UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		for the fiscal year ended December 31, 2009.

o		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 1-13053

STILLWATER MINING COMPANY

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices and zip code)

(Registrant’s telephone number, including area code)

TITLE OF EACH CLASS		NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $0.01 par value		The New York Stock Exchange
Preferred Stock Purchase Rights		The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). o YES þ NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o YES þ NO

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. þ YES o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). o YES þ NO

As of June 30, 2009, assuming a price of $5.71 per share, the closing sale price on the New York Stock Exchange, the aggregate market value of shares of voting and non-voting common equity held by non-affiliates was approximately $246,638,237.

As of February 23, 2010, the Company had outstanding 97,151,324 shares of common stock, par value $0.01 per share.

     Certain information required in Part III of this Annual Report on Form 10-K is incorporated herein by reference to the registrant’s Proxy Statement for its 2010 Annual Meeting of Stockholders.

 

 

TABLE OF CONTENTS

GLOSSARY

		PART I
ITEMS 1, 1A, AND 2 BUSINESS, RISK FACTORS AND PROPERTIES					6
ITEM 3		LEGAL PROCEEDINGS			42
ITEM 4		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			42
		PART II
ITEM 5		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			43
ITEM 6		SELECTED FINANCIAL DATA			44
ITEM 7		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			52
ITEM 7A		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			67
ITEM 8		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			69
ITEM 9		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			97
ITEM 9A		CONTROLS AND PROCEDURES			97
ITEM 9B		OTHER INFORMATION			98
		PART III
ITEM 10		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE			98
ITEM 11		EXECUTIVE COMPENSATION			100
ITEM 12		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			100
ITEM 13		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE			100
ITEM 14		PRINCIPAL ACCOUNTING FEES AND SERVICES			100
		PART IV
ITEM 15		EXHIBITS, FINANCIAL STATEMENT SCHEDULES			101
		SIGNATURES			105
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

GLOSSARY OF SELECTED MINING TERMS

The following is a glossary of selected mining terms used in the Form 10-K that may be technical in nature:

Adit		A horizontal tunnel or drive, open to the surface at one end, which is used as an entrance to a mine.
Anorthosite		Igneous rock composed almost wholly of the mineral plagioclase feldspar.
Assay		The analysis of the proportions of metals in ore, or the testing of an ore or mineral for composition, purity, weight, or other properties of commercial interest.
Catalysts		Catalysts are materials that facilitate one or more chemical reactions without being consumed in the reaction themselves. As referenced in this report, platinum-group metals serve as catalysts within the catalytic converters used in automotive exhaust and pollution control systems and, where so indicated, within similar applications in petroleum refining or other chemical processes.
Close-spaced drilling		The drilling of holes designed to extract representative samples of rock in a target area.
Concentrate		A mineral processing product that generally describes the material that is produced after crushing and grinding ore effecting significant separation of gangue (waste) minerals from the metal and/or metal minerals, and discarding the waste and minor amounts of metal and/or metal minerals. The resulting “concentrate” of metal and/or metal minerals typically has an order of magnitude higher content of metal and/or metal minerals than the beginning ore material.
Crystallize		Process by which matter becomes crystalline (solid) from a gaseous, fluid or dispersed state. The separation, usually from a liquid phase on cooling, of a solid crystalline phase.
Cut-off grade		The lowest grade of mineralized material that qualifies as ore in a given deposit. The grade above which minerals are considered economically mineable considering the following parameters: estimates over the relevant period of mining costs, ore treatment costs, smelting and refining costs, process and refining recovery rates, royalty expenses, by-product credits, general and administrative costs, and PGM prices.
Decline		A gently sloped underground excavation constructed for purposes of moving mobile equipment, materials, supplies or personnel from surface openings to deeper mine workings or as an alternative to hoisting in a shaft for mobilization of equipment and materials between mine levels.
Dilution		An estimate of the amount of waste or low-grade mineralized rock which will be mined with the ore as part of normal mining practices in extracting an ore body.
Drift		A major horizontal access tunnel used for the transportation of ore or waste.
Ductility		Property of a solid material that undergoes more or less plastic deformation before it ruptures. The ability of a material to stretch without fracturing.
Fault		A geologic fracture or a zone of fractures along which there has been displacement of the sides relative to one another parallel to the fracture.
Filter cake		The PGM-bearing product that is shipped from the base metal refinery, as the Company’s final product, to a third-party toll refinery for the final extractive stages in the refining process.
Footwall		The underlying side of a fault, ore body, or mine working; especially the wall rock beneath an inclined vein, fault, or reef.

