Stillwater Mining is the best PGM stock to own nowHere are seven reasons why you should be excited about this company:
#1: Big, High-Grade Assets
The company has two distinct but closely related mine sites. These alone will support the company’s growth for many years. However, only nine miles of an estimated 28 miles of known mineralization has been developed between them—essentially one-third of one giant mineralized structure. Management thinks it has an additional 102 million tonnes of undeveloped resources waiting to be dug up.
And get this: the average grade of their proven and probable reserves is 0.45ounces per tonne, the world’s highest-grade PGM deposit. Of these, 78% is palladium, a very attractive figure since we’re even more bullish on it than platinum.
At the right metals prices, this company could double or triple production and still maintain a very long mine life.
#2: Growing Production and Low Costs
The company grew 2013 production by 10,000 ounces, but has yet to use all its milling capacity. It currently uses about 3,600 tonnes per day (tpd) of its 6,000 tpd total capacity. The company is working to increase ore production this year, which is good timing for us.
With a much cleaner balance sheet and a forecast of $800-$850 per ounce for all-in sustaining costs (AISC) in 2014, the company looks poised to make money in the current price environment—and a lot of money in the supply squeeze we anticipate.
#3: Recycling Business
In addition to mining, this company recycles depleted catalyst materials to recover palladium, platinum, and rhodium at its smelter and base metal refinery. It’s been doing this since 1997, and business is booming. Pre-tax earnings last year rose a whopping 233% over 2012. And management says it will expand this end of their business over the next few years.
#4: Strong Financial Performance
This company reported over a billion dollars of revenue last year, up nearly 30% from 2012. It finished the year with a very strong working capital position of almost a half billion dollars.
#5: Unique North American Operations
The company is one of only a few PGM producers in North America. Nearly all other PGM mines operate in South Africa (Impala, Amplats, Lonmin, etc.) or Russia (Norilsk). Therefore, this company is more stable than most that mine in other jurisdictions.
#6: Upgraded Management
A prior management team made a poor investment in Argentina a few years back, which led to major changes in the board of directors and top management last year. The new president and CEO is a 21-year industry veteran and has experience in both M&A and mine optimization. He’s already corrected past mistakes, and we’re happy with the direction he’s taken the company. The technical people on the ground seem competent and are getting admirable results.