Zhang Fei

Stillwater Mining: Capitalize on Undervalued Palladium

If their extraction costs are $340 per ounce, then it would probably make sense to value the company's reserves at $20 per ounce. And if palladium mining is anything like gold mining, it probably consists of making sand out of big rocks. Which means the cost of extraction is probably much closer to $360 per ounce than $20 per ounce.

Here's a quote from Stillwater itself:

"n 2005, Stillwater Mining produced a total of 554,000oz of palladium and platinum, which included 428,000oz of palladium and 126,000oz of platinum. The average cash cost of production was US$324/oz, with a total production cost of US$472/oz."

The cash cost probably refers to ongoing costs (power and labor costs) whereas the total production cost includes the sunk (fixed) costs as well, which might include exploration and equipment costs.