Stillwater - Montana
| Royalty: | 5% NSR |
|---|---|
| 2009 Revenue: | $10.135 M |
| Operator: | Stillwater Mining Company |
Stillwater Mining Company ("Stillwater") owns and operates the Stillwater mine and the East Boulder mine in Montana. Production began in 1986 at the Stillwater Mine and in 2002 at East Boulder Mine (together, the “Stillwater complex”). Franco-Nevada’s royalty is a 5% NSR payable 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. The royalty is calculated and payable monthly and Franco-Nevada may elect to receive the royalty in cash or in kind.
Based on management’s estimates, Franco-Nevada’s Stillwater complex royalty covers 80-85% of the combined reserves and resources of the deposit. Historically, the percentage of ore mined from the royalty ground has been significantly lower than the 80-85% reserve/resource estimate. However, in recent years the annual percentage of production on the royalty ground has increased, averaging 87% since 2006.
Prior to 2006, Stillwater was successful in replacing reserves net of depletion at the Stillwater complex. As a result of what Stillwater describes as the unique PGM enrichment of the J-M Reef, management believes that reserve replacement will not be a function of discovery but, instead, will depend on Stillwater’s ability to complete adequate definition drilling, fund adequate infrastructure development and successfully manage capital and operating cost pressures.
In its January 12, 2010 press release of 2009 results, Stillwater reported mine production of palladium and platinum for 2009 of 529,900 ounces. Management estimates approximately 82% of this 2009 production was sourced from our royalty lands. Stillwater also provided production guidance for 2010 of 515,000 ounces from the Stillwater complex. Management expects the percentage of production being sourced from our royalty lands to decline from the current levels under Stillwater’s new operating plan. Capital expenditures were $39.5 million in 2009 and, based on Stillwater’s year-end guidance, are expected to be $50 million in 2010.
