely pleased with the Company's performance for the year. Our 2010 reported net income of $50.4 million makes 2010 the best year financially that we have had in almost a decade. Even after funding $63.6 million of the Marathon acquisition out of internal cash flow, our cash position remains stronger at the end of 2010 than it was when the year started. Both mines continue to perform very well, with excellent productivity and good cost control. The Stillwater Mine problems in 2010 were almost entirely due to realizing a slightly lower grade than expected within certain stopes in the off-shaft area of the mine -- an issue we can plan around in the future -- and some unscheduled remediation work during the second quarter. East Boulder Mine is consistently performing on plan.

"Our recycling business recovered nicely during 2010 after the steep drop in processing volumes during 2009. The new crushing and sampling unit and automated x-ray facility that will increase our ability to handle large volumes of recycling material are now installed and coming on line. Most of the installation work was handled by our own employees, who took the concept and ran with it. The original smelter furnace, which sits next to the new furnace that was placed into service in May 2009, has now been stripped of its old refractory brick and is ready to be reconfigured as a slag cleaning furnace during 2011. And we are currently evaluating several additional technological improvements that potentially could add to our operating and financial performance in the future.

"As we discussed last quarter, in early 2010 we assembled a team of experienced geologists and engineers to evaluate the potential of various undeveloped areas along the J-M Reef. In its assessments, the team considered such factors as prospective ore grades, cost to develop and mine, availability of infrastructure, and the likely timeline required. Nine separate projects were considered, and two projects quickly emerged as the preferred options. The first, known as the Blitz project, extends the existing Stillwater Mine development about 20,000 feet toward the eastern extremity of the J-M Reef by driving two parallel drifts on the 5,000 and 5,200 levels. The other, the Graham Creek project, will extend the existing East Boulder Mine development about 8,200 feet toward the west using an existing tunnel boring machine. Although these were both engineered as five-year projects with no contribution to production until ventilation raises can be installed during the last year of development, we will evaluate opportunities to bring on production earlier if attractive areas are identified."

Turning to 2011 guidance for investors, Mr. McAllister added, "After carefully reviewing our plans for 2011, we now feel comfortable in giving public guidance for this year. As we had indicated previously, we find that our operations seem to function optimally with targeted mine production of approximately 500,000 palladium and platinum ounces per year. We have structured our mine plans toward achieving that level of production in 2011, assuming some continuation of the lower grades seen in the off-shaft at Stillwater last year, and resuming some production on the east side of the mine to offset that reduction. The east side was shut down in 2008 when PGM prices dropped -- grades on the east side tend to be higher than average, but mining efficiency there is hindered by poor ground conditions. At the current higher PGM prices, it makes sense to incur the higher cost in order to benefit from the extra production. It appears that our average cost per ounce across the two mines should average about $430 per ounce (a non-GAAP measure) in 2011. That is up about 8% over the $397 per ounce averaged in 2010, but it actually is better than the average costs realized in the second half of 2010. Capital expenditures are budgeted at $120 million for the year, up from just $50.3 million in 2010. Of that total, about $10 million is attributable to the Marathon project, another $10 million to the Blitz and Graham Creek efforts, and about $8 million is for a new slag cleaning circuit at our Columbus smelter operation. The remaining funds will go for equipment replacement and toward an expanded mine development program.

"In summary," Mr. McAllister concluded, "during 2011 we will maintain our focus on the sustainability of our operations, investing in improvements to developed state and mining efficiency. We will also emphasize growing the Company's recycling business. We are currently in the process of assembling a project team for Marathon and will continue to advance the permitting process there. We will expand our corporate expenditures for exploration and for marketing palladium -- both programs that were sharply cut back in 2009 -- and will continue research into new technological avenues. And so long as our cash flow remains strong, we will seek additional investment opportunities to build value for our shareholders."

