Back to GetFilings.com



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 10-Q


[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended June 30, 2002.

OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from ______ to _____

Commission file number 0-25090
-------

STILLWATER MINING COMPANY
-------------------------
(Exact name of registrant as specified in its charter)


Delaware 81-0480654
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)


536 East Pike Avenue
Columbus, Montana 59019
------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)


(406) 322-8700
-------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: YES X NO __

At July 22, 2002, 43,359,869 shares of common stock, $0.01 par value per
share, were issued and outstanding.



STILLWATER MINING COMPANY

FORM 10-Q

QUARTER ENDED June 30, 2002

INDEX




PAGE
----


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements................................................... 3

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 11

Item 3. Quantitative and Qualitative Disclosures About Market Risk............. 24


PART II - OTHER INFORMATION

Item 1. Legal Proceedings...................................................... 25

Item 2. Changes in Securities and Use of Proceeds.............................. 26

Item 3. Defaults Upon Senior Securities........................................ 26

Item 4. Submission of Matters to a Vote of Security Holders.................... 26

Item 5. Other Information...................................................... 26

Item 6. Exhibits and Reports on Form 8-K....................................... 26

SIGNATURES ....................................................................... 27







PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Stillwater Mining Company
Consolidated Balance Sheet
(Unaudited)
(in thousands, except share and per share amounts)
June 30, December 31,
2002 2001
------------------ ------------------
ASSETS
Current assets

Cash and cash equivalents $ 41,709 $ 14,911
Inventories 46,181 42,944
Accounts receivable 27,371 21,773
Deferred income taxes 803 1,417
Other current assets 4,492 4,745
------------------ ------------------
Total current assets 120,556 85,790

Property, plant and equipment, net 779,341 774,036
Other noncurrent assets 6,760 8,395
------------------ ------------------
Total assets $ 906,657 $ 868,221

LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 11,317 $ 21,539
Accrued payroll and benefits 10,506 10,630
Property, production and franchise taxes payable 4,331 7,768
Current portion of long-term debt and capital lease
obligations 15,250 9,008
Accrued restructuring costs 2,535 10,974
Income taxes payable 340 -
Other current liabilities 7,803 3,588
------------------ ------------------
Total current liabilities 52,082 63,507
================== ==================

Long-term debt and capital lease obligations 209,397 246,803
Deferred income taxes 75,222 71,887
Other noncurrent liabilities 13,537 10,901
------------------ ------------------
Total liabilities 350,238 393,098
------------------ ------------------

Shareholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized; none issued - -
Common stock, $0.01 par value, 100,000,000 shares
authorized; 43,335,416 and 38,771,377 shares
issued and outstanding 433 388
Paid-in capital 349,855 291,182
Retained earnings 205,445 177,820
Accumulated other comprehensive income 1,856 5,733
Unearned compensation - restricted stock awards (1,170) -
------------------ ------------------
Total shareholders' equity 556,419 475,123
------------------ ------------------
Total liabilities and shareholders' equity $ 906,657 $ 868,221
================== ==================


See notes to consolidated financial statements.






Stillwater Mining Company
Consolidated Statement of Operations
(Unaudited)
(in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
-------------------------------- -------------------------------
2002 2001 2002 2001
--------------- ------------- ------------- ---------------

Revenues $ 75,007 $ 75,304 $ 150,984 $ 165,168

Costs and expenses
Cost of metals sold 44,125 35,593 87,664 73,838
Depreciation and amortization 10,315 5,608 19,576 11,221
--------------- ------------- ------------- ---------------
Total cost of sales 54,440 41,201 107,240 85,059

General and administrative expenses 3,159 5,003 6,725 10,455
Restructuring costs, net 339 - (5,938) -
--------------- ------------- ------------- ---------------
Total costs and expenses 57,938 46,204 108,027 95,514
--------------- ------------- ------------- ---------------

Operating income 17,069 29,100 42,957 69,654

Other income (expense)
Interest income 264 678 482 1,246
Interest expense, net of capitalized interest
of $0, $4,733, $0 and $8,948 (4,103) - (8,528) -
--------------- ------------- ------------- ---------------

Income before income taxes 13,230 29,778 34,911 70,900

Income tax provision (2,170) (8,486) (7,286) (20,206)
--------------- ------------- ------------- ---------------

Net income $ 11,060 $ 21,292 $ 27,625 $ 50,694
--------------- ------------- ------------- ---------------

Other comprehensive income (loss), net of tax (2,432) 5,260 (3,877) 11,774
--------------- ------------- ------------- ---------------

Comprehensive income $ 8,628 $ 26,552 $ 23,748 $ 62,468
=============== ============= ============= ===============

Earnings per share
Basic 0.26 0.55 0.65 1.31
Diluted 0.26 0.54 0.65 1.29


Weighted average common shares outstanding
Basic 43,155 38,723 42,401 38,691
Diluted 43,370 39,332 42,632 39,366


See notes to consolidated financial statements.







Stillwater Mining Company
Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)

Six Months ended
June 30,
------------------------------------
2002 2001
----------------- ---------------
Cash flows from operating activities


Net income $ 27,625 $ 50,694

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,576 11,221
Deferred income taxes 3,949 16,706
Restructuring costs, net (5,938) -
Cash paid on accrued restructuring costs (2,501) -
Amortization of debt issuance costs 503 282
Amortization of restricted stock compensation 425 -

Changes in operating assets and liabilities:
Inventories (3,237) 12,052
Accounts receivable (5,598) (32,786)
Accounts payable (10,222) (2,261)
Other 2,228 641
----------------- ---------------

Net cash provided by operating activities 26,810 56,549
----------------- ---------------

Cash flows from investing activities
Capital expenditures (23,198) (102,979)
Proceeds from sale/leaseback transactions 1,282 -
----------------- ---------------

Net cash used in investing activities (21,916) (102,979)
----------------- ---------------
Cash flows from financing activities

Payments on long-term debt and capital lease
obligations (34,129) (126,155)
Issuance of common stock, net of issue costs 56,033 1,368
Payments for debt issuance costs - (3,946)
Net metals repurchase agreement transactions - (9,386)
Issuance of long-term debt - 202,611
----------------- ---------------
Net cash provided by financing activities 21,904 64,492
----------------- ---------------
Cash and cash equivalents
Net increase 26,798 18,062
Balance at beginning of period 14,911 18,219
----------------- ---------------
Balance at end of period $ 41,709 $ 36,281
================= ===============



See notes to consolidated financial statements.



Stillwater Mining Company
Notes to Consolidated Financial Statements
(Unaudited)

Note 1 - General

In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the company's
financial position as of June 30, 2002 and the results of its operations
for the three- and six-month periods ended June 30, 2002 and 2001 and cash
flows for the six-month periods ended June 30, 2002 and 2001. Certain prior
year amounts have been reclassified to conform with the current year
presentation. The results of operations for the three- and six-month
periods are not necessarily indicative of the results to be expected for
the full year. The accompanying consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the company's 2001 Annual Report on Form 10-K/A.

Note 2 - New Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 143,
Accounting for Asset Retirement Obligations, which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
standard applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction,
development and normal use of the asset.

SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The fair value
of the liability is added to the carrying amount of the associated asset
and this additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period through charges
to operating expense. If the obligation is settled for other than the
carrying amount of the liability, the company will recognize a gain or loss
on settlement.

The company is required to adopt the provisions of SFAS No. 143
for the quarter ending March 31, 2003. To accomplish this, the company must
quantify all legal obligations for asset retirement obligations and
determine the fair value of these obligations on the date of adoption.
Additionally, the company will be required to develop processes to track
and monitor these obligations. Because of the effort necessary to comply
with the adoption of SFAS No. 143, the company has not yet completed its
evaluation of the impact of adoption.

