Stillwater Mining Company Reports Third Quarter 2016 Results

Stillwater Mining Company (NYSE:SWC) today reported financial results for the quarter ended September 30, 2016.

Third Quarter 2016 Highlights:c

• Continued positive safety performance, with a reportable incidence rate decrease of 13.2% compared to the third quarter of 2015
• PGM mined sales of 131,800 ounces, an increase of 12.4% from 117,300 ounces sold during the third quarter of 2015
• Costs of metals sold of $498 per PGM mined ounce, down 15.3% from $588 per PGM mined ounce for the third quarter of 2015
• PGM mined production of 138,800 ounces, an increase of 8.4% from 128,100 PGM mined ounces during the third quarter of 2015
• All-in sustaining costs (AISC)* of $624 per PGM mined ounce produced, down 7.8% from $677 per PGM mined ounce for the third quarter of 2015
• Processed 175,000 ounces of recycled palladium, platinum and rhodium; an increase of 8.7% over 161,000 ounces recycled during the third quarter of 2015 and a Company record
• Cash and cash equivalents plus highly liquid investments of $439.4 million at quarter end, after funding a $22.4 million increase of recycling working capital and all capital deployed during the third quarter of 2016
• 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, reflecting cost reductions and an increase in sales price per PGM mined ounce to $764 from $693 realized for the third quarter of 2015

Commenting on the third quarter 2016 results, Mick McMullen, the Company’s President and Chief Executive Officer stated, “The third quarter 2016 results demonstrate that Stillwater Mining Company continues to deliver on operational plans and stated objectives. Our efforts to grow the recycling business have been successful as we processed 175,000 ounces of recycled PGMs during the third quarter of 2016, which was a Company record. Mined production and costs were in-line with our expectations. Based on our year-to-date results and future outlook, we remain confident in our ability to achieve the improved full-year guidance targets provided last quarter.

“In addition to the many operational improvements made throughout the organization, our safety performance has continued on a record pace. The safety incidence rate for the third quarter of 2016 decreased by 13.2% compared to the third quarter of 2015. Even more impressive, our safety incidence rate through the first nine months of 2016 is less than the record low rate achieved last year.
“The Company remains focused on Blitz, our primary growth project. The 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. We now anticipate that Blitz will add between 270,000 and 330,000 ounces of mine production annually when fully ramped up by 2021-2022. This is anticipated to be all incremental production for at least the first decade of the Blitz production phase. Costs for the project are expected to increase to approximately $250 million from the previous $205 million estimate, which we consider 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.

Mr. McMullen concluded, “The third quarter provides another data point for the evaluation of the progress we are making at Stillwater. As the business continues to evolve, we have consistently reached our performance targets, while achieving record safety results. I believe we have successfully established a foundation of financial discipline and focus on continuous operational improvement that will allow our shareholders to benefit from the world-class mining and processing assets we possess along with robust PGM market fundamentals. I would like to thank our team for the hard work to achieve the success Stillwater has experienced to date and the continued efforts for future progress.”

2016 Full-Year Guidance:
Following a review of the third quarter 2016 results and forecasts for the remainder of the year, guidance for the full-year 2016 is unchanged as detailed in the table below.

Third Quarter 2016 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 third quarter of 2016 was positively impacted by cost reductions, an increase in realized metal prices and higher mined sales volumes compared to the third quarter of 2015.

PGM Mine Production Comparison:

Mine production revenues (including proceeds from the sale of by-products) totaled $106.9 million in the third quarter of 2016, an increase from $86.4 million for the third quarter of 2015. The combined average realized price for the sales of mined palladium and platinum increased for the third quarter of 2016 to $764 per ounce, compared to $693 per ounce realized in the third quarter of 2015. The total quantity of mined palladium and platinum sold in the third quarter of 2016 was 131,800 ounces compared to 117,300 ounces sold in the third quarter of 2015.

Total costs of metals sold from PGM mined production decreased to $65.6 million in the third quarter of 2016 from $69.0 million in the third quarter of 2015.

Recycling Activity Comparison:

Total recycled PGM ounces fed to the smelter of 175,000 for the third quarter of 2016 was a Company record and an increase of 8.7% from the third quarter of 2015. The recycling business segment continued to experience a shift from tolled to purchased material in the third quarter of 2016.

PGM recycling revenues totaled $89.6 million for the 2016 third quarter, an increase from $82.0 million in the same period of 2015. The Company’s combined average realized price for sales of recycled palladium, platinum and rhodium decreased to $742 per ounce in the third quarter of 2016 compared to $881 per ounce in the third quarter of 2015. Recycling sales volumes for the third quarter of 2016 increased to 117,600 ounces from 88,800 ounces sold in the third quarter of 2015. In conjunction, tolled ounces returned to customers decreased to 49,900 ounces for the third quarter of 2016 from 73,700 ounces in the third quarter of 2015.

PGM recycling costs of metals sold totaled $86.2 million in the third quarter of 2016, an increase from $78.9 million in the third quarter of 2015. 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 by the volume and the value of the PGMs in the materials purchased by the Company.

General and administrative costs were $8.7 million in the third quarter of 2016, compared to $8.9 million incurred during the same period of 2015.

Costs of Metals Sold Per PGM Mined Ounce:

Costs of metals sold per PGM mined ounce totaled $498 for the third quarter of 2016, a decrease from $588 recorded for the third quarter of 2015. Cost improvement initiatives and reduced labor costs contributed to the lower costs of metals sold per PGM mined ounce result.

All-In Sustaining Costs Per PGM Mined Ounce Produced:

AISC* per PGM mined ounce produced totaled $624 for the third quarter of 2016, a decrease from $677 recorded for the same period of 2015. Reductions in cash costs and sustaining capital contributed to the lower AISC result.