Cash Flow and Liquidity

At December 31, 2010, the Company's available balance of cash and cash equivalents and highly liquid short-term investments (excluding restricted cash) was $208.4 million, up from $201.2 million at December 31, 2009, and it reported $196.0 million of debt outstanding. Available cash and cash equivalents at December 31, 2010, was $19.4 million, down from $166.7 million at December 31, 2009. Late in 2010, the Company expended cash of $63.6 million (along with issuing 3.88 million common shares) in its acquisition of the PGM assets of Marathon PGM Corporation. The Company also restructured its investment guidelines during 2010, so that a larger share of available liquidity is now in short-term investments rather than in cash and cash equivalents. Working capital associated with the recycling business, constituting marketable inventories and related recycling advances, increased to $41.5 million at the end of 2010, from $28.6 million at the end of 2009.

Net cash provided by operating activities (which includes changes in working capital) totaled $28.6 million in the 2010 fourth quarter and $123.9 million for the full year. By comparison, $8.0 million of cash was provided from operations in the fourth quarter of 2009 and $59.7 million for the full year 2009. Cash generation strengthened in 2010 primarily as a result of increased market prices for palladium and platinum, the Company's primary products.

Capital expenditures in 2010 totaled $50.3 million, of which $14.7 million pertained to the 2010 fourth quarter. Capital spending in 2009 totaled $39.5 million, of which $7.3 million was spent during the fourth quarter of 2009. The Company increased capital spending modestly in its 2010 budget in response to higher PGM prices and correspondingly higher projected cash availability during 2010.

Outstanding debt at December 31, 2010, was $196.0 million, essentially unchanged from the end of 2009. The Company's total debt includes $166.5 million outstanding in the form of convertible debentures due in 2028 and $29.5 million of Exempt Facility Revenue Bonds due in 2020.

Fourth Quarter Results -- Details

In the fourth quarter of 2010, the Company's mining operations produced 121,100 ounces of palladium and platinum, including 86,600 ounces from the Stillwater Mine and 34,500 ounces from East Boulder Mine. For the comparable quarter of 2009, Stillwater Mine produced 102,800 ounces and East Boulder Mine produced 35,500 ounces of palladium and platinum. The 12.4% decrease in total output between 2010 and 2009 is mostly the result of lower average realized ore grades at the Stillwater Mine.

In the 2010 fourth quarter, total cash costs, after by-product and recycling credits, were $432 per ounce, a 22.7% increase over the fourth quarter 2009 average of $352 per ounce. Excluding the benefit of by-product and recycling credits, total cash costs in the fourth quarter of 2010 averaged $506 per ounce, up 20% compared to the $404 per ounce averaged in the fourth quarter of 2009. Much of this increase in cost per ounce is attributable to the lower ounce production in 2010.

Sales from mine production totaled 117,100 ounces in the fourth quarter of 2010 at an overall average realization of $844 per ounce, compared to 128,000 ounces at $579 per ounce in the fourth quarter of 2009. The Company's average realization on palladium sales from mine production was $619 per ounce in the 2010 fourth quarter, compared to $374 per ounce in the same period of 2009. Palladium realizations during 2009 benefited from the floor prices in the auto contracts, and consequently were higher than the corresponding market prices. The comparable average realization on platinum, reduced by the effect of contractual price caps on 14% of production in both periods, was $1,557 per ounce in the fourth quarter of 2010, up from $1,296 per ounce in the 2009 fourth quarter.

During the fourth quarter of 2010, the Company processed about 102,400 ounces of PGMs from recycled catalytic materials. By comparison, in the fourth quarter of 2009, the Company processed about 90,900 ounces of recycled material. The Company processes both recycled material it purchases from third parties and material it toll processes on behalf of others for a fee. Volumes of material available for recycling increased in 2010 in response to higher PGM prices.

Revenues for the fourth quarter 2010 totaled $144.7 million, up 42.1% from $101.8 million realized in the fourth quarter of 2009. Proceeds from sales of mined PGMs totaled $105.1 million in the 2010 fourth quarter, up from $80.2 million in the same quarter of 2009, reflecting higher PGM prices during the fourth quarter 2010. Recycling revenues increased to $38.0 million in the fourth quarter of 2010 from $21.6 million in the 2009 fourth quarter because of the higher sales volumes and realized prices in 2010. Resales of finished metal purchased in the open market generated $1.6 million in revenue during the fourth quarter of 2010.