Effective January 1, 2002, the company adopted the FASB SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, which
addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, it retains many of the fundamental provisions of
that Statement. The adoption of SFAS No. 144 did not have an impact on the
company's financial position or results of operations as of and for the
three- and six-month periods ended June 30, 2002.

Note 3 - Comprehensive Income

Comprehensive income consists of net income and other gains and
losses affecting shareholders' equity that, under generally accepted
accounting principles, are excluded from net income. For the company, such
items consist of unrealized gains and losses on derivative financial
instruments.

The following summary sets forth the changes of other
comprehensive income (loss) accumulated in shareholders' equity (in thousands):




Commodity Interest Total Derivative
Instruments Rate Swaps Financial Instruments
------------- ----------------- ----------------------

Balance at December 31, 2001 $ 9,458 $ - $ 9,458
Reclassification to earnings (4,790) 580 (4,210)
Change in value (285) (1,901) (2,186)
------------- ----------------- ----------------------
4,383 (1,321) 3,062
Tax effect (1,726) 520 (1,206)
------------- ----------------- ----------------------
Balance at June 30, 2002 $ 2,657 $ (801) $ 1,856
============= ================= ======================



Commodity instruments outstanding at June 30, 2002 consist of
cashless put and call option collars and financially settled forwards. All
financially settled forward commodity instruments reported at June 30,
2002, have been settled and cash has been received. The gains related to
commodity instruments are being deferred in accumulated other comprehensive
income until the original contract settlement dates. The company expects to
realize and reclassify to earnings the entire $4.4 million ($2.7 million
net of tax) of unrealized gains existing at June 30, 2002 during the next
six months. The Company entered into and had outstanding put and call
option collars at June 30, 2002, consisting of 5,000 ounces of platinum
with an average put price of $525 per ounce to the company and an average
call price of $544 to the counter party. At June 30, 2002 the net fair
value of the cashless put and call option collars was insignificant. The
outstanding put and call option collars will be settled in the third
quarter of 2002.

The unrealized losses of $1.3 million ($0.8 million net of tax)
existing at June 30, 2002 on the interest rate swaps are being deferred and
are expected to be recognized as an addition to interest expense over the
next twenty-one months.

Note 4 - Inventories

Inventories consisted of the following (in thousands):

June 30, December 31,
2002 2001
----------------- ---------------
Metals inventory
Raw ore $ 1,205 $ 1,571
Concentrate and in-process 15,067 14,944
Finished goods 19,025 17,171
----------------- ---------------
35,297 33,686
Materials and supplies 10,884 9,258
----------------- ---------------
$ 46,181 $ 42,944
================= ===============

Note 5 - Long-Term Debt
Credit Facility

In February 2001, the company obtained a $250 million credit
facility (the "Credit Facility") from a syndicate of financial
institutions. The Credit Facility provides for a $65 million five-year term
loan facility (Term A), a $135 million seven-year term loan facility (Term
B) and a $50 million revolving credit facility. Amortization of the term
loan facilities commenced on March 31, 2002. The final maturity of the Term
A and the revolving credit facility is December 30, 2005 while the Term B
facility final maturity date is December 31, 2007. As of June 30, 2002, the
company had $60.4 million and $130.5 million outstanding under the Term A
and Term B loan facilities, respectively, bearing interest at 4.5% and 5.7%
for the Term A and Term B facilities, respectively. No balance is
outstanding under the revolving credit facility as of June 30, 2002, which
requires an annual commitment fee of 0.5% on the unadvanced amount.

Note 6 - Capital Stock Transactions

Restricted Stock

During the first quarter of 2002, the company granted 135,119
shares of restricted stock to certain of its officers and employees. On
July 2, 2002, 40,146 shares had vested and the remaining shares will vest
on January 2, 2005, provided that the recipient is still employed by the
company on such vesting date. Vesting may accelerate upon the attainment of
certain performance criteria measured on specified dates. The market value
of restricted stock awarded totaled approximately $2.6 million on the grant
date and was recorded as a separate component of shareholders' equity.
Approximately 6,000 shares of restricted stock were forfeited or cancelled
during the second quarter of 2002. The company is amortizing unearned
compensation over the vesting periods. During the three- and six-month
periods ended June 30, 2002, approximately $171,000 and $425,000,
respectively, related to the restricted stock was recognized as
compensation expense.

Stock Offering

On January 31, 2002, the company completed a $60 million private
placement of its common stock involving approximately 4.3 million shares or
approximately 10% of the outstanding shares after such issuance. The price
per share represents an approximate 10% discount from the closing price of
$15.61 on January 29, 2002. As of June 30, 2002, proceeds from the offering
were approximately $54.0 million, net of actual offering costs of $6.0
million incurred.

Note 7 - Earnings per Share

The effect of outstanding stock options on diluted weighted
average shares outstanding was 161,634 and 609,391 shares for the
three-month periods ending June 30, 2002 and 2001, respectively.
Outstanding options to purchase 2,009,315 and 419,175 shares of common
stock were excluded from the computation of diluted earnings per share for
the three-month periods ended June 30, 2002 and 2001, respectively, because
the effect of inclusion would have been antidilutive using the treasury
stock method.

The effect of outstanding stock options on diluted weighted
average shares outstanding was 174,031 and 674,190 shares for the six-month
periods ending June 30, 2002 and 2001, respectively. Outstanding options to
purchase 1,931,002 and 390,075 shares of common stock were excluded from
the computation of diluted earnings per share for the six-month periods
ended June 30, 2002 and 2001, respectively, because the effect of inclusion
would have been antidilutive using the treasury stock method.

The effect of outstanding restricted stock on diluted weighted
average shares outstanding was 53,491 and 56,844 shares for the three- and
six-month periods ending June 30, 2002, respectively.

Note 8 - Long-Term Sales Contracts

The company maintains long-term sales contracts with General
Motors Corporation, Ford Motor Company and Mitsubishi Corporation. The
contracts provide for floor and ceiling price structures as summarized
below:



PALLADIUM PLATINUM
------------------------------------------------ -----------------------------------------------------
Avg. Avg. Avg. Avg.
% of Floor % of Ceiling % of Floor % of Ceiling
Year Production Price Production Price Production Price Production Price
- ------- ---------- -------- ---------- -------- ----------- -------- ----------- --------

2002 95% $370 28% $400 100% $403 44% $562
2003 95% $357 28% $400 98% $404 21% $569
2004 100% $371 39% $644 80% $425 16% $856
2005 100% $355 31% $702 80% $425 16% $856
2006 100% $339 16% $981 80% $425 16% $856
2007 80% $400 20% $975 70% $425 14% $850
2008 80% $385 20% $975 70% $425 14% $850
2009 80% $380 20% $975 70% $425 14% $850
2010 80% $375 20% $975 70% $425 14% $850




Note 9 - Financial Instruments

The company utilizes the following types of derivative financial
instruments: fixed forwards, cashless put and call option collars,
financially settled forwards and interest rate swaps. For derivative
instruments, the company designates derivatives as a hedge of a forecasted
transaction or the variability of cash flows to be received or paid related
to a recognized asset or liability ("cash flow" hedge). Changes in fair
value of derivatives that are highly effective as hedges and that are
designated and qualified as a cash-flow hedge are reported in other
comprehensive income until the related specific firm commitments or
forecasted transactions occur. Hedging gains or (losses) on commodity
instruments were recognized as an adjustment to revenue and consisted of
the following (in thousands):



Three months ended June 30, Six months ended June 30,
2002 2001 2002 2001
----------------- ---------------- ------------------- ---------------

Cashless put and call
option collars $ - $ - $ - $ (2,457)
Financially settled forwards
1,953 678 4,790 (1,087)
----------------- ---------------- ------------------- ---------------
$ 1,953 $ 678 $ 4,790 $ (3,544)
================= ================ =================== ===============



The company had no fixed forward contracts outstanding during the
periods ending June 30, 2002 and 2001. The Company entered into and had
outstanding put and call option collars at June 30, 2002, consisting of
5,000 ounces of platinum with an average put price of $525 per ounce to the
company and an average call price of $544 to the counter party. At June 30,
2002, the net fair value of the cashless put and call option collars was
insignificant. The outstanding put and call option collars will be settled
in the third quarter of 2002.

