Stillwater Mining Co. (NYSE:SWC)
This article is an update of my preceding article about Stillwater on November 2,2015.
TB1 - Q3'15 production results, on October 30, 2015. ( 4 last consecutive quarters).
K oz (2013)
East Boulder mine
K oz processed *
|Average price per Oz (Pt,Pd)||770~||674~||693||842||871|
* These numbers are including the Rhodium, which represents about 7% of the total processed. Ratio for the mix Palladium, Platinum is 3.41:1.
Cash on Hand:
At December 31, 2015, the Company's cash, cash equivalents and highly liquid investments balance was $463.8 million (including $18.5 million of investments which have been reserved as collateral on letters of credit).
Stillwater Mining released its 4Q'15 and full 2015 year preliminary results on January 19, 2016.
It was a mixed bag because the mining segment was quite strong -- +3.4% QoQ -- in 4Q'15, but recycling dropped significantly or 19.4% quarter over quarter.
However, the main topic recently is the collapse of the PGM and particularly Platinum. Below is the 4Q'15 chart for both palladium ($604) and Platinum ($911).
1 - Platinum.
2 - Palladium.
Platinum and palladium have drop significantly in January 2016, and now trade at $921/ Oz for platinum and $489/ Oz for palladium, which translates to $564/ Oz for SWC, another whopping 16.3% lower than the already low price in 4Q'15.
The good news in this recent results is the AISC for the 4Q'15 at between $603-$623 and AISC for 2015 between $705-$715, which is a sharp improvement from a year ago. However, it is much higher than the price of the metal sold, which means that the company is now mining at a loss basically.
As always, the price of platinum and palladium are of a paramount importance, and they have been weak since November 2015. Unfortunately, they continue to drop to a level now, below the breakeven point.
The Company continued to make progress on its Blitz development project during 2015, expected to be complete in 2018-2019 with a production of 150K to 200K PGM ounces/year. Project highlights include:
- Surface drilling program successfully demonstrated J-M Reef existence over the length of the project
- Grades are consistent with historical off-shaft mineralization (0.6 to 0.7 ounce/ton)
- Benbow portal permit was approved and surface construction is underway
- Tunnel boring machine drive progressed 9,500 feet out of total planned 23,000 feet
- Parallel conventional drive resulted in 14,700 feet of ramp and infrastructure development
- First production expected in 2018 with total infrastructure completion in 2019
- Project expected to provide primarily growth in production until gradual off-set of depletion from the Stillwater Mine in approximately 10 years
- Production of 150,000 to 200,000 PGM ounces/year anticipated upon full ramp up
- Production from the Blitz area expected to be Company's lowest cost mined production
- Total spend through 2015 of approximately $80 million out of total anticipated project cost of $205 million
SWC is the perfect long-term investment, with good long-term production and excellent balance sheet with a low debt level and high cash on hand.
I believe the stock is now extremely undervalued due to an unprecedented collapse of the PGM metals price and especially Platinum. In short, it is a good and safe company caught in a temporary depressed market. I recommend a BUY at these level.
Disclosure: I am/we are long SWC.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.