Costs of metals sold (before depletion, depreciation and amortization expense) increased to $96.1 million in the 2010 fourth quarter from $72.7 million in the fourth quarter of 2009. Mining costs included in costs of metals sold increased to $58.9 million in the 2010 fourth quarter from $52.4 million in the 2009 fourth quarter, reflecting some cost inflation and increased royalties and taxes on the higher sales revenues. Recycling costs, largely comprised of the cost to purchase spent catalytic materials for processing, totaled $35.4 million in the fourth quarter of 2010, compared to $20.3 million in the fourth quarter of 2009, reflecting both the greater volume of material recycled and higher metal values in the fourth quarter 2010. The cost to purchase 3,000 ounces of palladium for resale added $1.8 million to fourth quarter 2010 costs.

Depletion, depreciation and amortization expense increased to $18.4 million in the 2010 fourth quarter from $17.6 million in the same period of 2009. The increase is attributable to the capital placed into service during the fourth quarter 2010, offset in part by lower mine production.

General and administrative ("G&A") costs increased to $12.7 million in the fourth quarter of 2010 from $8.0 million in the 2009 fourth quarter, mostly reflecting one-time expenses in 2010 associated with the Marathon acquisition of approximately $1.5 million and contractual support for the Norilsk Nickel secondary offering of Stillwater shares of approximately $5.0 million.

Consolidated net income of $16.5 million recorded for the fourth quarter of 2010 included, by business segment, $27.9 million of income from mining operations and $2.7 million income from recycling activities (including associated financing income), less corporate costs including $12.7 million of G&A expense and about $1.3 million of unallocated net interest expense.

The net loss of $5.8 million recorded for the fourth quarter 2009 included, by business segment, $10.2 million of income from mining operations and $1.5 million income from recycling activities (including associated financing income), less corporate costs including $7.9 million of G&A expense and about $1.5 million of unallocated net interest expense. There was also a non-cash inducement loss of $8.1 million recorded in fourth quarter 2009, reflecting the value of excess shares issued in a transaction that exchanged equity for $15.0 million of outstanding debentures during the 2009 fourth quarter.

Year End Results -- Details

For the full year 2010, Stillwater Mining Company produced 485,100 ounces of palladium and platinum from its mining operations, including 351,700 ounces from the Stillwater Mine and 133,400 ounces from the East Boulder Mine. In 2009, the Company's mines produced 529,900 ounces -- 393,800 ounces at Stillwater and 136,100 ounces at East Boulder. The lower production during 2010 reflected lower ore grades realized in the off-shaft area at the Stillwater Mine, as well as diversion of some production effort into unscheduled remediation during the second quarter of 2010.

Palladium and platinum sold from mine production during 2010 totaled 489,400 ounces at an overall average realization of $721 per ounce, compared to 515,700 ounces sold during 2009 at a combined average realization of $549 per ounce. Broken out by metal, total sales from mine production in 2010 included 377,600 ounces of palladium at an average realization of $495 per ounce and platinum sales of 111,800 ounces at an average realization, net of the contractual price ceiling on 14% of mine production, of $1,488 per ounce. In 2009, sales of mined palladium totaled 392,800 ounces at an average realized price, including the benefit of floor prices, of $365 per ounce and platinum sales totaled 122,900 ounces at an average price, net of the price ceiling, of $1,137 per ounce in 2009.

The level of recycling activity increased during 2010, with a total of 399,400 ounces of spent catalytic material processed, up from 251,000 ounces processed in 2009. The Company processes both recycling material purchased from third parties and material tolled on behalf of third parties for a fee. The higher volumes processed in 2010 reflected increased PGM prices that incentivized more catalyst recycling worldwide.

Total Company revenues for 2010 equaled $555.9 million, up substantially from $394.4 million of revenue in the previous year, as higher PGM prices and higher recycling volumes prevailed in 2010. Sales of mined PGM ounces contributed $381.0 million to 2010's total revenue and $306.9 million to 2009's revenue, with the difference driven by price. Recycling revenues more than doubled to $168.6 million in 2010 from $81.8 million in 2009, as the volume of recycled materials processed increased, coupled with higher PGM market prices. Other sales, mostly of metal purchased to meet resale obligations, contributed $6.2 million to 2010 revenue, up from $5.8 million in 2009.