Gabbro rocks (See Mafic/Ultramafic)		A group of dark-colored igneous rocks composed primarily of the minerals plagioclase feldspar and clinopyroxene, with minor orthopyroxene.
Gangue material		The non-metalliferous or waste metalliferous mineral in the ore.
Grade		The average metal content, as determined by assay of a volume of ore. For precious metals, grade is normally expressed as troy ounces per ton of ore or as grams per metric tonne of ore.
Hanging wall		The overlying side of a fault, ore body, or mine working; especially the wall rock above an inclined vein, fault, or reef. (Compare “footwall.”)
Hoist		See shaft
Jackleg drill		A manually operated rock drill, generally powered by compressed air, used to drill holes for blasting rock and to install ground support hardware.
Lenticular-shaped		Resembling in shape the cross section of a double-convex lens.
Load-haul-dump		A vehicle used underground to scoop up mined material and move it to a central collection or discharge point. Generally called an “LHD” by miners.
Lode claims		Claims to the mineral rights along a lode (vein) structure of mineralized material on Federal land; typically in the U.S. lode claims are 1,500 feet in length and 600 feet wide along the trend of the mineralized material.
Mafic rocks		Igneous rocks composed chiefly of dark, ferromagnesian minerals in addition to lighter-colored feldspars.
Matrix		The finer-grained material between the larger particles of a rock or the material surrounding mineral particles.
Mill		A processing plant that produces a concentrate of the valuable minerals or metals contained in an ore. The concentrate must then be treated in some other type of plant, such as a smelter, to effect recovery of the pure metal. Term used interchangeably with concentrator.
Mill site claims		Claiming of Federal land for mill site purposes or other operations connected with mining lode claims. Used for nonmineralized land not necessarily contiguous with the vein or lode.
Mineral beneficiation		A treatment process separating the valuable minerals from the host material.
Mineralization		The concentration of metals and their compounds in rocks, and the processes involved therein.
Mineralized material		A mineralized body which has been delineated by appropriately spaced drilling and/or underground sampling to support a general estimate of available tonnage and average grade of metals. Such a deposit does not qualify as a reserve until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility.
Mouat Agreement		Mining and Processing Agreement dated March 16, 1984 regarding the Mouat family. The Mouat royalty stems back to the formation of Stillwater Mining Company at which time claims staked by the Mouats’ forebears in 1876 were leased to Stillwater Mining Company.
Net smelter royalty		A share of revenue paid by the Company to the owner of a royalty interest generally calculated based on the imputed value of the PGM concentrate delivered to the smelter. At Stillwater Mining Company, royalties are calculated on the mineral production subject to each royalty as a percentage of the revenue received by the Company after deducting treatment, refining and transportation charges paid to third parties, and certain other costs incurred in connection with processing the concentrate at the Columbus smelter.

Norite		Coarse-grained igneous rock composed of the minerals plagioclase feldspar and orthopyroxene.
Ore		That part of a mineral deposit which could be economically and legally extracted or produced at the time of reserve determination.
Outcrop		The part of a rock formation that appears at the earth’s surface often protruding above the surrounding ground.
PGM		The platinum group metals collectively and in any combination of palladium, platinum, rhodium, ruthenium, osmium, and iridium. Reference to PGM grades for the Company’s mine operations include measured quantities of palladium and platinum only. References to PGM grades associated with recycle materials typically include palladium, platinum and rhodium.
PGM rich matte		Matte is an intermediate product of smelting; an impure metallic sulfide mixture made by melting sulfide ore concentrates. PGM rich matte is a matte with an elevated level of platinum group metals.
Probable (indicated) reserves		Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
Proven (measured) reserves		Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established.
Recovery		The percentage of contained metal actually extracted from ore in the course of processing such ore.
Reef		A layer precipitated within the Stillwater Layered Igneous Complex enriched in platinum group metal-bearing minerals, chalcopyrite, pyrrhotite, pentlandite, and other sulfide materials. The J-M Reef, which the Company mines, occurs at a regular stratigraphic position within the Stillwater Complex. Note: this use of “reef” is uncommon and originated in South Africa where it is used to describe the PGM-bearing Merensky, UG2, and other similar layers in the Bushveld Complex.
Refining		The final stage of metal production in which residual impurities are removed from the metal.
Reserves		That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
Recycling materials		Spent PGM-bearing materials collected for reprocessing from automotive, petroleum, chemical, medical, food and other catalysts. Additionally, PGMs for recycling may be sourced from scrap electronics and thermocouples, old jewelry and materials used in manufacturing glass.
Shaft		A vertical or steeply inclined excavation for the purposes of opening and servicing an underground mine. It is usually equipped with a hoist at the top which lowers and raises a conveyance for handling personnel and materials.
Slag		Slag is a nonmetallic product resulting from the mutual dissolution of flux and nonmetallic impurities during smelting. A silica rich slag is a smelting slag that contains a relatively high level of silica.
Sill		(1) With respect to a mine opening, the base or floor of the excavated area (stope); (2) With respect to intrusive rock, a tabular intrusive unit that is conformable with surrounding rock layers.