During the first quarter of 2002, the company entered into two
identical interest rate swap agreements with a combined notional amount
totaling $100 million. The outstanding interest rate swap agreements were
effective March 4, 2002 and mature on March 4, 2004. The agreements require
the company to pay interest at a fixed rate of 3.67% and receive interest
at a rate based on London Interbank Offered Rate (LIBOR), which is adjusted
on a quarterly basis. The adjusted quarterly rate at June 30, 2002 was
1.9%. The interest rate swap agreements qualify as a cash flow hedge and
are considered to be highly effective since the change in the value of the
interest rate swap will offset changes in the future cash flows related to
interest payments on the company's debt.

Note 10 - Restructuring Costs

In the fourth quarter of 2001, the company began implementing a
revised operating plan, which included a reduction of the company's
previously planned capital expenditures and production levels. In
accordance with the plan, the company terminated certain contracts related
to ongoing mine development and accrued a pre-tax charge of approximately
$11 million for early contract termination costs. The accrual was based on
the termination provisions of the related contracts. During the first half
of 2002, the company reduced its accrued restructuring costs resulting in a
gain of $7.0 million primarily as a result of negotiations of certain
termination clauses of the construction contracts. Any adjustments to the
original estimate of the accrual have been included in the company's
results of operations.

In accordance with the revised operating plan, during the second
quarter of 2002, the company revised its estimate of the restructuring
accrual, which included the elimination of six management positions and
recorded a net addition to the restructuring accrual of $0.3 million. The
following summary sets forth the changes of the restructuring accrual
during the second quarter of 2002 (in thousands):



Total
Contract Employee Restructuring
Terminations Terminations Accrual
---------------- ---------------- ----------------

Balance at March 31, 2001 $ 3,615 $ - $ 3,615

Additional accrual - 1,089 1,089
Cash paid (1,134) (285) (1,419)
Accrual adjustments (750) - (750)
---------------- ---------------- ----------------
Balance at June 30, 2002 $ 1,731 $ 804 $ 2,535
---------------- ---------------- ----------------



The following summary sets forth the changes of the restructuring accrual
during the first six months of 2002 (in thousands):



Total
Contract Employee Restructuring
Terminations Terminations Accrual
---------------- ---------------- ----------------

Balance at December 31, 2001 $ 10,974 $ - $ 10,974

Additional accrual - 1,089 1,089
Cash paid (2,216) (285) (2,419)
Accrual adjustments (7,027) - (7,027)
---------------- ---------------- ----------------
Balance at June 30, 2002 $ 1,731 $ 804 $ 2,535
---------------- ---------------- ----------------







Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Stillwater Mining Company
Key Factors
(Unaudited)
Three months ended Six months ended
June 30, June 30,
--------------------------------- --- ------------------------------
2002 2001 2002 2001
------------- --------------- ------------- -------------

OPERATING DATA

Consolidated:
- -------------

Ounces produced (000)
Palladium 127 93 255 189
Platinum 38 30 76 58
------------- --------------- ------------- -------------
Total 165 123 331 247

Tons mined (000) 348 182 673 381

Tons milled (000) 349 195 674 395
Mill head grade (ounce per ton) 0.53 0.73 0.55 0.69

Sub-grade tons milled (000) 12 17 24 35
Sub-grade mill head grade (ounce per ton) 0.13 0.21 0.21 0.21

Total tons milled (000) 361 212 698 430
Combined mill head grade (ounce per ton) 0.51 0.65 0.53 0.64
Total mill recovery (%) 90 91 90 90


Stillwater Mine:
- ----------------

Ounces produced (000)
Palladium 103 93 213 189
Platinum 31 30 64 58
------------- --------------- ------------- -------------
Total 134 123 277 247

Tons mined (000) 241 182 497 381

Tons milled (000) 244 195 497 395
Mill head grade (ounce per ton) 0.60 0.73 0.61 0.69

Sub-grade tons milled (000) 8 17 20 35
Sub-grade mill head grade (ounce per ton) 0.12 0.21 0.22 0.21

Total tons milled (000) 252 212 517 430
Combined mill head grade (ounce per ton) 0.59 0.65 0.60 0.64
Total mill recovery (%) 91 91 90 90








Stillwater Mining Company
Key Factors
(Unaudited)
Three months ended Six months ended
June 30, June 30,
--------------------------------- --- ------------------------------
2002 2001 2002 2001
------------- --------------- ------------- -------------
OPERATING DATA (Continued)

East Boulder Mine:
- ------------------

Ounces produced (000)
Palladium 24 - 42 -
Platinum 7 - 12 -
------------- --------------- ------------- -------------
Total 31 - 54 -

Tons mined (000) 107 - 176 -

Tons milled (000) 105 - 177 -
Mill head grade (ounce per ton) 0.34 - 0.36 -

Sub-grade tons milled (000) 4 - 4 -
Sub-grade mill head grade (ounce per ton) 0.15 - 0.15 -

Total tons milled (000) 109 - 181 -
Combined mill head grade (ounce per ton) 0.34 - 0.35 -
Total mill recovery (%) 87 - 87 -


SALES AND PRICE DATA

Ounces sold (000)
Palladium 127 103 251 212
Platinum 38 29 79 58
------------- --------------- ------------- -------------
Total 165 132 330 270

Average realized price per ounce(1)
Palladium $ 442 $ 591 $ 449 $ 648
Platinum 511 541 502 535
Combined 458 580 461 624

Average market price per ounce(1)
Palladium $ 355 $ 654 $ 371 $ 795
Platinum 543 595 513 598
Combined 398 640 404 749


(1) Stillwater Mining reports a combined average realized and market price
of palladium and platinum at the same ratio as ounces are produced from
the refinery. The average realized price represents revenues of the
company excluding contract discounts divided by ounces sold. The
average market price represents the average London PM Fix for the
actual months of the period.








Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------

COST DATA

Consolidated:
-------------

PER TON MILLED(2)

Cash operating costs $ 109 $ 127 $ 114 $ 125
Royalties and taxes 14 23 14 25
------------ ------------ ------------ ------------
Total cash costs $ 123 $ 150 $ 128 $ 150
Depreciation and amortization 29 26 28 27
------------ ------------ ------------ ------------
Total production costs $ 152 $ 176 $ 156 $ 177
============ ============ ============ ============

PER OUNCE PRODUCED(2)

Cash operating costs $ 239 $ 220 $ 239 $ 218
Royalties and taxes 31 39 30 44
------------ ------------ ------------ ------------
Total cash costs $ 270 $ 259 $ 269 $ 262
Depreciation and amortization 63 47 60 46
------------ ------------ ------------ ------------
Total production costs $ 333 $ 306 $ 329 $ 308
============ ============ ============ ============

Stillwater Mine:
----------------

PER TON MILLED(2)

Cash operating costs $ 116 $ 127 $ 116 $ 125
Royalties and taxes 15 23 15 25
------------ ------------ ------------ ------------
Total cash costs $ 131 $ 150 $ 131 $ 150
Depreciation and amortization 28 26 27 27
------------ ------------ ------------ ------------
Total production costs $ 159 $ 176 $ 158 $ 177
============ ============ ============ ============

PER OUNCE PRODUCED(2)

Cash operating costs $ 219 $ 220 $ 218 $ 218
Royalties and taxes 28 39 27 44
------------ ------------ ------------ ------------
Total cash costs $ 247 $ 259 $ 245 $ 262
Depreciation and amortization 53 47 51 46
------------ ------------ ------------ ------------
Total production costs $ 300 $ 306 $ 296 $ 308
============ ============ ============ ============

(2) Income taxes, corporate general and administrative expense and
interest income and expense are not included in total cash costs or
total production costs.










Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
COST DATA (Continued)

East Boulder Mine:
------------------

PER TON MILLED(2)

Cash operating costs $ 93 $ - $ 105 $ -
Royalties and taxes 12 - 12 -
------------ ------------ ------------ ------------
Total cash costs $ 105 $ - $ 117 $ -
Depreciation and amortization 30 - 32 -
------------ ------------ ------------ ------------
Total production costs $ 135 $ - $ 149 $ -
============ ============ ============ ============

PER OUNCE PRODUCED(2)

Cash operating costs $ 324 $ - $ 348 $ -
Royalties and taxes 40 - 41 -
------------ ------------ ------------ ------------
Total cash costs $ 364 $ - $ 389 $ -
Depreciation and amortization 106 - 106 -
------------ ------------ ------------ ------------
Total production costs $ 470 $ - $ 495 $ -
============ ============ ============ ============

(2) Income taxes, corporate general and administrative expense and interest income and expense
are not included in total cash costs or total production costs.




Recent Developments

The company has resolved the issue concerning its estimate of
probable ore reserves with the Securities and Exchange Commission ("SEC").
The ore reserve issue arose in connection with the SEC's review of the
Company's "shelf" registration statement, which was filed in December 2001.
The Company was first informed of the reserve issue on March 13, 2002 in a
comment letter from the SEC, which detailed the SEC staff's specific
concerns and which informed the Company that it believed the Company's ore
reserve estimate should be revised to better conform to the SEC's
interpretation of industry standards.

As a result of these discussions, the Company has agreed to modify
certain parameters used in determining its probable ore reserve estimate.
Historically, the Company has vertically projected its probable ore
reserves in certain ore blocks for distances of up to 1,900 feet beyond
sample points. These projections were based on demonstrated ore continuity
within the J-M Reef, the Company's knowledge of geologic features affecting
ore continuity and reconciliation of prior ore reserve estimates with
actual mining results. The revised parameters limit ore reserve projections
to 1,000 feet beyond sample points. The Company will continue its practice
of selectively limiting ore reserve projections to distances less than
1,000 feet on the basis of its knowledge of geologic features.

Based on these revised parameters, total ore reserves for the
Company from both mines decreased from the originally reported 27.7 million
ounces of palladium and platinum, as of December 31, 2001, to 25.0 million
ounces, a 10% decrease. The Stillwater Mine ore reserves decreased from
16.1 million ounces of palladium and platinum as originally reported in the
2001 10-K and 2001 Annual Report to 13.5 million ounces and the East
Boulder Mine ore reserves decreased from 11.6 million ounces of palladium
and platinum to 11.5 million ounces. The Company has filed an amended Form
10-K for the year ended December 31, 2001 with the SEC on June 7, 2002,
giving effect to the ore reserve change. The SEC has declared the Company's
registration statement on Form S-3 effective as of June 7, 2002. Since the
registration statement was declared effective subsequent to May 1, 2002,
the company incurred $720,000 of contractual penalties associated with the
$60 million private placement of equity completed on January 31, 2002,
which was recorded as a reduction of the related proceeds.

The accounting effect of the revised ore reserve estimate was
accounted for as a change of estimate and was effected prospectively
commencing with the second quarter of 2002.

Results of Operations

Three months ended June 30, 2002 compared to three months ended June 30, 2001
- -----------------------------------------------------------------------------

PGM Production. During the second quarter of 2002, the company
produced approximately 127,000 ounces of palladium and 38,000 ounces of
platinum compared with production of approximately 93,000 ounces of
palladium and 30,000 ounces of platinum in the second quarter of 2001. The
increase was primarily due to a 9% increase in production at the Stillwater
Mine, which produced 103,000 ounces of palladium and 31,000 ounces of
platinum in the second quarter of 2002, and the East Boulder Mine, which
commenced commercial production in the first quarter of 2002 and produced
24,000 ounces of palladium and 7,000 ounces of platinum in the second
quarter of 2002. The increased production is primarily the result of a 71%
increase in total tons milled of 362,000 tons compared to 212,000 tons in
the second quarter of 2001, partially offset by a 22% decrease in the
combined mill head grade. The increase in tonnage and decrease in grade is
primarily due to the start-up of the East Boulder Mine in 2002, which is
currently producing ore containing a lower overall grade than the
Stillwater Mine.

Revenues. Revenues were $75.0 million for the second quarter of
2002 compared with $75.3 million for the second quarter of 2001. The
decrease is primarily due to a 21% decrease in realized palladium and
platinum prices, partially offset by a 25% increase in the number of ounces
sold.

Palladium and platinum sales increased by 33,000 ounces to 165,000
ounces compared with 132,000 ounces for the same period of 2001. Palladium
and platinum ounces sold increased to approximately 127,000 ounces and
38,000 ounces, respectively, compared to 103,000 ounces and 29,000 ounces,
respectively, for the second quarter of 2001.

The company's combined average realized price per ounce of
palladium and platinum sold in the second quarter of 2002 decreased 21% to
$458, compared to $580 in the second quarter of 2001. The combined average
market price decreased 38% to $398 per ounce in the second quarter of 2002,
compared to $640 per ounce in the second quarter of 2001. The company's
average realized price per ounce of palladium was $442 in the second
quarter of 2002, compared to $591 in the second quarter of 2001, while the
average market price of palladium was $355 per ounce in the second quarter
of 2002 compared to $654 per ounce in the second quarter of 2001. The
company's average realized price per ounce of platinum was $511 in the
second quarter of 2002, compared to $541 in the second quarter of 2001,
while the average market price of platinum was $543 per ounce in the second
quarter of 2002 compared to $595 per ounce in the second quarter of 2001.

Production Costs. The company's total cash costs per ounce
produced for the quarter ended June 30, 2002 increased $11 or 4% to $270
per ounce from $259 per ounce in the quarter ended June 30, 2001. The
increase in total cash costs per ounce is attributed to higher operating
costs of $19 per ounce primarily related to the East Boulder Mine, which
has not reached its full production capacity as of June 30, 2002. This is
offset by lower royalties and taxes of $8 per ounce primarily due to lower
palladium and platinum market prices as compared to the same period of
2001. The company's total production costs per ounce increased $27, or 9%,
to $333 per ounce in the quarter ended June 30, 2002 due to the increase in
cash costs and an increase in non-cash costs of $16 per ounce, primarily
related to placing the East Boulder Mine into commercial production during
2002.

Expenses. General and administrative expenses decreased from $5.0
million in the second quarter of 2001 to $3.2 million in the second quarter
of 2002. The decrease is due to lower costs of $0.5 million as a result of
reduced project management and recruiting activities associated with the
company's previous expansion plan. The company also incurred legal expenses
of $1.0 million arising from various corporate matters during the second
quarter of 2001.

During the second quarter of 2002, the company revised its
estimate of accrued restructuring costs, which included the elimination of
six management positions, and recorded a net addition to the restructuring
accrual of $0.3 million.

Interest expense increased $4.1 million as a result of the
start-up of the East Boulder Mine, which resulted in discontinuing interest
capitalization since that facility was placed into commercial operation in
the first quarter of 2002.

Income Taxes. The company has provided for income taxes of $2.2
million, or 16%, of pre-tax income for the quarter ended June 30, 2002
compared to $8.5 million, or 28.5% of pre-tax income, for the quarter ended
June 30, 2001. The reduction in the effective tax rate is the result of a
change in the treatment of mine development costs that will allow the
company to claim additional statutory depletion for tax purposes.

Net Income. The company reported net income of $11.1 million or
$0.26 per diluted share for the second quarter of 2002 compared with net
income of $21.3 million, or $0.54 per diluted share for the second quarter
of 2001.

