(Source: MARKETWIRE)STILLWATER MINING COMPANY (NYSE: SWC) today reported a first quarter 2009 net loss of $11.6 million, or $0.12 per diluted share, on revenues of $85.8 million. This compares to first quarter 2008 net income of $2.8 million, or $0.03 per diluted share, on revenues of $186.4 million. The 2009 first-quarter included charges of $9.8 million for writing down product inventories to net realizable value, driven by market prices lower than the Company's cost in inventory for platinum-group metals (PGMs), the Company's primary products.

The Company mines palladium and platinum from two underground mines located in south-central Montana. Operations at the two mines were restructured in late 2008 to reduce costs in response to a sharp decline in PGM prices. Despite the restructuring, these mines together produced 124,800 ounces of palladium and platinum during the first quarter of 2009, a bit ahead of plan for the first quarter and a decline of only 3.3% from the 129,000 ounces produced in the same quarter last year. Production at the Company's Stillwater Mine increased to 92,900 ounces, compared to 85,300 ounces in first quarter 2008, while East Boulder Mine production decreased to 31,900 ounces from 43,700 ounces in last year's first quarter. Stillwater Mine's higher production benefited from the transfer of miners from the East Boulder Mine as part of the Company's restructuring plan, while the lower East Boulder Mine production likewise followed from fewer miners as a result of the restructuring plan and from a cost-based focus in determining the areas to be mined there. The average combined sales realization on mined palladium and platinum ounces declined to $510 per ounce in this year's first quarter from $625 per ounce in the same period last year, reflecting the late 2008 decline in PGM prices.

The Company also operates a smelting and refining complex in Columbus, Montana. In addition to processing the Company's mine concentrates, these facilities recycle catalyst materials received from third parties. The Company processed recycling material containing a total of 38,600 ounces of platinum, palladium and rhodium through the smelter and refinery during the first quarter 2009, about half the 78,100 ounces fed into the smelter during the same period last year. Recycling activities contributed about $1.1 million to the Company's operating margin (before corporate overhead and financing charges) during the first quarter of 2009, compared to about $3.9 million in the first quarter of 2008. Volumes of material available for recycling have dropped off sharply with the decline in PGM prices and in response to a managed reduction in advances to suppliers, reflecting the market's reduced incentive to recycle at lower prices and steep losses incurred by many collectors in the industry as the value of their inventories declined. Volumes available for recycling appeared to be recovering somewhat as the first quarter of 2009 progressed, but remained far below the robust levels seen during 2008 -- about as planned.

First Quarter Highlights

 --  Following the fourth-quarter restructuring of operations, first     quarter performance met or exceeded the Company's revised operating plan: --  The Company's liquidity improved slightly during the quarter and     remains strong: --  Mine production exceeded expectations: --  Prices for platinum and palladium have increased appreciably since the     beginning of 2009.      

Addressing the Company's 2009 first quarter financial performance, Francis R. McAllister, Stillwater Chairman and CEO, commented; "While we reported a loss of $11.6 million in this year's first quarter, in the current economic environment our eye remained on managing toward preserving liquidity. I am pleased to report that, following the significant steps taken to restructure our operations during the fourth quarter of 2008, our liquidity remained stable during the first quarter of 2009. Available cash and cash equivalents increased to $170.8 million at March 31, 2009 from $161.8 million at the end of last year; if we include highly liquid short-term investments together with our available cash, our available liquidity increased slightly to $181.8 million from $180.8 million at year-end 2008 -- again, about as planned.

"Prices for our primary metals, palladium and platinum, regained some momentum during the 2009 first quarter, although they remain well below their 2008 highs. The afternoon posted price for platinum as quoted on the London Metals Exchange (LME) was $1,124 per ounce on March 31, 2009, up from $898 at December 31, 2008, but nowhere near the 2008 high of $2,273 per ounce quoted on March 4, 2008. Similarly, palladium ended the 2009 first quarter quoted at $215 per ounce on the LME, up from $183.50 per ounce at the end of 2008 but well below the $582 per ounce peak quoted on the LME at March 4, 2008. Prices of some of our other significant by-products, including rhodium, nickel and copper, also remain at fairly depressed levels.