Slusher		(1) An electric double-drum winch with two steel ropes attached to an open-bottomed scoop that transports (drags) ore from the rock face to a loading point, where the ore is discharged. (2) A very selective mining method in which small ore stopes are mined using a slusher.
Smelting		Heating ore or concentrate material with suitable flux materials at high temperatures creating a fusion of these materials to produce a melt consisting of two layers with a slag of the flux and gangue (waste) minerals on top and molten impure metals below. This generally produces an unfinished product (matte) requiring refining.
Sponge		A granular (shot) form of PGM. Commonly, the form required for manufacture of many PGM-based chemicals and catalysts.
Stope		A localized area of underground excavation from which ore is extracted.
Strike		The course, direction or bearing of a vein or a layer of rock.
Tailings		That portion of the mined material that remains after the valuable minerals have been extracted.
Tolling		Processing of material owned by others for a fee without taking title to the material.
Troy ounce		A unit measure used in the precious metals industry. A troy ounce is equal to 31.10 grams. The amounts of palladium and platinum produced and/or sold by the Company are reported in troy ounces. There are 12 troy ounces to a troy pound.
Ultramafic rocks		Igneous rocks composed chiefly of dark, ferromagnesian minerals in the absence of significant lighter-colored feldspars.
Vein		A mineralized zone having regular development in length, width and depth that clearly separates it from neighboring rock.
Wall rock		The rock adjacent to, enclosing, or including a vein, layer, or dissemination of ore minerals. See “Hanging wall” and “Footwall” above.

PART I

INTRODUCTION AND 2009 HIGHLIGHTS

     Stillwater Mining Company (the Company) is engaged in the development, extraction, processing, refining and marketing of palladium, platinum and associated metals (platinum group metals or PGMs) from a geological formation in south central Montana known as the J-M Reef and from the recycling of spent catalytic converters. The J-M Reef is the only known significant primary source of platinum group metals inside the United States and one of the significant resources outside South Africa and Russia. Associated by-product metals at the Company’s operations include significant amounts of nickel and copper and minor amounts of gold, silver and rhodium. The J-M Reef is a narrow but extensive mineralized zone containing PGMs, which has been traced over a strike length of approximately 28 miles.

     The Company conducts mining operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine near Big Timber, Montana. Ore extraction at both mines takes place within the J-M Reef. The Company operates concentrating plants at each mining operation to upgrade the mined production into a concentrate form. The Company operates a smelter and base metal refinery at Columbus, Montana which further upgrade the mined concentrates into a PGM-rich filter cake. The filter cake is shipped to third-party custom refiners for final refining before being sold to third parties.

     Besides processing mine concentrates, the Company also recycles spent catalyst material at the smelter and base metal refinery to recover the contained PGMs — palladium, platinum and rhodium. The Company currently has catalyst sourcing arrangements with two suppliers and spot arrangements with other suppliers who ship spent catalysts to the Company for processing to recover the PGMs. The Company smelts and refines the spent catalysts within the same process stream as for the mined production.

     The Company has a sales agreement with Ford Motor Company (Ford) and had an agreement, until July 2009, with General Motors Corporation (GM) to supply PGMs from the mines for use in automotive catalytic converters. On July 22, 2009, as part of the GM bankruptcy proceedings, the bankruptcy court approved a GM petition to reject its obligations under the Company’s supply agreement, thereby nullifying the agreement with retroactive effect from July 7, 2009. The GM supply agreement was scheduled to expire on December 31, 2012. The sales agreement with Ford Motor Company will expire at the end of 2010.

     PGMs are rare precious metals with unique physical properties that are used in diverse industrial applications and in jewelry. The largest use for PGMs currently is in the automotive industry for the production of catalysts that reduce harmful automobile emissions. Besides being used in catalytic converters, palladium is used in jewelry, in the production of electronic components for personal computers, cellular telephones and facsimile machines, as well as in dental applications and in petroleum and industrial catalysts. Platinum’s largest use after catalytic converters is for jewelry. Industrial uses for platinum, in addition to automobile and industrial catalysts, include the manufacturing of data storage disks, fiberglass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells. Rhodium, produced in the Company’s recycling operations and to a limited extent as a by-product from mining, also is used in automotive catalytic converters to reduce nitrogen oxides and in jewelry as a plating agent to provide brightness.

     At December 31, 2009, the Company had proven and probable ore reserves of approximately 41.0 million tons with an average grade of 0.50 ounce of PGMs per ton containing approximately 20.6 million ounces of palladium and platinum at an in-situ ratio of about 3.57 parts palladium to one part platinum. See “Business, Risk Factors, and Properties — Proven and Probable Ore Reserves”.

Worldwide Financial and Credit Crises

     The Company was heavily impacted, particularly in late 2008 and through the first half of 2009, by the ongoing world financial crisis. As credit markets tightened, automotive demand dropped steeply in the U. S. and Western Europe, pulling down demand for PGMs in catalytic converters, the Company’s principal market. In light of world events and the sharp decrease in PGM prices, during the fourth quarter of 2008 the Company underwent a major restructuring of its operations in an effort to conserve cash and reduce anticipated losses. The restructuring of the Company’s operations resulted in a dramatic improvement in productivity at both mines and only a limited reduction in the scope of its mining

operations. The Company recognized its exposure to the combined effect of low PGM prices, the forthcoming expiration of its automobile agreements and reduced demand for its metals and concluded to cut back its operating and cash costs to a level that would preserve the Company’s cash position at the reduced PGM prices prevailing during the fourth quarter of 2008. While subsequent to that time PGM prices have strengthened substantially, there can be no assurance that PGM market prices will not decline again in the future, and in view of the impending loss of floor prices in its sales agreement with Ford, the Company continues its efforts to optimize its cost structure and improve mining productivities.

