Stilllwater Mining Co.: A Not for the Faint of Heart Palladium Mining Play

Apr.23.09 | About: Stillwater Mining (SWC)

By Brandon Clay

In 1803, scientist William Hyde Wollaston discovered a new metal in South America. Found in platinum ore, Wollaston isolated the metal using a complex chemical solution. This metal would eventually be used in everything from tuberculosis treatments to multilayer ceramic capacitors. Jewelers, photographers, artists, and every automobile manufacturer later employed this versatile metal. It is called palladium.

Manufacturers know the value of palladium. Along with platinum, palladium is an essential component in the catalytic converters that transform most of the harmful greenhouse gasses emitted by automobiles into harmless carbon, nitrogen, and water. It would be impossible for catalytic converters to efficiently operate without palladium. As China continues to outpace the United States in auto manufacturing, palladium resources are tapped. Just last month, China hit an all time high of 1.11 million sales, despite the global slowdown. This means sustained palladium demand.

In addition to known uses, palladium has promise for the not-so-distant future. Once considered-junk science, new researchers are exploring cold fusion possibilities again. Electro-chemist, Michael McKubre, at SRI International in California, recently touted cold fusion potential saying,

“We can yield the power of nuclear physics on a tabletop. The potential is unlimited. That is the most powerful energy source known to man. For example, a laptop would come pre-charged with all of the energy that you would ever intend to use. You’re now decoupled from your charger and the wall socket.”

And all of this could be made possible by palladium rods. Granted, this technology is years from market, but it shows how versatile palladium is - and how valuable it could become.

Another interesting tidbit: Palladium just started trading on the Russian futures market last Wednesday. A Palladium ETF is also in the registration process stateside - similar to the way silver is traded via SLV. These “IPOs” tend to drive positive interest in the underlying product. As more buyers enter the market, prices of securities tied to the metal tend to appreciate. We expect one such stock to do well when that happens.

Stillwater Mining Company (NYSE:SWC) has rights to the largest known palladium deposit in the US. The company mines palladium, platinum, and similar metals in the Stillwater Mine near Nye, Montana. They are the only significant palladium producer in the Western Hemisphere; their competition consists mainly of Russian and South African interests. With the renewed interest in precious metals, palladium looks poised to rise with similar metals. SWC should enjoy those benefits of appreciation.

Price is one thing to consider about SWC. SWC is currently trading at $4.42 and it has had quite a range already this week. SWC is not for the faint at heart. However, if you can stomach the volatility this stock could be a big winner. Technically, it’s been in an uptrend since early March. SWC’s recent down move could be a great entry before it continues the uptrend. Look for Stillwater Mining Company to climb as palladium rises.

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