Six months ended June 30, 2002 compared to six months ended June 30, 2001
- -------------------------------------------------------------------------

PGM Production. During the first half of 2002, the company
produced approximately 255,000 ounces of palladium and 76,000 ounces of
platinum compared with production of approximately 189,000 ounces of
palladium and 58,000 ounces of platinum in the first half of 2001. The
increase was primarily due to a 12% increase in production at the
Stillwater Mine, which produced 213,000 ounces of palladium and 64,000
ounces of platinum in the first half of 2002, and the East Boulder Mine,
which commenced commercial production in the first quarter of 2002 and
produced 42,000 ounces of palladium and 12,000 ounces of platinum in the
first half of 2002. The increased production is primarily the result of a
62% increase in total tons milled of 697,000 tons compared to 430,000 tons
in the first half of 2001, partially offset by a 17% decrease in the
combined mill head grade. The increase in tonnage and decrease in grade is
primarily due to the start-up of the East Boulder Mine in 2002, which is
currently producing ore containing a lower overall grade than the
Stillwater Mine.

Revenues. Revenues were $151.0 million for the first half of 2002
compared with $165.2 million for the first half of 2001. The 9% decrease is
primarily due to a 26% decrease in realized palladium and platinum prices,
partially offset by a 22% increase in the number of ounces sold.

Palladium and platinum sales increased by 60,000 ounces to 330,000
ounces compared with 270,000 ounces for the same period of 2001. Palladium
and platinum ounces sold increased to approximately 251,000 ounces and
79,000 ounces, respectively, compared to 212,000 ounces and 58,000 ounces,
respectively, for the first half of 2001.

The company's combined average realized price per ounce of
palladium and platinum sold in the first half of 2002 decreased 26% to
$461, compared to $624 in the first half of 2001. The combined average
market price decreased 46% to $404 per ounce in the first half of 2002,
compared to $749 per ounce in the first half of 2001. The company's average
realized price per ounce of palladium was $449 in the first half of 2002,
compared to $648 in the first half of 2001, while the average market price
of palladium was $371 per ounce in the first half of 2002 compared to $795
per ounce in the first half of 2001. The company's average realized price
per ounce of platinum was $502 in the first half of 2002, compared to $535
in the first half of 2001, while the average market price of platinum was
$513 per ounce in the first half of 2002 compared to $598 per ounce in the
first half of 2001.

Production Costs. The company's total cash costs per ounce
produced for the six months ended June 30, 2002 increased $7 or 3% to $269
from $262 in the six months ended June 30, 2001. The increase in total cash
costs per ounce is attributed to higher operating costs of $21 per ounce
primarily related to the East Boulder Mine, which has not reached its full
production capacity as of June 30, 2002. This is offset by lower royalties
and taxes of $14 per ounce primarily due to lower palladium and platinum
market prices as compared to the same period of 2001. The company's total
production costs per ounce increased $21, or 7%, to $329 in the six months
ended June 30, 2002 due to the increase in cash costs and an increase in
non-cash costs of $14 per ounce, primarily related to placing the East
Boulder Mine into commercial production during the first six months of 2002.

Expenses. General and administrative expenses decreased from $10.5
million in the first six months of 2001 to $6.7 million in the first six
months of 2002. The decrease is due to lower costs of $1.4 million as a
result of reduced project management and recruiting activities associated
with the company's previous expansion plan. The company also incurred $1.7
million of severance costs attributable to a management realignment and
legal expenses of $1.0 million arising from various corporate matters
during the first half of 2001.

During the first half of 2002, the company revised its estimate of
accrued restructuring costs as a result of negotiations of certain
termination clauses of construction contracts cancelled and the elimination
of six management positions. The company made adjustments to reduce the
accrual by $5.9 million during the first six months of 2002.

Interest expense increased $8.5 million as a result of the
start-up of the East Boulder Mine, which resulted in discontinuing interest
capitalization since that facility was placed into commercial operation in
the first quarter of 2002.

Income Taxes. The company has provided for income taxes of $7.3
million, or 20.9% of pre-tax income for the six months ended June 30, 2002
compared to $20.2 million, or 28.5% of pre-tax income, for the six months
ended June 30, 2001. The reduction in the effective tax rate is the result
of a change in the treatment of mine development costs that will allow the
company to claim additional statutory depletion for tax purposes.

Net Income. The company reported net income of $27.6 million or
$0.65 per diluted share for the first six months of 2002 compared with net
income of $50.7 million, or $1.29 per diluted share for the first six
months of 2001.

Liquidity and Capital Resources

The company's working capital at June 30, 2002 was $68.5 million
compared to $22.3 million at December 31, 2001. The ratio of current assets
to current liabilities was 2.4 at June 30, 2002, compared to 1.4 at
December 31, 2001.

Net cash provided by operations for the six months ended June 30,
2002, was $26.8 million compared with $56.5 million for the comparable
period of 2001, a decrease of $29.7 million. The decrease was primarily a
result of decreased net income of $23.1 million, a decrease in the
restructuring accrual of $8.4 million and a decrease in other non-cash
expenses of $3.8 million, offset by an increase in net operating assets and
liabilities of $5.5 million.

A total of $21.9 million of cash was used in investing activities
in the first six months of 2002 compared to $103.0 million in the same
period of 2001, a decrease of $81.1 million. The decrease is due to a
reduction of capital expenditures in accordance with the company's
optimization plan. The capital expenditures in the first six months of 2002
primarily relate to mine development activities.

For the six months ended June 30, 2002, cash provided by financing
activities was $21.9 million compared to $64.5 million for the comparable
period of 2001. Cash provided by financing activities were primarily
attributed to net proceeds from a $60 million common stock offering, offset
by $33.1 million repayment on the company's credit facility.

Cash and cash equivalents increased by $26.8 million for the first
six months of 2002 compared to an increase of $18.1 million for the
comparable period of 2001.

The company intends to utilize cash on hand and expected cash
flows from operations, along with available borrowings under the existing
$50 million Revolving Credit Facility to fund its operating and capital
needs. At June 30, 2002, $25 million was available to the company and an
additional $25 million could be available in the future if certain
operating and financial parameters are met. At June 30, 2002, there were no
outstanding borrowings under the Revolving Credit Facility. See Note 5 to
the financial statements for a description of the company's Credit
Facility. In addition, the company may, from time to time, also seek to
raise additional capital from the public or private securities markets or
from other sources for general corporate purposes and for investments
beyond the scope of the current phase of the current operating plans.

FORWARD LOOKING STATEMENT; FACTORS THAT MAY AFFECT FUTURE RESULTS
AND FINANCIAL CONDITION

Some statements contained in this report are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and, therefore, involve uncertainties or risks that could cause
actual results to differ materially. Such statements include comments
regarding expansion plans, costs, grade, production and recovery rates,
permitting, financing needs, and capital expenditures, increases in
processing capacity, cost reduction measures, safety, timing for
engineering studies, and environmental permitting and compliance,
litigation and the palladium and platinum market.

Investors are cautioned not to put undue reliance on
forward-looking statements. The company disclaims any obligation to update
forward-looking statements.

RISK FACTORS

Set forth below are certain risks faced by the company.

Vulnerability to Metals Price Volatility--Changes in supply and demand
could reduce market prices.

Since our sole source of revenue is the sale of platinum group
metals (PGM's), changes in the market price of PGM's significantly impacts
profitability. Many factors beyond our control influence the market prices
of these metals. These factors include global supply and demand,
speculative activities, international political and economic conditions and
production levels and costs in other PGM producing countries, particularly
Russia and South Africa.

The market prices of PGM's have fallen significantly over the past
year and may continue to fall. The price for palladium, which had reached
record high price levels of $1,090 per ounce in January 2001 fell sharply
to approximately $320 per ounce during the third quarter of 2001 and at
July 22, 2002 was approximately $322 per ounce. The price for platinum also
fell from $640 per ounce early in 2001 to approximately $525 per ounce at
July 22, 2002. The economic contraction experienced in the United States
and worldwide may lead to further reductions in market prices of PGM's,
particularly if demand for PGM's falls in connection with reduced
automobile and electronics production. Any such economic downturn or
continued drop in prices could adversely impact our results of operations
and could impair our ability to achieve our production plans.