     The world financial crisis also negatively impacted the Company’s recycling segment, which has proven for a number of years to be a profitable ancillary business and which for the Company has unique advantages. (The Company’s smelting and refining facilities have available capacity and are designed to process PGM containing materials. Recycle material is blended with mine concentrate for smelting and refining. The copper and nickel contained in the concentrate naturally collect PGMs from the material during the smelting process). However, the volumes of catalytic material available in the recycling market are sensitive to PGM prices, and along with the collapse of PGM prices during the second half of 2008, the Company saw recycling volumes drop off precipitously. The Company had advanced working capital to recycling collectors to facilitate their collection efforts, and with the sharp drop in prices, these collectors suffered inventory losses and were unable to fully repay the advances. Consequently, the Company wrote off $26.0 million of these advances at the end of 2008. Subsequently, the Company has restructured its recycling business model to reduce its financial exposure as a result of such abrupt market changes. The volumes of material recycled have gradually recovered during 2009. See “Business, Risk Factors and Properties — Risk Factors.”

2009 — In Review:

•

The Company’s revenues, in terms of dollars and ounces sold, for 2009, 2008 and 2007 were:

Year ended December 31,		Sales Revenues																				Troy Ounces Sold
(in thousands)		Palladium				Platinum				Rhodium				Other (1)				Total				Palladium				Platinum				Rhodium				Other(3)				Total
2009
Mine production		$	143,514			$	139,733			$	6,453			$	17,192			$	306,892				393				123				4				15				535
PGM recycling			14,947				45,736				18,666				2,439				81,788				53				40				9				—				102
Other (2)			2,679				3,028				45				—				5,752				12				3				—				—				15
Total		$	161,140			$	188,497			$	25,164			$	19,631			$	394,432				458				166				13				15				652
2008
Mine production		$	163,433			$	160,171			$	16,474			$	20,286			$	360,364				399				115				2				19				535
PGM recycling			47,760				227,358				197,469				2,801				475,388				119				131				25				—				275
Other (2)			19,980				—				—				—				19,980				49				—				—				—				49
Total		$	231,173			$	387,529			$	213,943			$	23,087			$	855,732				567				246				27				19				859
2007
Mine production		$	162,811			$	114,645			$	23,407			$	30,414			$	331,277				425				120				4				20				569
PGM recycling			36,505				149,061				138,798				2,030				326,394				102				119				24				—				245
Other (2)			15,365				—				—				—				15,365				44				—				—				—				44
Total		$	214,681			$	263,706			$	162,205			$	32,444			$	673,036				571				239				28				20				858

•

The Company reported a net loss of $9.2 million, or $0.10 per diluted share, for the year ended December 31, 2009, compared to a net loss of $116.9 million, or $1.26 per diluted share, in 2008. Contributing to the net loss in 2009 was an $8.1 million non-cash charge related to the issuance in October of approximately 1.8 million common shares in exchange for $15 million principal amount of the Company’s outstanding 1.875% convertible debentures. Additional charges taken in 2009 included $10.9 million of lower-of-cost-or-market inventory adjustments, $0.6 million to write-off certain trade receivables and a $0.5 million write-down of advances on recycling inventory purchases. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Year Ended December 31, 2009 Compared to Year Ended December 31, 2008.”

•		In 2009, the Company’s mining operations produced a total of 529,900 ounces of palladium and platinum, 6.2% better than the 498,900 ounces produced in 2008. Total consolidated cash cost per ounce (a non-GAAP measure of extraction efficiency) averaged $360 in 2009, compared with $405 in 2008. This decrease in cash costs per ounce reflected the effect of an approximate 27% reduction in workforce (including contractors) late in 2008, and the resulting efficiency improvements achieved in various mining and support functions, as well as generally lower material costs. Mine production for 2010 is projected at 515,000 combined ounces of palladium and platinum, and as in 2009, the Company plans to continue its emphasis on mining efficiency and cost reduction, rather than pushing to increase mine production at this time. Total consolidated cash costs per ounce (a non-GAAP measure) for 2010 currently are projected to be in line with 2009 at $360 per ounce. See Part II, Item 6 “Selected Financial and Operating Data” for further discussion of non-GAAP measures.
•		Revenues from PGM recycling fell 82.8% during 2009, decreasing to $81.8 million in 2009, from $475.4 million in 2008, a direct result of the decrease in volumes processed and lower PGM prices. Recycled ounces sold decreased in 2009 to 102,000 ounces compared to 275,000 ounces in 2008 and the Company’s combined average realization on recycling sales (which include palladium, platinum and rhodium) decreased to $779 per ounce in 2009 from $1,715 per ounce in 2008, reflecting much lower PGM prices. In addition to purchased material, the Company processed 128,000 ounces of PGMs on a tolling basis in 2009 up from 126,000 tolled ounces in 2008. Recycled volumes fed to the smelter totaled 251,000 ounces of PGMs in 2009, down 36.9% from 398,100 ounces in 2008; mostly the result of lower availability of recycling materials in the market in early 2009 but also resulting from the Company’s modified commercial approach to the business. Recycling volumes gradually strengthened as 2009 progressed. As recycling volumes diminished in late 2008, the Company’s cash balances benefitted from a reduction in the amount of working capital required to sustain recycling activities; these volumes, and the associated working capital have increased somewhat as the recycling market gradually recovered during 2009. Working capital associated with recycling activities in the form of inventories and advances was $28.6 million and $22.1 million at December 31, 2009 and 2008, respectively. The year-end 2009 balance reflects the write-down of $0.5 million against advances on inventory purchases during 2009; the year-end 2008 balance is shown net of the $26.0 million write-off against advances on inventory purchases recorded in 2008.

