Amid a hostile effort by a hedge fund and former Montana Gov. Brian Schweitzer to take over Stillwater Mining’s Board of Directors, Stillwater Mining reported a 62% drop in its profits in 2012.
A 1.1% Stillwater shareholder, New York-based hedge fund Clinton Group submitted a formal notice to Stillwater Monday of its plan to replace Stillwater’s current board of directors with six new directors that include Schweitzer.
Speculation is that Schweitzer is considering challenging incumbent U.S. Sen. Max Baucus, D-Montana, in the 2014 Democratic Primary.
However, Schweitzer insists, “I’ve got some time on my hands and I’d like to turn this company around. It’s an important company to Montana and it’s an important company to me.”
“You’ve got a company that’s ruining its equity, and you can’t run a mine if you don’t have any money and don’t have equity,” he added.
“The only board of directors that is doing worse is the U.S. Congress,” Schweitzer told Bloomberg. “We’ve had our belly-full in Montana of good Montana-based mining companies throwing the long ball in South America, he added, in a reference to Stillwater’s investment in a copper project in Argentina.
Aside from a statement issued Monday in response to the Clinton bid, Stillwater CEO Frank McAllister declined to discuss the hostile takeover during a conference call Wednesday to discuss Stillwater’s financial results.
In Monday’s news release, Stillwater said Clinton “has minimal experience in the mining industry and has failed to recognize the significant positive momentum in Stillwater’s business. Furthermore, several of Clinton’s proposals are substantially aligned with actions that have been in progress at Stillwater for some time to ensure that the company is ideally positioned to benefit from the positive structural trends in the PGM market, thereby creating sustainable value for all Stillwater shareholders.”
McAllister told mining analysts and shareholders that he anticipated that Stillwater’s 2013 annual meeting will be in May.
Contrary to Clinton’s allegations, McAllister told analysts, “Stillwater had an exceptional fourth quarter in year 2012. Our operations, both at our mines and our processing facilities, performed extremely well. Production and cost results both came in better than planned and most important, combined safety performance at our two Montana mines was the best in Stillwater’s history.
“We believe the market fundamentals for PGMs and particularly palladium, our primary product, are current more robust than ever,” McAllister advised. “Supply remains constrained as the future demand outlook continues to grow, moving industry analysts to project significant PGM supply deficits this year as well as into the future.”
“We anticipate these fundamentals will continue to drive more palladium and platinum prices higher, more specifically, as to palladium,” he stressed.
Stillwater reported that total PGM production hit 513,700 ounces in 2012, exceeding guidance of 500,000 ounces. This includes 396,000 ounces of palladium and 117,700 ounces of platinum.
However, 2012 production was lower than the 517,900 PGM ounces reported in 2011. “The modest decrease in ounces produced between 2011 and 2012 resulted primarily from normal variability in mining conditions,” said Stillwater, “as well as the array of stopes available for mining from period to period.”
Total cash costs per PGM ounce average $484/oz in 2012, better than the company’s guidance of $500 per PGM ounce. Cash costs increased 15% over the $420/oz experienced in 2011.
During Wednesday’s conference call, McAllister said Stillwater is again giving 2013 mine production guidance of 500,000 PGM ounces. Total cash cost per ounce for the Montana mines is expected to average $560 per ounce this year.
Stillwater said it more than replaced the reserves it extracted from existing mines during 2012, increasing proven reserves to 3.1 million in-situ ounces at the end of 2012 from 2.6 million ounces at the end of 2011.
The company also increased probable PGM reserves from 17.4 million ounces at the end of 2011 to 18.4 million ounces at the end of 2012.
The company recycled 445,200 ounces of palladium, platinum and rhodium through its smelter and refinery last year, down from 486,700 combined ounces in 2011.
Stillwater reported 2012 net income attributable to common stockholders of $55 million or 46-cents per diluted share. This compares to a net income of $144 million or $1.30 per diluted share in 2011.
For the fourth-quarter 2012, Stillwater reported a net income attributable to common shareholders of $16.9 million or 13-cents per diluted share, down from net income of $24.66 million or 21-cents reported during the same period of 2011. The 4Q12 results reflect lower PGM sales volumes, higher consolidated total cash costs, and a $2.2 million forex gain.
The company has budgeted $172.8 million for 2013 capex, a significant increase from the $116.6 million spent in 2012. Spending on Montana operations will comprise 87% of this year’s capex.