Costs of metals sold, excluding depletion, depreciation and amortization expense, increased by 35.6% to $393.7 million for 2010 from $290.8 million in 2009, driven mostly by the growth in recycling activity. The costs of mining operations included here increased by 10.0% to $230.0 million in 2010 from $209.1 million in 2009, reflecting 2010 increases in labor and materials costs, along with higher royalties and taxes on the increased revenue. Recycling costs of metals sold increased by 107.3% to $157.3 million in 2010 from $75.9 million in 2009, mirroring the higher sales volumes. Most of the costs of recycling represent costs to purchase the spent catalyst material itself, as the actual processing is a relatively small portion of the total cost. Costs of other miscellaneous metals purchased for resale totaled $6.4 million in 2010, up from $5.7 million the year before.

Depletion, depreciation and amortization expense increased to $71.6 million in 2010 from $70.4 million in 2009. The increase reflects the additional capital placed into service in 2010, offset in part by lower mine production.

Marketing -- The Company limited its market development efforts for palladium to some extent during 2010. The Company spent $2.4 million in support of marketing programs during 2010, up slightly from $2.0 million in 2009.

General and administrative -- Executive marketing expenses discussed above, general and administrative costs were $33.0 million in 2010, compared to $25.1 million in 2009, a 31.5% increase, due to approximately $1.5 million in acquisition expenses and approximately $5.0 million in contractual support of the Norilsk Nickel secondary offering, a write-down of $0.6 million in advances for inventory purchases and increased share-based compensation expense. The Company also recorded valuation allowances totaling $1.2 million in early 2009, including adjustments to trade receivables, long-term investments and advances, and inventories. The Company also recorded an $8.1 million inducement loss in 2009 for shares issued in a transaction exchanging equity for $15.0 million of outstanding debentures.

The Company's consolidated net income for the full year 2010 was $50.4 million. Broken out by business segment, mining operations contributed $80.0 million and recycling contributed $11.5 million of earnings (including associated financing income). At the corporate level, G&A expense totaled $35.5 million and unallocated net interest expense equaled $5.6 million.

The Company's net loss for the full year 2009 was $8.7 million. Breaking this out by business segment, mining operations contributed $26.9 million and recycling contributed $6.4 million of earnings (including associated financing income). At the corporate level, G&A expense totaled $28.2 million for the year and unallocated net interest expense equaled $5.7 million. An $8.1 million inducement loss for shares issued to retire debt was also recorded as a corporate item.

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Stillwater Mining Company will host its 2010 year-end results conference call at 12:00 noon Eastern Standard Time on February 22, 2011. The conference call dial-in numbers are 800-230-1951 (U.S.) and 612-332-0632 (International). The conference call will simultaneously be webcast on the Internet via the Company's website at www.stillwatermining.com. To access the conference call on the Company's website, go to the Investor Relations section under Presentations and click on the link to the conference call. A replay of the conference call will be available on the Company's website or by a telephone replay, numbers (800) 475-6701 (U.S.) and (320) 365-3844 (International), access code 192919, through March 1, 2011, ending at 11:59 p.m. Eastern Standard Time.

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Stillwater Mining Company is the only U.S. producer of palladium and platinum and is the largest primary producer of platinum group metals outside of South Africa and the Russian Federation. The Company's shares are traded on the New York Stock Exchange under the symbol SWC. Information on Stillwater Mining can be found at its Website: www.stillwatermining.com.