•

The Company’s 2009 capital expenditures totaled $39.5 million, down from $82.3 million in 2008. Capital spending in 2009 reflected scaled-back development spending in the mines and completion of various critical infrastructure projects. Capitalized development expenditures totaled $25.9 million in 2009, down substantially from $55.9 million in 2008 and somewhat below that necessary to sustain production over the long term. One major infrastructure project completed during 2009 was construction of a second electric furnace at the smelter, a project that was begun during 2008. Capital spending in 2010 is budgeted at about $50 million, which management believes is adequate to sustain the developed state of both mines at current levels of production. For a discussion of certain risks associated with the Company’s business, see “Business, Risk Factors and Properties — Current Operations”, and “— Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

2010 — Looking Forward

     The Company believes its actions over the past 18 months have been measured and appropriate. In the face of the worldwide financial crisis, decreased demand for automobiles, extremely volatile commodity prices, the termination of the General Motors sales agreement and the looming expiration of the Ford agreement, the Company significantly changed its operations, as described above and throughout this Annual Report. From a management perspective, the Company currently sees its focus along the following lines:

•

Although commodity prices have improved from their lows in the fourth quarter of 2008, the Company is not proposing at this time any significant changes to its restructured mining plan adopted at the end of 2008 and continuously fine-tuned during 2009. It will continue to emphasize mining efficiency and cost reduction rather than returning to a focus on increasing mine production. The Company believes it is prudent to monitor the worldwide industrial recession and recovery, as well as commodity prices, before directing its attention toward increased production and broadened capital spending. The year 2010 will include some growth in development spending at both mines, but only by an amount sufficient to sustain their current production levels going forward. The Company views its existing cash balance ($201.2 million at December 31, 2009) as an important cushion to be utilized carefully as circumstances require. In light of tight credit markets and relatively high borrowing costs, the Company has not sought to put a revolving line of credit into place at this time.

•

The Company believes it has seen signs of a recovery in its PGM recycling business and expects to increase its recycling volumes processed as conditions permit. However, the Company also expects to maintain tighter controls over funding advances, which may constrain achieving the kind of strong revenue growth in this business seen in 2007 and early 2008. At the same time, the Company expects the tighter controls to result in the funding advances being more secure.

•

The Company will continue to review potential growth opportunities in other sectors of the business in an effort to address concerns over its narrow focus on a single commodity at a single location in an effort to diversify business risks and opportunities. While the Company’s relatively low debt and stable balance sheet may be helpful in this effort, a need to avoid over-leveraging the Company or unduly diluting existing shareholders is likely to limit the size of potential acquisitions. Management intends to balance the benefits and risks of any such opportunity carefully before moving ahead.

HISTORY OF THE COMPANY

     Mineral exploration in the Stillwater Complex dates from at least the late nineteenth century, with early mining activities — primarily for chromium — beginning in the 1920s. Palladium and platinum were discovered within the Stillwater Complex, by geologists from Johns Manville Corporation (Manville) in the early 1970s, in what then became known as the J-M Reef. In 1979, a Manville subsidiary entered into a partnership agreement with Chevron U.S.A. Inc. (Chevron) to develop PGMs discovered in the J-M Reef. Manville and Chevron explored and developed the Stillwater property and commenced commercial underground mining in 1986.

     Stillwater Mining Company was incorporated in 1992 and on October 1, 1993, Chevron and Manville transferred substantially all assets, liabilities and operations at the Stillwater property into the Company, with Chevron and Manville each receiving a 50% ownership interest in the Company’s stock. In September 1994, the Company redeemed Chevron’s entire 50% ownership. The Company subsequently completed an initial public offering in December 1994 and Manville sold a portion of its shares through the offering, reducing its ownership percentage to approximately 27%. In August 1995, Manville sold its remaining ownership interest in the Company to a group of institutional investors. The Company’s common stock is publicly traded on the New York Stock Exchange (NYSE) under the symbol “SWC”.

     On June 23, 2003, the Company completed a stock purchase transaction with MMC Norilsk Nickel (Norilsk Nickel), whereby a subsidiary of Norilsk Nickel became a majority stockholder of the Company. On that date, the parties entered into a Stockholders Agreement governing the terms of Norilsk Nickel’s investment in the Company. A copy of the Stockholders Agreement was included in the Company’s Report on Form 8-K filed on June 23, 2003. As of December 31, 2009, Norilsk Nickel controlled approximately 51.5% of the Company’s outstanding common shares and held $80 million of the Company’s $166.5 million outstanding 1.875% convertible debentures maturing in 2028.