Economic and political events in Russia could also result in
declining market prices. If Russia disposes of substantial amounts of PGM's
from stockpiles or otherwise, the increased supply could reduce the market
prices of palladium and platinum. Financial, economic, or political
instability in Russia and economic problems could make Russian shipments
difficult to predict and the risk of sales from stockpiles more
significant. Volatility was evident during 1997 through 2001 when apparent
tightness in the market for PGM's led to high prices for current delivery
contracts and "backwardation", a condition in which delivery prices for
metals in the near-term are higher than delivery prices for metals to be
delivered in the future.

Any drop in PGM prices adversely impacts our revenues, profits and
cash flows. In addition, sustained low prices could reduce revenues further
by production cutbacks due to cessation of the mining of deposits or
portions of deposits that have become uneconomic at the then prevailing PGM
price and reduce funds available for development. See "Business and
Properties - Competition: Palladium and Platinum Market" in the company's
annual report on Form 10-K/A for the year ended December 31, 2001 for
further explanation of these factors.

Effect of Hedging--Hedging could limit the realization of higher metal prices.

We enter into hedging contracts from time to time in an effort to
reduce the negative effect of price changes on our cash flow. These hedging
activities typically consist of contracts that require us to deliver
specific quantities of metal, or to financially settle the obligation in
the future at specific prices, the sale of call options and the purchase of
put options. At July 22, 2002, the market prices for palladium and platinum
were $322 and $525 per ounce, respectively. See Note 9 to the financial
statements attached hereto for a discussion of our outstanding hedge
positions. While hedging transactions are intended to reduce the negative
effects of price decreases, they can also prevent us from benefiting from
price increases. When PGM prices are above the price for which future
production has been sold, we would have an opportunity loss. We have
entered into long-term sales contracts that provide a floor price for sales
of a portion of our production. See Note 8 to the financial statements
attached hereto for a description of these contracts.

Operating Plan Risks - Achievement of our production goals is subject to
significant uncertainties.

Our achievement of our production goals depends upon our ability
to sustain production at the Stillwater Mine and our related facilities and
its ability to achieve initial production targets at the East Boulder Mine.
Each of these tasks will require us to develop mine facilities to commence
and maintain production within budgeted levels. We have previously and may
need to further revise our plans and cost estimates for the Stillwater Mine
and East Boulder Mine as the mining progresses. See "Business and
Properties - Current Operations" in the company's annual report on Form
10-K/A for the year ended December 31, 2001 for further discussion of our
operating plans. Among the major risks to a successful operating plan are
potential cost overruns during development of new mine operations and
construction of new facilities, the inability to retain sufficient numbers
of skilled underground miners, and the ability to achieve mill throughput
and ore grade objectives.

Based on the complexity and uncertainty involved in operating
underground mines, it is extremely difficult to provide accurate production
and cost estimates. We cannot be certain that either the Stillwater or East
Boulder Mines operations will achieve the anticipated production capacity
or that the expected operating cost levels will be achieved or that funding
will be available from internal and external sources in necessary amounts
or on acceptable terms. Failure to achieve our anticipated production
capacity would reduce production levels, which would impact our revenues,
profits and cash flows which could adversely impact future mine operations
and project viability. The reduction of production levels would also impact
certain covenants under our credit facility relating to the accomplishment
of specified production levels. As underground operations expand at depth
and horizontally, it is likely that operating costs will increase unless
employee productivity is increased. In addition, as additional underground
infrastructure is constructed, amortization will increase unless additional
ore reserves are identified. Such increase in costs could adversely effect
the company's profitability.

In the course of seeking to increase production, we have
historically experienced difficulties resulting from development shortfalls
and production constraints including underground materials handling
constraints, equipment unavailability, operational inconsistencies and
service interruptions. New mining operations often experience unexpected
problems, which can result in substantial delays in reaching production
targets. During 2001, we revised our operating plans at the Stillwater Mine
and East Boulder Mine. See "Business and Properties - Current Operations -
Optimization Plan for Stillwater and East Boulder Mines" in the company's
annual report on Form 10-K/A for the year ended December 31, 2001. The
operating plan further contemplates a significant effort to reduce expenses.

The East Boulder Mine commenced commercial operations in the first
quarter of 2002 and has no previous operating history. As a result,
estimates of future cash operating costs at East Boulder are based largely
on our operating experience at the Stillwater Mine portion of the J-M Reef.
Actual production, cash operating costs and economic returns may differ
significantly from those currently estimated or those established in future
studies and estimates. New mining operations often experience unexpected
problems during development, which can result in substantial delays in
reaching production targets.

Compliance with Bank Credit Agreement - The restrictions imposed by our
debt agreements could negatively affect our ability to engage in certain
activities.

Our agreement with the syndicate of financial institutions
provides a credit facility that is being used to finance our revised
operating plan and contains covenants relating to the accomplishment of
specific production objectives, capital cost and financial targets. If we
are unable to comply with the debt covenants, we would seek to amend the
existing contract or to seek alternative financing. If we violate any of
the covenants contained in our agreement, such default could cause
immediate acceleration of the loan and could increase the interest rate on
any borrowings thereunder. During 2001, we were required to amend certain
credit agreement covenants to align the credit agreement with our revised
operating plan. These covenants were amended effective December 2001. See
Note 5 to the financial statements attached hereto for a discussion of the
company's credit facility. The Credit Agreement dated February 23, 2001
between Stillwater Mining Company and TD Securities (USA), Ltd. has been
filed as Exhibit 10.19 to the company's 2000 Form 10-K.

Dependence on Agreements with Significant Customers - We depend upon a few
customers and our sales and operations could suffer if we lose any of them.

We are party to long-term sales contracts with General Motors
Corporation, Ford Motor Company and Mitsubishi Corporation, each of who
represent more than 10% of the company's revenues. For more information
about these sales contracts, see Note 8 to the financial statements
attached hereto.

As a result of these contracts, we are subject to the customers'
compliance with the terms of the contracts, their ability to terminate or
suspend the contracts and the customers' willingness and ability to pay.
The loss of any of these customers would require us to sell at prevailing
market prices, which may expose us to lower metal prices as compared to the
floor and ceiling price structures under the sales contracts. In the event
we become involved in a disagreement with one or more of its customers,
their compliance with these contracts may be at risk. For example, we have
negotiated floor prices that are well above historical low prices for
palladium and platinum. In the event of a substantial decline in the market
price of palladium or platinum, one or more of these customers could seek
to renegotiate the prices or fail to honor the contracts. In such an event,
our operating plans could be threatened. In addition, under our syndicated
credit facility, a default or modification of the sales contracts could
prohibit additional loans or require the repayment of outstanding loans. A
termination or breach by a customer could negatively impact our results of
operations. The contracts are designed to limit the downside risk of metal
prices at the risk of foregoing a portion of upside price potential should
market prices exceed the price ceilings. See Note 8 to the financial
statements attached hereto for additional information about the sales
contracts.

Substitution of Materials - Users of PGM's may substitute other materials
for palladium and platinum.

High PGM prices may lead users of PGM's to substitute other
materials for palladium and platinum. The automobile, electronics and
dental industries are the three largest sources of palladium demand. In
response to supply questions and high market prices for palladium, some
automobile manufacturers may seek alternatives to palladium and may reduce
their PGM purchases. There has been some substitution of other metals for
palladium in the automobile, electronics and dental applications.
Substitution in all of these industries may increase significantly if the
PGM market prices rise or if supply becomes unreliable. Significant
substitution for any reason could result in a material PGM price decrease,
which would negatively impact our revenues.