"The price decline in PGMs during the second half of 2008 coincided with a general drop in almost all commodity prices as automotive demand fell, particularly in the U.S. and Western Europe, and speculative positions in commodities were unwound to meet traders' liquidity requirements. In the case of palladium, substantial Russian government exports during the past few months into inventories in Switzerland, the U.S. and Asian markets have also contributed to oversupply, although most of this metal appears to have been retained in inventory rather than being offered for sale. As of the end of the 2009 first quarter, there were ample supplies of PGMs available in the market despite production cutbacks by most major producers. Price support for the metals appeared to be coming from fairly strong investor interest in PGMs as a hedge against potential future inflation, as well as from continued commercial demand particularly in China.

"Stillwater's efforts to restructure its mine production in response to the fall in PGM prices have included employee cutbacks and realignment of work assignments, renegotiating labor and supply agreements, a freeze on salaries and on most discretionary spending, and changes in work processes to improve productivity and reduce costs. In particular, we have reduced the overall workforce at the East Boulder Mine, employing a team-based approach to mining there that focuses only on areas that can be mined and supported efficiently at current PGM prices. A portion of the East Boulder mining workforce was transferred to the Stillwater Mine, allowing the Company to reduce the contractor workforce at Stillwater and more fully staff its mining stopes.

"During the 2009 first quarter, we have been pleased overall with the outcome of these changes. While we still have more to accomplish, both the East Boulder and Stillwater Mines are producing at rates higher than originally projected. Total cash costs per ounce, a non-GAAP measure we use to assess extraction efficiency, at $405 per ounce for the quarter ran slightly higher overall than the full-year target of $399 per ounce, but better than our plan for the first quarter. Stillwater Mine averaged total cash costs of $387 per ounce for the quarter, while East Boulder Mine came out at $455 per ounce, both better than plan. In general, strong cost improvements at both mines were masked by lower than planned credits for recycling, as the volume of recycling material available for processing was much weaker during the quarter than expected."

Commenting on this weakness in recycling, Mr. McAllister noted, "We saw the worldwide volumes of recycled catalyst available for reprocessing decline sharply as PGM prices fell in late 2008. Many of the businesses that collect old catalytic converters and supply them to the market experienced painful inventory losses as the value of their material on hand dropped in value, and some have exited the business altogether. Coupled with reduced incentive to actively collect these converters at current low PGM prices and a slowing in the number of cars being scrapped, previously robust recycling volumes slowed to a trickle in the first quarter of 2009. Although the Company's recycling activities have remained profitable even at these lower volumes, the profit contribution of the recycling business segment has declined substantially. The Company experienced some improvement in recycling volumes toward the end of the 2009 first quarter and projects that volumes will gradually increase further over the course of 2009, although there can be no certainty as to just how much."

Reflecting on the Company's earnings prospects, McAllister added, "The Company's reported earnings include non-cash charges of about $70 million each year for depreciation and amortization charges. The magnitude of our depreciation and amortization charges makes it likely that the Company will report significant losses at current PGM price levels, even though our cash balances are planned to remain stable. Consequently, as we have reported previously, the Company is targeting its operations primarily toward maintaining neutral or marginally positive free cash flow in this market environment to position us for an eventual recovery to more sustainable PGM price levels.

"Although the first quarter provides some encouraging indications, the broader economic environment still presents the Company with significant risks. PGM prices are largely dependent on the fortunes of the automotive industry, and automotive demand remains severely depressed, particularly in the U.S. and Europe. Several of the Company's key suppliers and customers, including Ford and General Motors, are struggling with credit issues, and General Motors in particular reportedly is considering a bankruptcy filing. The overall consequences of a General Motors bankruptcy are difficult to predict. The contractual floor prices in our automotive contracts and the collectability of our accounts receivable could be placed in jeopardy. We are monitoring these risks closely."

Commenting on the Company's business objectives, Mr. McAllister continued: "Mine production in this year's first quarter was 124,800 ounces, on track to meet or exceed our 2009 full-year production guidance. Consequently, we reaffirm our earlier full-year 2009 mine production guidance of 495,000 PGM ounces. Our year 2009 guidance for total cash costs averaging $399 per ounce also remains as it stands, even though costs for the first quarter at $405 per ounce came in slightly higher than the full-year projection, as expected.