GEOLOGY OF THE J-M REEF

     The Stillwater Complex, which hosts the J-M Reef ore deposit, is located in the Beartooth Mountains in south central Montana. It is situated along the northern edge of the Beartooth Uplift and Plateau, which rise to elevations in excess of 10,000 feet above sea level. The plateau and Stillwater Complex have been deeply incised by the major drainages and tributaries of the Stillwater and Boulder Rivers down to elevations at the valley floor of approximately 5,000 feet.

     Geologically the Stillwater Layered Igneous Complex is composed of a succession of ultramafic to mafic rocks derived from a large complex magma body emplaced deep in the Earth’s crust an estimated 2.7 billion years ago. The molten mass was sufficiently large and fluid at the time of emplacement to allow its chemical constituents to crystallize slowly and sequentially, with the heavier mafic minerals settling more rapidly toward the base of the cooling complex. The lighter, more siliceous suites crystallized more slowly and also settled into layered successions of norite, gabbroic and anorthosite suites. This systematic process resulted in mineral segregations being deposited into extensive and relatively uniform layers of varied mineral concentrations.

     The uniquely PGM-enriched J-M Reef and its characteristic host rock package represent one such layered sequence. The geosciences community believes that the PGM-enriched suite and other minerals characterizing the J-M Reef accumulated at the same time and by the same mechanisms of formation as the rocks enclosing them. Over time, the orientation of a portion of the original horizontal reef and layered igneous complex was faulted an estimated 20,000 feet to the northeast and was tilted upward at angles of 50 to 90 degrees to the north by the Beartooth Uplift. Localized faulting and intrusive mafic dikes are also evident along the 28-mile strike length of exposed Stillwater Complex. The impact of these structural events is localized along the J-M Reef and affect the percent mineable tonnage in an area, create

additional dilution, or result in below cut-off grade and barren zones within the reef. The impacts on ore reserves of these events are quantified in the percent mineable discussion under “Ore Reserves.” The upper portion and exposed edge of the uplifted reef complex were eroded forming the lenticular-shaped surface exposure of the Stillwater Complex and J-M Reef package evident today.

     The J-M Reef package has been traced at its predictable geologic position and with unusual overall uniformity over considerable distances within the uplifted portion of the Stillwater Complex. The surface outcrops of the reef have been examined, mapped and sampled for approximately 28 miles along its east-southeasterly course and over a known expression of over 8,200 feet vertically. The predictability of the J-M Reef has been further confirmed in subsurface mine workings of the Stillwater and East Boulder Mines and by over 27,000 drill hole penetrations.

     The PGMs in the J-M Reef consist primarily of palladium, platinum and a minor amount of rhodium. The reef also contains significant amounts of nickel and copper and trace amounts of gold and silver. Five-year production figures from the Company’s mining operations on the J-M Reef are summarized in Part II, Item 6, “Selected Financial and Operating Data.”

ORE RESERVE DETERMINATION

     As of December 31, 2009, the Company’s total proven palladium and platinum ore reserves were 4.6 million tons at an average grade of 0.56 ounce per ton, containing 2.6 million ounces of palladium and platinum, representing a decrease of 9.0% in proven contained ounces from December 31, 2008. The Company’s total probable palladium and platinum ore reserves at December 31, 2009, were 36.4 million tons at an average grade of 0.50 ounce per ton, containing 18.0 million ounces of palladium plus platinum, an increase of 2.3% in probable contained ounces from December 31, 2008. Combined, the Company’s total proven and probable palladium and platinum ore reserves were 41.0 million tons at an average grade of 0.50 ounce per ton, containing 20.6 million ounces of palladium plus platinum, a modest increase of 0.7% in total proven and probable contained ounces from December 31, 2008.

Methodology

     The Company utilizes statistical methodologies to calculate ore reserves based on interpolation between and projection beyond sample points. Interpolation and projection are limited by certain modifying factors including geologic boundaries, economic considerations and constraints imposed by safe mining practices. Sample points consist of variably spaced drill core intervals through the J-M Reef obtained from drill sites located on the surface and in underground development workings. Results from all sample points within the ore reserve area are evaluated and applied in determining the ore reserve.

     For proven ore reserves, distances between samples range from 25 to 100 feet but are typically spaced at 50-foot intervals both horizontally and vertically. The sample data for proven ore reserves consists of survey data, lithologic data and assay results. Quality Assurance/Quality Control (QA/QC) protocols are in place at both mine sites to test the sampling and analysis procedures. To test assay accuracy and reproducibility, pulps from core samples are resubmitted and compared. To test for sample label errors or cross-contamination, blank core (waste core) samples are submitted with the mineralized sample lots and compared. The QA/QC protocols are practiced on both resource development and production samples. The resulting data is entered into a 3-dimensional modeling software package and is analyzed to produce a 3-dimensional solid block model of the resource. The assay values are further analyzed by a geostatistical modeling technique (kriging) to establish a grade distribution within the 3-dimensional block model. Dilution is then applied to the model and a diluted tonnage and grade are calculated for each block. Ore and waste tons, contained ounces and grade are then calculated and summed for all blocks. A percent mineable factor based on historic geologic unit values is applied and the final proven reserve tons and grade are calculated.

