OPERATOR: STILLWATER MINING COMPANY
ROYALTY: NSR: 5%
Stillwater Mining Company (“Stillwater”) owns and operates the Stillwater mine and the East Boulder mine in Montana (together, the “Stillwater Complex”). Production began in 1986 at the Stillwater mine and in 2002 at the East Boulder mine. Both are PGM mines with the majority of production being palladium. Franco-Nevada has a 5% NSR royalty on all commercially recoverable metals produced from 813 of the 995 claims that cover the Stillwater Complex. The amount of the royalty is reduced by permissible “onward processing” deductions, which have averaged 10-12% of revenue over the last several years.
Based on Franco-Nevada’s estimates, the NSR royalty currently covers 80-85% of the Stillwater Mineral Reserves and Mineral Resources and 100% of the East Boulder Mineral Reserves and Mineral Resources. Historically, because of reliance on near-shaft stopes in the Stillwater mine, production has been sourced disproportionately from non-Franco-Nevada royalty ground. However, in recent years, the percentage of Stillwater Complex production subject to Franco-Nevada’s royalty has increased. In 2015, Stillwater produced 520,800 ounces of PGM, a slight increase year over year and within its guidance range of 520,000-535,000 ounces of PGM. For 2016, Stillwater expects to produce between 515,000-535,000 ounces of PGM. Based on existing Mineral Reserves, the Stillwater Complex is estimated to support a 35-40 mine life.
Despite the weakness in PGM prices, Stillwater brought the Graham Creek project online in 2015 and continues to advance the Blitz project which are both on Franco-Nevada royalty ground. The Blitz project, located east of the Stillwater mine, is progressing well. Stillwater expects first production from Blitz in 2018 which is expected to contribute 150,000-200,000 PGM ounces per year upon full ramp up. The Blitz project is also expected to be Stillwater’s lowest cost production. Stillwater estimates that only ~11 miles of a 28 mile strike length has been developed on the property in total.
|Revenue to Franco-Nevada ($ million)