BILLINGS, MT -- 11/17/08 --
STILLWATER MINING COMPANY (NYSE: SWC) today
announced immediate plans to restructure its operations and reduce and
redeploy portions of its workforce. The move is largely focused on the
Company's East Boulder Mine operations south of Big Timber, although the
Company's Stillwater Mine at Nye, Columbus Metallurgical operations, and
administrative offices in Columbus and Billings are also affected. The
action follows the previously announced decision to review all operations
in the face of the rapid third quarter deterioration in economic conditions
during which prices for palladium and platinum, the Company's primary
products, fell more than 60% from levels earlier in the year.
Commenting on the announcement, Francis R. McAllister, Stillwater's
Chairman and CEO, said, "The restructuring we are announcing today is the
result of a thoughtful and carefully planned process intended to ensure the
long-term sustainability of the Company. We have great people and a great
workforce that we wish to preserve to the extent possible. We regret the
adjustments will require reductions and redeployment of some of our
employees. While the adjustments are unavoidable under the current market
conditions, they are designed to preserve the Company's operating options,
improve our competitive position and enhance our resilience to market price
volatility for platinum-group metals (PGMs)."
Mr. McAllister continued, "Our plan shows that we can operate cash positive
at current prices on a pared down basis at the East Boulder Mine. We are
targeting a viable operation that will yield between 105,000 and 120,000
ounces of PGMs annually for the next 18 to 24 months and require only
nominal primary development, thereby conserving its developed state and our
options for the mine. Operational success under the restructured plan is
essential to the continued operation of the mine and improved metal prices
may dictate whether we can continue operating beyond that time frame.
Further, putting the plan into effect will depend on quickly working out
details with the United Steel Workers Union Local 11-0001 representing our
hourly workforce.
"The Company is providing the required 60-day WARN notice to all 526
employees at its East Boulder Mine, pursuant to the Worker Adjustment and
Retraining Notification ('WARN') Act, and is notifying the appropriate
government entities. East Boulder Mine employees have been directed not to
report to work, unless and until they are advised otherwise, while the
Company discusses its plans for the East Boulder operations with Union
representatives. Once a restructuring plan is finalized the Company
expects operations at the mine to resume promptly, although with a
substantially reduced workforce.
"The Company will immediately begin offering positions at its Stillwater
Mine operations for a portion of the miners at the East Boulder Mine.
Although the total number of miners at the Stillwater Mine will increase,
some workforce reductions on a smaller scale are slated there. In the near
term we also plan to implement a schedule change at the Stillwater Mine
that will result in our miners taking broader responsibility for workplace
support, thereby modifying the task structure of the workforce. With the
restructuring and added miner workforce we expect the Stillwater Mine to
produce at a rate of between 345,000 and 370,000 ounces of PGMs annually."
Emphasizing the extent of the restructuring, Mr. McAllister added, "Our
objective at current prices is to manage for positive cash flow to maintain
adequate liquidity in the face of the lower PGM prices. We are reviewing
the cost of all business activities and paring capital, operating, support
and corporate expenditures to those essential to the restructured
operation.
"Capital expenditures will be reduced to about $40 million in 2009,
compared with about $90 million in 2008. Mine infrastructure development
will be reduced at both mines and capital expenditures limited to
completing only critical projects that will maintain our ability to produce
at projected levels. The critical projects to be completed include our
second smelter furnace in Columbus and key haulage infrastructure in the
lower off-shaft area of the Stillwater Mine.
"Workforce reductions will be made at our Columbus Metallurgical operations
and at Company offices in Columbus and Billings. General and
Administrative costs, including those for marketing and exploration, will
be reduced to about $20 million in 2009 from an expenditure rate of over
$35 million projected for 2008. Company-wide the restructuring will
involve an estimated 21% reduction in our 1,770 person workforce, including
about 320 employees and about 50 contractors."
With regard to the Company's liquidity position, Mr. McAllister commented,
"As of the end of September, the Company had available cash and short-term
investments of $129 million and working capital in recycling inventories
and advances totaled $132 million. Assuming about $60 million of the
working capital inventory will be freed up due to lower PGM prices the
Company expects to have available cash of about $190 million going forward.
Although some of this cash will be consumed in the process of implementing
the operating adjustments, we believe the Company has more than adequate
liquidity on hand to endure the present downturn in prices.
"Without any operating changes and at current PGM prices, the Company's
operations would consume cash at a rate of over $25 million per quarter.
Consuming cash at that rate clearly is unacceptable and would jeopardize
our liquidity. Consequently we have already taken steps to advance our
revised plan. These initial actions have included suspending or postponing
all but the critical capital projects, terminating mine contract services,
freezing hiring for most job classifications, reducing inventory and
equipment purchases, and limiting business travel.
"We recognize the impact this restructuring will have on our employees,
their families and the communities affected by these changes, and we will
be providing support by working with the United Steel Workers Union, the
Department of Labor, area training centers, potential employers, state and
federal agencies, and affected local governments and school districts."
Mr. McAllister summarized the restructuring, stating, "Our planning shows
that the impact of these changes will result in PGM mine production for
2009 of between 450,000 to 490,000 ounces, only marginally lower than our
outlook for 2008. Our total cash cost per ounce* guidance for 2009 is
between $400 to $425 per ounce, roughly the same as in 2008 and with some
opportunity to improve on this in the face of declining material costs. It
is essential to note that total cash cost per ounce is net of by-product
and recycling credits estimated at $65 per ounce for 2009 which, due to
lower prices and volumes, is sharply below the robust $163 per ounce
credits in our guidance for 2008. Consequently, under the restructured
2009 operating plan projected total cash costs per ounce before credits
have been reduced by almost $100 per ounce from 2008 levels. It is also
essential to note that our PGM recycling operation will continue as at
present, but the strength of its profitability is subject to market
conditions."
* A non-GAAP measure of extraction efficiency.
Commenting on the outlook for the rest of 2008, Mr. McAllister noted,
"Given that these changes are currently being implemented, our updated
guidance for 2008 is mine production of about 490,000 PGM ounces, with some
risk to the production associated with implementation of the restructuring.
This production level is down from our most recent prior guidance of
515,000 to 525,000 ounces. Total cash cost per ounce for 2008 is projected
between $395 and $415 per ounce (net of by-product and recycling credits
expected to average $163 per ounce for the full year), at or slightly above
the upper end of our previous guidance."
In conclusion, McAllister cautioned, "While we are hopeful these steps will
be sufficient to carry us through the current difficult economic
environment, there is no assurance our plans will be successful nor that
markets will not deteriorate further. Consequently, we will continue to
closely scrutinize our markets, the financial health of our customers and
our own performance against the objectives outlined in our restructuring
plan. We recognize and deeply regret the negative effect of the changes on
our displaced employees and on the communities in which we operate. At the
same time our plan is designed to preserve our core miner base and keep in
place as many jobs as possible while acting in the best interest of all our
stakeholders."
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 Russia. The Company's shares are traded on the
New York Stock Exchange under the symbol SWC. Information on Stillwater
Mining Company can be found at its web site: 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 "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 our 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 expansion plans and restructuring of operations,
costs, grade, production and recovery rates, permitting, labor matters,
financing needs and the terms of future credit facilities, capital
expenditures, increases in processing capacity, cost reduction measures,
safety, timing of engineering studies, environmental permitting and
compliance, litigation, permitting, and the palladium and platinum market.
Additional information regarding factors, which could cause results to
differ materially from management's expectations, is found in the section
entitled "Risk Factors" in the Company's 2007 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.
CONTACT:
Greg Wing
406-373-8700