     Two types of cut-off grades are recognized for the J-M Reef, a geologic cut-off boundary and an economic cut-off grade. The geologic cut-off boundary of 0.3 troy ounces of palladium plus platinum per ton is an inherent characteristic of the formation of the J-M Reef and is used for calculation of the proven and probable reserves. The economic cut-off grade is lower than the geologic cut-off and can vary between the mines based on cost and efficiency factors. The determination of the economic cut-off grade is completed on a round by round basis and is driven primarily by excess mill capacity and geologic character encountered at the face. See “Proven and Probable Ore Reserves — Discussion” for reserve sensitivity to metal pricing.

     Probable ore reserves are based on longer projections, up to a maximum radius of 1,000 feet beyond the limit of existing drill hole sample intercepts of the J-M Reef obtained from surface and underground drilling. Statistical modeling and the established continuity of the J-M Reef as determined from results of over 20 years of mining activity to date support the Company’s technical confidence in estimates of tonnage and grade over this projection distance. Where appropriate, projections for the probable ore reserve determination are constrained by any known or anticipated restrictive geologic features. The probable reserve estimate of tons and grade is based on the projection of factors calculated from adjacent proven reserve blocks or from diamond drilling data where available. The factors consist of a probable area, proven yield in tons per foot of footwall lateral, average grade and percent mineable. The area is calculated based on projections up to a maximum of 1,000-feet; the proven yield in tons per foot of footwall lateral and grade are calculated based on long-term proven ore reserve results in adjacent areas; and the percent mineable is calculated based on long-term experience from actual mining in adjacent areas. Contained ounces are calculated based on area divided by 300 (square feet) times proven yield in tons per foot of footwall lateral times grade (ounces per ton) times percent mineable (%).

     The Company reviews its methodology for calculating ore reserves on an annual basis. Conversion, an indicator of the success in upgrading probable ore reserves to proven ore reserves, is evaluated annually as part of the reserve process. The annual review examines the effect of new geologic information, changes implemented or planned in mining practices and mine economics on factors used for the estimation of probable ore reserves. The review includes an evaluation of the Company’s rate of conversion of probable reserves to proven reserves.

     The proven and probable ore reserves are then modeled as a long-term mine plan and additional factors including process recoveries, mining methods, metal prices, mine operating productivities and costs and capital estimates are applied to determine the overall economics of the ore reserves.

SEC Guidelines

     The United States Securities and Exchange Commission (SEC) have established guidelines contained in Industry Guide No. 7 to assist registered companies as they estimate ore reserves. These guidelines set forth technical, legal and economic criteria for determining whether the Company’s ore reserves can be classified as proven and probable.

     The SEC’s economic guidelines have not historically constrained the Company’s ore reserves, and did not constrain the ore reserves at December 31, 2009. Under these guidelines, ore may be classified as proven or probable if extraction and sale result in positive cumulative undiscounted cash flow. The Company utilizes both the historical trailing twelve-quarter average combined PGM market price and the current PGM market price in ascertaining these cumulative undiscounted cash flows. In testing ore reserves at December 31, 2009, the Company applied the trailing twelve-quarter combined average PGM market price of about $556 per ounce, based upon the twelve-quarter average palladium price of about $324 per ounce and the twelve-quarter average platinum price of about $1,362 per ounce.

     The Company believes that it is appropriate to use a long-term average price for measuring ore reserves as such a price, better matches the period over which the reserves will ultimately be mined. However, should metal prices decline substantially from their present level for an extended period, the twelve-quarter trailing average price might also decline and could result in a reduction of the Company’s reported ore reserves.

     The Company’s board of directors has established an Ore Reserve Committee, which met three times during 2009 with management who also met with outside experts to review ore reserve methodology, to identify best practices in the industry and to receive reports on the progress and results of the Company’s mine development efforts. The Committee has reviewed the Company’s ore reserves as reported at December 31, 2009, having met with management and with the Company’s independent consultant on ore reserves.

Results

     The December 31, 2009, ore reserves were reviewed by Behre Dolbear & Company, Inc. (Behre Dolbear), third party independent consultants, who are experts in mining, geology and ore reserve determination. The Company has utilized Behre Dolbear to carry out independent reviews and inventories of the Company’s ore reserves since 1990. Behre Dolbear has consented to be a named expert herein. See “Business, Risk Factors and Properties — Risk Factors — Ore Reserves Are Very Difficult to Estimate and Ore Reserve Estimates May Require Adjustment in the Future; Changes in Ore Grades, Mining Practices and Economic Factors Could Materially Affect the Company’s Production and Reported Results.”

     The Stillwater Mine proven and probable ore reserves at year-end 2009 decreased by 3.5% in terms of ore tons from those reported at year-end 2008. The East Boulder Mine proven and probable ore reserves at year-end 2009 increased by 15.9% in ore tons from those reported at year-end 2008. Overall, the Company’s estimated proven and probable ore reserves based on ore tons increased by 7.3% in 2009. The Company’s ore reserve determination for 2009, calculated at December 31, 2009, was limited by geologic certainty and not by economic constraints.

