Stillwater losing money

By Jan Falstad - 11/12/2008

BILLINGS — Collapsing worldwide prices for platinum and palladium and a slow-motion wreck among the Detroit automakers has Montana's Stillwater Mining Co. losing money.

And a round of layoffs is rumored at the East Boulder mine, located southwest of Billings.

Stillwater Chairman and Chief Executive Officer Frank McAllister said the deteriorating worldwide economic situation has driven platinum and palladium prices down 60 percent off the highs set earlier this year, making the current operations unprofitable.

"Consequently, we are now in the process of reviewing all operations, recognizing that at current prices we must make some adjustments to conserve cash," he said.

McAllister gave no specifics about pending changes, making no mention of layoffs or mine closures. A conference call with financial analysts to discuss Monday's financial report has been postponed indefinitely until Stillwater's board of directors approves a new operational plan.

Jim Williams, president of the Steelworkers International 11-001, said he has heard rumors that layoffs, not a mine closure, may come to the 426 hourly workers at the East Boulder mine on Friday or early next week.

"We hear all kinds of rumors, but they haven't said anything to anybody," Williams said. "There are salaried people that don't know and we don't know. They (the workers) are on needles and pins." The main mine at Nye employs 1,040 hourly workers, with total company employment at around 1,656.

Despite the glum predictions, the latest financial report shows marked improvement over last year, largely due to high prices in early 2008.

Last year, Stillwater Mining lost nearly $15 million, or 16 cents per share, for the first nine months. This year, the company has a profit of $20 million, or 22 cents per share. The Billings-based mining company said its losses were $300,000 for the three months ending Sept. 30, compared to losing $11 million during the same period last year.

The Columbus plant that recycles platinum and palladium from old catalytic converters is making money. However, fewer cars being sold means fewer old junkers to recycle. And metal prices could fall further, cutting into future earnings, McAllister said.

With the possibility of bankruptcy looming, Detroit automakers are begging for a federal bailout. Stillwater Mining sells 100 percent of its palladium and a minor percentage of platinum to Detroit automakers. The two Detroit contracts run out around 2010 and 2012.

So, what ails Detroit ails Stillwater Mining, one of the largest and best-paying employers in Montana.

"Several of the company's key suppliers and customers, including Ford and General Motors, are struggling with credit issues," McAllister said. "If conditions worsen, the outstanding advances to our suppliers, the contractual floor prices in our automotive contracts and the collectability of our accounts receivable could be placed in jeopardy." The company's second quarter results were "excellent," he said. But commodity prices, which set highs last winter, started freefalling in July, affecting the third quarter results.

Stillwater Mining is selling its ore for just less than $500 per mined ounce and that's below the cost of production.

The company still has $129 million in cash reserves, but McAllister said there is no credit line to borrow against now. And negotiating affordable financing during these troubled economic times is unlikely, he said.

Company stock on Tuesday closed down $1.45 at $2.46, a new 52-week low.

— Reporter Jan Falstad may be reached at jfalstad@billingsgazette.com or 657-1306.