"Longer term, as we have discussed regularly over the past several years, the Company has three primary strategic initiatives: mine transformation, market development efforts, and corporate diversification. We are continuing to direct attention to each of these initiatives, although the resources available are more limited in the current market environment.

"Regarding our mine transformation efforts, we have shifted our operating focus in the current pricing environment toward minimizing costs rather than necessarily maximizing mine production. Consequently, at present we are committing our limited resources more toward maintaining the developed state of the mines, rather than improving and expanding infrastructure. We also are continuing our efforts toward tailoring the mining methods used to the ore configuration in each specific area being mined. Broadly, the Company employs three different mining methods in its extraction efforts, depending on the structure of the reef in a particular mining area. The most highly mechanized of these, known as sublevel extraction or panel mining, is based on developing drifts, or 'sills,' at different levels within the ore body, drilling boreholes between the different levels, and then blasting out the ore in sections or panels. The second method, known as 'mechanized ramp-and-fill' mining, requires developing ramps from the footwall laterals into the ore body, where mechanized equipment is used to extract the ore at the level of the ramp. Once the ore is extracted, the ramp is filled and cut to a new level and then the next level of ore is extracted. The third method, known as 'captive cut-and-fill' mining, is the most manpower intensive, but also the most selective in terms of the material extracted. A small mining team is assigned to a particular stoping block and, working within successive levels of the ore body, follows the reef closely using jackleg drills to surgically extract the ore. Each of these methods requires a specific set of skill sets, and over the past several years the Company has committed considerable effort toward providing miner training to support this mix of methods.

"Turning to market development, while our spending is scaled back in the present economic environment, we are maintaining a presence in the Chinese palladium markets through our contacts in Shanghai, Beijing and Shenzhen. Despite the economic downturn, by all indications the popularity of palladium as a jewelry metal in China has increased, with over one million ounces reportedly consumed in jewelry during 2008. The Chinese market also absorbs significant volumes of PGMs in its growing automobile production and as an investment metal. Outside of China, however, PGM markets have generally suffered as consumers have scaled back automotive purchases and other discretionary spending in the tight economic climate. Investment demand for PGMs apparently recovered somewhat during the first quarter of 2009 after initially experiencing strong liquidation as prices fell during last year's fourth quarter.

"With regard to corporate diversification, during the first quarter the Company completed construction of a second smelter furnace within the Columbus processing facilities and the new furnace is currently in the test phase. The new furnace is intended to accommodate expansion of both mining production and recycling volumes, as well as potentially to improve metal recoveries and reduce process risk. Reflecting other diversification efforts, the Company holds relatively small investment positions in two small exploration companies that target PGMs and other precious metals. We regularly monitor opportunities to participate in various later-stage mineral development projects, as well as potential merger or acquisition candidates, in an effort to diversify the Company's operating risk. The current economic downturn may create additional opportunities as other companies seek similar diversification objectives, access to credit markets is restricted and market values are depressed. Such diversification may be critical to our future in view of the cyclical nature of PGM prices.

"On balance," McAllister concluded, "we appear to be on track with regard to most of the operational objectives we set for ourselves for 2009. Our cash position is holding stable, capital and operating expenditures have come down to accommodate current lower PGM prices, mine production is on track to meet or exceed annual guidance, and our employees have come through tremendously in supporting the Company's effort to remain competitive."

Cash Flow and Liquidity

At March 31, 2009, the Company's available cash and cash equivalents (excluding $35.6 million of restricted cash) totaled $170.8 million, up $9.0 million from December 31, 2008. If we include the Company's available-for-sale investments, total available cash and investments at March 31, 2009 was $181.8 million, up $1.0 million from $180.8 million at the end of last year. Net working capital, comprised of total current assets including available cash, less current liabilities, decreased slightly during the first quarter of 2009 to $227.4 million from $230.4 million at December 31, 2008. Recycling inventories and advances declined by $11.6 million during the quarter.

