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Why Has Stillwater Mining Underperformed Its Peers in 2016?

Can Stillwater Mining Weather Fickle Platinum, Palladium Prices?

Stillwater Mining’s price performance

Stillwater Mining (SWC) has underperformed its peers year-to-date (or YTD) as of March 2, 2016. It has, however, outperformed palladium prices as represented by the ETFS Physical Palladium (PALL). While palladium prices have fallen by 4% YTD, Stillwater has risen by 3%.

Stillwater’s peers Anglo American Platinum (AGPPY), Impala Platinum Holdings (IMPUY), Aquarius Platinum (AQPTY), and Norilsk Nickel (NILSY) have risen 100%, 47%, 45%, and 1%, respectively, in the same time period.

AGPPY, IMPUY, and AQPTY are South Africa-based platinum producers. They produce palladium as a by-product. Russian-based Norilsk Nickel, on the other hand, is the largest producer of nickel and palladium. Investors should note that Aquarius Platinum will be acquired by Sibanye Gold (SBGL), subject to certain approvals.

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Underperformance relative to peers

Stillwater’s relative underperformance compared to its peers is mainly due to other producers gaining more because of their depreciating local currencies. These include the South African rand and the Russian ruble. SWC has all its costs denominated in the US dollar. One of the other reasons is that platinum prices, as represented by the ETFS Physical Platinum (PPLT), has risen 5% YTD. Most of SWC’s peers are mainly platinum producers.

What is Stillwater Mining?

Stillwater Mining is mainly a palladium and platinum producer. It also has a refining and recycling facility for large-scale platinum group metals (or PGM). Stillwater’s financial performance is closely related to the price of palladium and, to a lesser extent, platinum. In 2015, Stillwater produced ~521,000 ounces of PGMs, with palladium accounting for 77% of production. The remainder was from platinum at its two Montana mines and its Stillwater and East Boulder mines.

In this series, we’ll look at Stillwater’s future prospects in relation to its peers. We’ll also see how Stillwater is placed to weather the current volatile price environment for platinum and palladium prices.

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