Limited Availability of Additional Mining Personnel and Uncertainty of
Labor Relations - Our operations depend significantly upon the availability
of qualified miners, and if we are not able to attract and retain these
miners, our production targets may not be met.

Our operations depend significantly on the availability of
qualified miners. Historically, we have experienced high turnover with
respect to our miners. In addition, we must compete for individuals skilled
in the operation and development of mining properties. The number of such
persons is limited, and significant competition exists to obtain their
skills. We cannot be certain that we will be able to maintain an adequate
supply of miners and other personnel or that our labor expenses will not
increase as a result of a shortage in supply of such workers. We currently
employ 421 miners and under the current operating plan expect to slightly
increase the number of miners within the next five years. Failure to
maintain an adequate supply of miners could limit our ability to meet our
contractual requirements. We currently have approximately 1,593 employees,
about 985 located at the Stillwater Mine and at the Columbus facilities of
whom are covered by a collective bargaining agreement with Paper, Allied
Industrial, Chemical and Energy Workers International Union (PACE) Local
8-001, expiring June 30, 2004. On July 1, 2002, approximately 224 hourly
employees at the East Boulder Mine became covered by a collective
bargaining agreement with PACE Local 8-001, expiring June 30, 2005.

Availability of Surety Bonds - If the company is unable to obtain surety
bonds to collateralize our reclamation liabilities, our operating permits
may be impacted.

We are required to post surety bonds to guarantee performance of
reclamation activities at the Stillwater and East Boulder Mines. As a
result of the terrorist activities on September 11, 2001, the total bonding
capacity of the U.S. insurance industry has been severely reduced. In
addition, the State of Montana has been requiring higher bonding levels at
mining operations throughout the state. For example, the required bonded
amount at the East Boulder Mine was increased from $4.0 million to $11.2
million during 2002. The Stillwater Mine currently posts a bond of $9.2
million, which may require a substantial increase. In the event that
increased bonding requirements are imposed and we are unable to obtain the
required bonds, or provide either cash collateral or letter of credit
performance guarantees, the ability to operate under existing operating
permits could be adversely affected.

Availability of Cash - If we are unable to meet production targets under
the revised operating plan and/or control expenses, the company may not
have the necessary cash available.

The amount of cash available to us would be adversely affected if
we are unable meet the production targets under the revised operating plan
and/or control expenses. A drop in metal prices in the market would also
negatively impact the amount of cash available to us. While we raised $60
million in a private offering of our common stock in January 2002, a
portion of the proceeds from that offering must be used to address existing
obligations, such as increased surety bond requirements and letter of
credit requirements. In view of these uncertainties, we expect to
continually monitor our liquidity position and seek appropriate financial
and strategic transactions if required or as available at the time.

Mining Risks and Potential Inadequacy of Insurance Coverage - Our business
is subject to significant risks that may not be covered by insurance.

Underground mining and our milling, smelting and refining
operations involve a number of risks and hazards, including:

o unusual and unexpected rock formations,

o ground or slope failures,

o cave-ins and other mining or ground-related problems,

o environmental hazards,

o industrial accidents,

o labor disputes,

o metallurgical and other processing, smelting or refining problems,

o flooding and periodic interruptions due to inclement or hazardous
weather conditions or other acts of God,

o mechanical equipment and facility performance problems and

o the availability of materials and equipment.

Such risks could result in damage to, or destruction of, mineral
properties or production facilities, personal injury or death,
environmental damage, delays in mining, monetary losses and possible legal
liability. Fatalities have occurred at our mine since operations began in
1986. Industrial accidents could have a material adverse effect on our
business and operations. We cannot be certain that this insurance will
cover the risks associated with mining or that we will be able to maintain
insurance to cover these risks at economically feasible premiums. We might
also become subject to liability for environmental damage or other hazards
which we cannot insure against or which we may elect not to insure against
because of premium costs or other reasons. Losses from such events could
have a negative impact on our business, financial condition and results of
operations.

Adverse Effect of Governmental Regulations--Changes to regulations and
compliance with regulations could increase costs and cause delays.

Our business is subject to extensive federal, state and local
environmental controls and regulations, including the regulation of
discharge of materials into the environment, disturbance of lands,
threatened or endangered species and other environmental matters. These
laws are continually changing and, as a general matter, are becoming more
restrictive. Generally, compliance with these regulations requires us to
obtain permits issued by federal, state and local regulatory agencies.
Certain permits require periodic renewal or review of their conditions. We
cannot predict whether we will be able to renew such permits or whether
material changes in permit conditions will be imposed. Nonrenewal of
permits or the imposition of additional conditions could prohibit our
ability to conduct its operations. See "Business and Properties - Current
Operations - Regulatory and Environmental Matters" in the company's annual
report on Form 10-K/A for the year ended December 31, 2001.

Compliance with existing and future environmental laws and
regulations may require additional control measures and expenditures, which
we cannot predict. Environmental compliance requirements for new mines may
require substantial additional control measures that could materially
affect permitting and proposed construction schedules for such facilities.
Under certain circumstances, facility construction may be delayed pending
regulatory approval. Expansion may require new environmental permitting at
the Stillwater Mine, at the East Boulder Mine, and the company's processing
facilities. Private parties may pursue legal challenges of our permits. See
"Business and Properties - Current Operations - Regulatory and
Environmental Matters" in the company's annual report on Form 10-K/A for
the year ended December 31, 2001.

Our activities are also subject to extensive federal, state and
local laws and regulations governing matters relating to mine safety,
occupational health, labor standards, prospecting, exploration, production,
exports and taxes. Compliance with these and other laws and regulations
could require significant capital outlays.

Importance of a Single Mine--The Stillwater Mine is the company's largest
source of revenues.

A significant portion of our revenues are currently derived from
our mining operations at the Stillwater Mine. An interruption in operations
at the Stillwater Mine or at any of our processing facilities would have a
negative impact on our ability to generate revenues and profits in the
future. A smaller portion of our revenues are derived from our mining
operations at the East Boulder Mine. Material factors that could cause an
interruption in our operations at either mine include:

o ground or slope failures,

o cave-ins and other mining or ground-related problems,

o industrial accidents,

o mechanical equipment and facility performance problems and

o the availability of materials and equipment.

Uncertainty of Title to Properties - The validity of unpatented mining
claims is subject to title risk.

Although all of the company's proven ore reserves are situated on
patented claims, we maintain approximately 825 unpatented mining and mill
site claims. These unpatented claims cover geologic projections of the JM
Reef and lands utilized for surface facilities supporting our mining
operations. See "Business and Properties - Current Operations - Title and
Royalties" in the company's annual report on Form 10-K/A for the year ended
December 31, 2001. Unpatented mining claims may be located on Federal lands
in the US open to mineral entry. Mill site claims may be located on
non-mineral lands required for operations on valid mining claims.
Unpatented claims are generally considered to be subject to greater title
risk than other real property interests because the validity of unpatented
mining claims is often uncertain and subject to contest by third parties or
the federal government. The validity of an unpatented mining claim or mill
site claim is dependent on strict compliance with a complex body of federal
and state statutory and decisional law. Rights on unpatented mining claims
are conditioned on valid discovery of valuable minerals or occupancy in the
good faith pursuit of a discovery. Rights to mill site claims are
conditioned on the occupancy and valid use of the claim for mining-related
purposes. Often the public records are deficient and ineffective in
addressing issues of validity and ownership of unpatented mining and mill
site claims. While we have obtained various independent claim status
reviews and title opinions regarding the statutory compliance of our
unpatented mining and mill site claims, we cannot be certain that title to
any of our unpatented claims may not be defective or subjected to
challenge. See "Business and Properties - Current Operations - Title and
Royalties" in the company's annual report on Form 10-K/A for the year ended
December 31, 2001.