Net cash provided by operating activities (which includes changes in working capital) totaled $13.3 million in this year's first quarter, compared to $13.1 million of cash provided by operations in the first quarter of 2008. During the first quarter of 2008, growth in working capital associated with recycling largely offset the stronger earnings contribution in that period. Capital expenditures were $12.2 million in the first quarter of 2009, while capital spending in the first quarter of 2008 totaled $20.8 million. Capital spending has been cut back in 2009 as a result of lower PGM prices.

Outstanding debt at March 31, 2009, was $211.0 million, unchanged from December 31, 2008. The Company's total debt includes $181.5 million outstanding in the form of debentures due in 2028, $29.4 million of Exempt Facility Revenue Bonds due in 2020 and $0.1 million of Special Industrial Education Impact Revenue Bonds due in May 2009.

First quarter Results - Details

For the first quarter of 2009, the Company's mine production was 124,800 PGM ounces including 92,900 ounces from the Stillwater Mine and 31,900 ounces from East Boulder Mine. For the comparable quarter of 2008, the mines produced 129,000 ounces including 85,300 ounces at the Stillwater Mine and 43,700 ounces at East Boulder Mine. Stillwater Mine's production benefited from the additional miners transferred in from East Boulder Mine in conjunction with the fourth quarter 2008 restructuring. The lower production at East Boulder Mine reflected the reduced workforce there as the Company has limited production areas to those that can be most efficiently mined and supported in the current low-price environment.

Sales out of mine production totaled 114,600 ounces in the first quarter of 2009 at an overall average realization of $510 per ounce, down from 130,000 ounces at $625 per ounce in the first quarter of 2008. Mine revenues decreased to $62.3 million in the 2009 first quarter from $94.6 million in the same quarter of 2008. The lower 2009 mine revenues resulted from lower PGM prices in 2009, as well as the effect of lower sales volumes. The Company's average realization on palladium sales from mine production was $364 per ounce in the 2009 first quarter, reflecting the average floor price in the automotive contracts, compared to $414 per ounce for the same period in 2008. The Company's average net realization on platinum (after losses in 2008 on forward sales and the effect of contractual ceiling prices) was $952 per ounce in the first quarter of 2009 and $1,383 per ounce in the 2008 first quarter. Comparing these prices to the market, the London Metals Exchange afternoon posted prices per ounce for palladium and platinum were $215 and $1,124, respectively, on March 31, 2009, and $445 and $2,040, respectively, on March 31, 2008.

In its recycling activities, the Company processes material purchased from third parties and toll material that is processed on behalf of others for a fee, normally recovering platinum, palladium and rhodium. During the first quarter of 2009, the Company processed 38,600 total ounces of PGMs from recycled catalytic materials, including both purchased and tolled material. By comparison, in the first quarter of 2008 the Company processed 78,100 ounces of recycled material. The Company delivered for sale a total of 17,900 ounces of platinum, palladium and rhodium from recycled inventories during the first quarter 2009 at an overall average price of $1,132 per ounce; for the first quarter of 2008, the Company sold 60,600 recycled ounces at an average realization of $1,402 per ounce. The reduced level of activity in the first quarter of 2009 reflected a much lower level of PGM recycling activity worldwide as a result of lower metals prices and associated economic challenges for recycling collectors.

Revenues for the first quarter of 2009 were $85.8 million, down 54.0% from $186.4 million recorded in the first quarter of 2008. Proceeds from sales of mined PGMs and by-products totaled $62.3 million in the 2009 first quarter, 34.1% lower than the $94.6 million in the same quarter of 2008, again resulting from lower production volumes and PGM prices in the first quarter of 2009. Recycling revenues declined to $21.5 million from $86.4 million in last year's first quarter. Resales of purchased metal generated $2.0 million and $5.3 million in revenue during the 2009 and 2008 first quarters, respectively.

Costs of metals sold (before depreciation and amortization expense) decreased to $72.2 million in the 2009 first quarter from $153.7 million in the first quarter of 2008. Mining costs included in costs of metals sold declined to $49.9 million in the 2009 first quarter from $66.0 million in the 2008 first quarter.