Cash Costs Per PGM Mined Ounce:

Total combined cash costs per PGM mined ounce (net of by-product and recycling credits)* totaled $434 per ounce for the third quarter of 2016, a significant reduction from $465 per ounce for the third quarter of 2015.

The table below illustrates the effect of applying the by-product and PGM Recycling segment credits to the total cash costs per PGM mined ounce for the Montana mining operations.

Cash Flow and Liquidity:

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. The Company’s cash and cash equivalents plus highly liquid investments totaled $439.4 million at September 30, 2016 (including $18.5 million of investments which have been reserved as collateral on letters of credit), compared to $463.8 million at December 31, 2015. Net working capital increased to $532.9 million at September 30, 2016, compared to $523.0 million at December 31, 2015.

Net cash provided by operating activities (which includes changes in working capital) totaled $38.2 million for the nine months ended September 30, 2016, compared to $75.7 million for the same period in 2015. Cash capital expenditures were $62.0 million for the nine months ended September 30, 2016, compared to $83.4 million in the same period in 2015.

Outstanding total balance sheet debt reported at September 30, 2016, was approximately $269.1 million, an increase from $255.8 million at December 31, 2015. The Company’s debt balance at September 30, 2016, included approximately $268.6 million of 1.75% convertible debentures (net of unamortized discount of approximately $63.5 million and $3.2 million of deferred debt issuance costs) and $0.5 million of 1.875% convertible debentures. The change in debt balance is a result of the accretion of the discount on the Company’s outstanding 1.75% convertible debentures.

2016 Third Quarter Results Webcast and Conference Call:
Stillwater Mining Company will conduct a conference call to discuss third quarter 2016 results at 12:00 noon Eastern Daylight Time on Friday, October 28, 2016.

A simultaneous webcast of the conference call and related presentation materials will be accessible in the Investor Relations section of the Company’s website at: www.stillwatermining.com.

A telephone replay of the call will be available for one week following the event. The replay dial-in numbers are (877) 660-6853 (U.S.) and (201) 612-7415 (International), access code 13631292. The call transcript will be archived in the Investor Relations section of the Company’s website.

About Stillwater Mining Company
Stillwater Mining Company is the only U.S. miner of platinum group metals (PGMs) and the largest primary producer of PGMs outside of South Africa and the Russian Federation. PGMs are rare precious metals used in a wide variety of applications, including automobile catalysts, fuel cells, hydrogen purification, electronics, jewelry, dentistry, medicine and coinage. The Company is engaged in the development, extraction and processing of PGMs from a geological formation in south-central Montana recognized as the J-M Reef. The J-M Reef is the only known significant source of PGMs in the U.S. and the highest-grade PGM resource known in the world. The Company also recycles PGMs from spent catalytic converters and other industrial sources. The Company owns the Marathon PGM-copper deposit in Ontario, Canada, and the Altar porphyry copper-gold deposit located in the San Juan province of Argentina. The Company’s shares are traded on the New York Stock Exchange under the symbol “SWC”. Information about the Company can be found at its website: www.stillwatermining.com.

Cautionary Note Concerning Forward-Looking Statements 

Some statements contained in this press 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 from management’s expectations. These statements may contain words such as “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “predicts,” “should,” “will,” “may” or similar expressions. Such statements also include, but are not limited to, comments regarding continuing to deliver on operational plans and stated objectives; successful efforts to grow the recycling business; remaining confident in ability to achieve full-year guidance targets; increasing the scope of the Blitz project with relatively minimal additional costs; anticipation that the Blitz project with add between 270,000 and 330,000 ounces of mine production when fully ramped up by 2021-2022; anticipation that new production from Blitz will be incremental for at least the first decade of the Blitz production phase; costs for the Blitz project increasing to $250 million; additional capital required for the expansion of the Stillwater Mine concentrator; a foundation of financial discipline and operational improvement that will allow shareholders to benefit from the Company’s world-class mining and processing assets along with robust PGM market fundamentals; 2016 guidance for sales of mined ounces, total costs of metals sold per PGM mined ounce, PGM mined production ounces, total cash costs per PGM mined ounce (net of credits), all-in sustaining costs per PGM mined ounce, general and administrative costs, exploration expenditures and capital expenditures; and the usefulness of non-GAAP financial measures. The forward-looking statements in this release are based on assumptions and analyses made by management in light of 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 section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on February 22, 2016. 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 forward-looking statements herein speak only as of the date of this release. The Company disclaims any obligation to update forward-looking statements.
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Consolidated Statements of Comprehensive Income (Loss)
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Consolidated Balance Sheets
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Consolidated Statements of Cash Flows
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Key Operating Factors
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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.
With respect to 2016 guidance regarding Total Cash Costs per PGM Mined Ounce (net of by-product and recycling credits) and AISC per PGM Mined Ounce, the Company cannot provide a quantitative reconciliation to the most directly comparable GAAP measure without unreasonable effort. However, the Company would expect to calculate these non-GAAP measures in the same manner they were calculated in the reconciliations included in this press release.
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Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Continued)
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All-In Sustaining Costs (a Non-GAAP Financial Measure)
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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.

Stillwater Mining Company
Reconciliation of Total Cash Costs Guidance and AISC Guidance
(Non-GAAP Financial Measures)
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A reconciliation of the 2016 Total Cash Costs Guidance and the 2016 AISC Guidance is provided below. The estimates in the table below are considered “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, which are intended to be covered by the safe harbor created by such sections and other applicable laws. Please refer to: Cautionary Note Concerning Forward-Looking Statements, for additional information.

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Underlying Earnings (Loss)
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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:

CONTACT: INVESTOR CONTACT:
Mike Beckstead
(720) 502-7671
investor-relations@stillwatermining.com