Difficulty of Estimating Ore Reserves Accurately - Ore Reserves are very
difficult to estimate and ore reserve estimates may require adjustment in
the future; changes in ore grades could materially impact our production.

Ore reserve estimates are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which may
prove unreliable. Ore reserve estimates are expressions of judgment based
on knowledge, experience and industry practice. We cannot be certain that
our estimated ore reserves are accurate, and future production experience
could differ materially from such estimates. Should we encounter
mineralization or formations at any of our mines or projects different from
those predicted by drilling, sampling and similar examinations, ore reserve
estimates may have to be adjusted and mining plans may have to be altered
in a way that might adversely affect our operations. Declines in the market
prices of PGM's may render the mining of some or all of our ore reserves
uneconomic. The grade of ore may vary significantly from time to time and
between the Stillwater Mine and the East Boulder Mine, as well as with any
operation. We cannot give any assurances that any particular level of metal
may be recovered from the ore reserves. Moreover, short-term factors
relating to the ore reserves, such as the need for additional development
of the orebody or the processing of new or different grades, may impair our
profitability in any particular accounting period.

Complexity of Processing Platinum Group Metals - The complexity of
processing poses operational and environmental risks in addition to typical
mining risks.

Producers of PGM's are required to conduct processing procedures
and construct and operate additional facilities beyond those for gold and
silver producers. In addition to concentration facilities at the mine site,
we operate our own smelting and refining facilities in Columbus, Montana to
produce a filter cake that is shipped for final refining by a third party
refiner. The operations of a smelter and refinery by us require
environmental steps and operational expertise not required of most other
precious metals producers. This additional complexity of operations poses
additional operational and environmental risks, such as solution spills,
the release of sulfur dioxide from the storage vessels and product spills
in transportation.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The company is exposed to market risk, including the effects of
adverse changes in metal prices and interest rates as discussed below.

Commodity Price Risk

The company produces and sells palladium, platinum and associated
byproduct metals directly to its customers and also through third parties.
As a result, financial risks are materially affected when prices for these
commodities fluctuate. In order to manage commodity price risk and to
reduce the impact of fluctuation in prices, the company enters into
long-term contracts and uses various derivative financial instruments.
Because the company hedges only with instruments that have a high
correlation with the value of the hedged transactions, changes in
derivatives' fair value are expected to be offset by changes in the value
of the hedged transaction.

The company has entered into long-term sales contracts with
General Motors Corporation, Ford Motor Company and Mitsubishi Corporation.
The contracts apply to the portions of the company's production over the
period through December 2010 and provide for a floor and ceiling price
structure. See Note 8 to the financial statements attached hereto for
additional information about sales contracts.

From time to time, the company utilizes financially settled
forwards and cashless put and call option collars. Under financially
settled forwards, at each settlement date, the company receives the
difference between the forward price and the market price if the market
price is below the forward price and the company pays the difference
between the forward price and the market price if the market price is above
the forward price. The company's financially settled forwards are settled
at maturity. Under cashless put and call option collars, at each
settlement, the company receives the difference between the put price and
the market price if the market price is below the put price and the company
pays the difference between the call price and the market price of the
market price is above the call price. See Note 9 to the financial
statements attached hereto for additional information about the company's
outstanding commodity instruments.

Interest Rate Risk

During the first quarter of 2002, the company entered into two
identical interest rate swap agreements with a combined notional amount
totaling $100 million. The outstanding interest rate swap agreements were
effective March 4, 2002 and mature on March 4, 2004. The agreements require
the company to pay interest at a fixed rate of 3.67% and receive interest
at a rate based on London Interbank Offered Rate (LIBOR), which is adjusted
on a quarterly basis. The adjusted quarterly rate at June 30, 2002 was
1.9%. Therefore, the company is exposed to changes in interest rates on the
portion of its Credit Facility in excess of $100 million, since the credit
facility carries a variable interest rate based upon LIBOR. The company's
Credit Facility provides for a $65 million five-year term loan facility
(Term A), a $135 million seven-year term loan facility (Term B) and a $50
million revolving Credit Facility. The final maturity of the Term A and
revolving credit facility is December 30, 2005, while the Term B facility
final maturity date is December 31, 2007. As of June 30, 2002, the company
had $60.4 million and $130.5 million outstanding under the Term A and Term
B loan facilities, respectively, bearing interest at 4.5% and 5.7% for the
Term A and Term B loan facilities, respectively. No balance is outstanding
under the revolving credit facility as of June 30, 2002.



PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-----------------

The company is involved in various claims and legal
actions arising in the ordinary course of business. In the opinion
of management, the ultimate disposition of these matters will not
have a material adverse effect on the company's consolidated
financial position, results of operations or liquidity.

Shareholder Suits

During the second quarter of 2002, seven lawsuits were
filed against Stillwater Mining Company and certain senior
officers in United States District Court, Southern District of New
York. These actions purport to be a class action filed on behalf
of all persons who purchased or otherwise acquired common stock of
the company between April 20, 2001 through and including April 1,
2002, and asserts claims against the company and certain of its
officers under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934. Plaintiffs challenge the accuracy of certain public
disclosures made by the company regarding its financial
performance, and in particular, its accounting for probable ore
reserves. The court has entered an order to consolidate the cases
and has appointed lead counsel to represent the plaintiff.

On June 24, 2002, a shareholder derivative lawsuit was
filed against Stillwater and its directors in state court in
Delaware. It arises out of allegations similar to the class
actions and seeks damages allegedly on behalf of Stillwater for
breach of fiduciary duties by the directors.

The company intends to vigorously defend itself in both
of these actions.


Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------

On January 31, 2002, the company completed a $60 million
private placement of its common stock involving approximately 4.3
million shares or approximately 10% of the outstanding shares
after such issuance. The price per share represented an
approximate 10% discount from the closing price of $15.61 on
January 29, 2002. As of June 30, 2002, proceeds from the offering
were approximately $54.0 million, net of actual offering costs of
$6.0 million incurred. The proceeds were used to pay down the $25
million revolving credit facility and the remaining have been and
will be used for general corporate purposes.


Item 3. Defaults Upon Senior Securities
-------------------------------

None

Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------

(a) The annual meeting of stockholders was held on May 9, 2002.

(b) The following individuals were elected to continue as Directors at
the meeting: Richard E. Gilbert, Apolinar Guzman, Patrick M.
James, Stephen V. Kearney, Malcolm W. MacNaught, Joseph P. Mazurek
and Francis R. McAllister. Sheryl K. Pressler was elected to the
Board of Directors.

(c) Set forth below are the votes cast for the election of Directors:

For (*) Withheld

Richard E. Gilbert 34,647,965 341,849
Apolinar Guzman 34,634,950 354,864
Patrick M. James 34,647,965 341,849
Stephen V. Kearney 34,647,935 341,789
Joseph P. Mazurek 34,647,865 341,949
Malcolm W. MacNaught 34,647,965 341,849
Francis R. McAllister 34,647,965 341,849
Sheryl K. Pressler 34,647,935 341,879

* Stockholders have cumulative voting rights in connection with the
election of directors.

Stockholders were asked to ratify the appointment of KPMG LLP as
the company's independent accountants for the fiscal year ending
December 31, 2002. Votes cast for were 34,060,655, against were
458,251 and abstaining were 50,563.

(d) None

Item 5. Other Information
-----------------

None

Item 6. Exhibits and Reports on Form 8-K
--------------------------------

(a) Exhibits:

None

(b) Reports on Form 8-K:

None




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.


STILLWATER MINING COMPANY
(Registrant)


Date: July 29, 2002 By: /s/ FRANCIS R. MCALLISTER
-----------------------------------
Francis R. McAllister
Chairman and Chief Executive Officer
(Principal Executive Officer)


Date: July 29, 2002
By: /s/ JAMES A. SABALA
----------------------------------
James A. Sabala
Vice President and Chief Financial
Officer
(Principal Financial Officer)