Some statements contained in this news release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, therefore, involve uncertainties or risks that could cause actual results to differ materially. These statements may contain words such as "desires," "believes," "anticipates," "plans," "expects," "intends," "estimates" or similar expressions. 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. Such statements include, but are not limited to, comments regarding the economic environment, the timing and cost of the Marathon development, the outlook for the Company's operations, the expectation of future automotive PGM supply agreements, expansion and development plans, the status of research efforts, projections of mining costs, ore grades, production and recovery rates, permitting, labor matters, financing needs and the terms of future credit facilities, capital expenditures, changes in processing capacity, cost reduction measures, safety, timing for engineering studies and environmental permitting and compliance, future surety requirements, outstanding litigation and views on the palladium and platinum market. Additional information regarding factors that could cause results to differ materially from management's expectations is found in the section entitled "Risk Factors" in the Company's 2010 Annual Report on Form 10-K. The Company intends that the forward-looking statements contained herein be subject to the above-mentioned statutory safe harbors. Investors are cautioned not to rely on forward-looking statements. The Company disclaims any obligation to update forward-looking statements.

Reconciliation of Non-GAAP measures to costs of revenues

The Company utilizes certain non-GAAP 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 from one to three months between ore production and sale of the finished product. Sales in any period include some portion of material mined and processed from prior periods as the revenue recognition process is completed. Consequently, while costs of revenues (a GAAP measure included in the Company's Statement of Operations and Comprehensive Income/(Loss)) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP 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 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 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 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 revenues, they cannot meaningfully be used to develop measures of profitability. A reconciliation of these measures to costs of revenues for each period shown is provided as part of the following tables, and a description of each non-GAAP measure is provided below.

Total Costs of Revenues: For the Company on a consolidated basis, this measure is equal to consolidated costs of revenues, as reported in the Statement of Operations and Comprehensive Income/(Loss). For the Stillwater Mine, East Boulder Mine, and other PGM activities, the Company segregates the expenses within costs of revenues that are directly associated with each of these activities and then allocates the remaining facility costs included in consolidated costs of revenues in proportion to the monthly volumes from each activity. The resulting total costs of revenues measures for Stillwater Mine, East Boulder Mine and other PGM activities are equal in total to consolidated costs of revenues as reported in the Company's Statement of Operations and Comprehensive Income/(Loss).

Total Production Costs (Non-GAAP): Calculated as total costs of revenues (for each mine or consolidated) adjusted to exclude gains or losses on asset dispositions, costs and profit from secondary recycling, and changes in product inventories. This non-GAAP measure provides an indication of the total costs incurred in association with production and processing in a period, before taking into account the timing differences resulting from inventory changes and before any effect of asset dispositions or secondary recycling activities. The Company uses it as a comparative measure of the level of total production and processing activities in a period, and may be compared to prior periods or between the Company's mines. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

When divided by the total tons milled in the respective period, Total Production Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the cost 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. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Production Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Production Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

When divided by the total recoverable PGM ounces from production in the respective period, Total Production Cost per Ounce (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the cost per ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because extracting PGM material is ultimately the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Production Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Production Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated (for each mine or consolidated) as total costs of revenues adjusted to exclude gains or losses on asset dispositions, costs and profit from recycling activities, depletion, depreciation and amortization and asset retirement costs and changes in product inventories. The Company uses this measure as a comparative indication of the cash costs related to production and processing in any period. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

When divided by the total tons milled in the respective period, Total Cash Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of 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. And 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 Cash Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Cash Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

When divided by the total recoverable PGM ounces from production in the respective period, Total Cash Cost per Ounce (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Cash Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Cash Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

Total Operating Costs (Non-GAAP): This non-GAAP measure is derived from Total Cash Costs (Non-GAAP) for each mine or consolidated by excluding royalty, tax and insurance expenses from Total Cash Costs (Non-GAAP). Royalties, taxes and insurance costs are contractual or governmental obligations outside of the control of the Company's mining operations, and in the case of royalties and most taxes, are driven more by the level of sales realizations rather than by operating efficiency. Consequently, Total Operating Costs (Non-GAAP) is a useful indicator of the level of production and processing costs incurred in a period that are under the control of mining operations. As noted above, because this measure does not take into account the inventory timing differences that are included in costs of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

When divided by the total tons milled in the respective period, Total Operating Cost per Ton Milled (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of controllable 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. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Operating Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Operating Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

When divided by the total recoverable PGM ounces from production in the respective period, Total Operating Cost per Ounce (Non-GAAP) -- measured for each mine or consolidated -- provides an indication of the level of controllable cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Operating Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Operating Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.