PROVEN AND PROBABLE ORE RESERVES

     The Company’s proven ore reserves are generally expected to be extracted utilizing existing mine infrastructure. However, additional infrastructure development will be required to extract the Company’s probable ore reserves. Based on the 2010 mining plans at each mine, the year-end 2009 proven ore reserves of 2.6 million tons at the Stillwater Mine and 2.0 million tons at the East Boulder Mine represent an adequate level of proven ore reserves to support planned mining activities. The long-term proven ore reserve targets are 2.8 million tons at the Stillwater Mine and 2.0 million tons at the East Boulder Mine, which reflect adequate ore reserves to support production at the planned capacity of each facility.

     The grade of the Company’s ore reserves, measured in combined platinum and palladium ounces per ton, is a composite average of samples in all reserve areas. As is common in underground mines, the grade mined and the recovery rate achieved varies depending on the area being mined. In particular, mill head grade varies significantly between the Stillwater and East Boulder Mines, as well as within different areas of each mine. During 2009, 2008 and 2007, the average mill head grade for all tons processed from the Stillwater Mine was 0.56, 0.51 and 0.55 PGM ounces per ton of ore, respectively. During 2009, 2008 and 2007 the average mill head grade for all tons processed from the East Boulder Mine remained consistent at about 0.38 PGM ounces per ton of ore. Concentrator feeds at both mines typically include, along with the ore, some PGM-bearing material that is below the cut-off grade for reserves (reef waste) but that is economic to process so long as there is capacity available in the concentrator.

     As of December 31, 2009, 2008 and 2007 the Company’s proven and probable ore reserves were as follows:

		DECEMBER 31, 2009												DECEMBER 31, 2008																DECEMBER 31, 2007
						AVERAGE				CONTAINED								AVERAGE				CONTAINED								AVERAGE				CONTAINED
		TONS				GRADE				OUNCES				TONS				GRADE				OUNCES				TONS				GRADE				OUNCES
		(000’s)				(OUNCE/TON)				(000’S)				(000’s)				(OUNCE/TON)				(000’S)				(000’s)				(OUNCE/TON)				(000’S)
Stillwater Mine (2)
Proven Reserves			2,606				0.66				1,712				2,911				0.65				1,898				2,784				0.65				1,796
Probable Reserves			13,748				0.63				8,688				14,030				0.64				8,911				14,360				0.61				8,791
Total Proven and Probable Reserves (1)			16,354				0.64				10,400				16,941				0.64				10,809				17,144				0.62				10,586	(4)
East Boulder Mine (2)
Proven Reserves			2,036				0.43				867				2,066				0.45				935				2,017				0.46				921
Probable Reserves			22,607				0.41				9,347				19,202				0.45				8,717				20,868				0.46				9,660
Total Proven and Probable Reserves (1)			24,643				0.41				10,214				21,268				0.45				9,652				22,885				0.46				10,581
Total Company Reserves (2)
Proven Reserves			4,642				0.56				2,579				4,977				0.57				2,833				4,800				0.57				2,717
Probable Reserves			36,355				0.50				18,035				33,232				0.53				17,628				35,228				0.52				18,451
Total Proven and Probable Reserves (1)			40,997				0.50				20,614				38,209				0.54				20,461				40,028				0.53				21,167	(3)(4)

Discussion

     The Company’s total proven and probable ore reserves at December 31, 2009, have increased by about 2% or 1.0 million tons over the past two years. In 2009, proven and probable tons increased 7.3% while contained ounces slightly increased by 0.7% from those reported December 31, 2008. In 2008, proven and probable tons decreased 4.5% while contained ounces decreased 3.3% from those reported December 31, 2007. The Company’s mine development efforts over the past several years have focused on converting probable reserves to proven reserves, rather than on adding new probable reserves.

     Proven reserves have decreased over the past two years. In 2009, total proven tons decreased by about 3.3% and total contained ounces decreased by 5.0% from those reported December 31, 2007.

     Changes in proven and probable ore reserves are due to the net effect of:

	•		Additions to proven ore reserves from new definition drilling,
	•		Deletions as proven reserves are mined,
	•		Deletions from probable ore reserves as areas are converted by new drilling from probable to proven ore reserves,
	•		Additions from development activity to convert mineralized inventory to probable ore reserves,
	•		Additions and deletions from adjustments to ore reserve estimation factors and mine planning criteria. The cut-off grade used in mine planning is .3 ounces of platinum and palladium per ton for the Stillwater Mine and is .2 ounces of platinum and palladium per ton for the East Boulder Mine, depending on the mining method employed. The economic value of this cut-off grade varies with platinum and palladium prices and with the different mining methods employed, their costs and their efficiency.

     The Company’s production levels for palladium and platinum are driven by the number of ore tons mined, the mill head grade of the ore and the metallurgical recovery percentages. The Company measures its net mine production in terms of the number of ounces contained in the mill concentrate, adjusted for subsequent processing losses expected to be incurred in smelting and refining. The Company defines an ounce of metal as “produced” at the time it is transferred from the mine site and received at the concentrator. Depreciation and amortization costs are inventoried at each stage of production.

     The graph above provides a general indication of the sensitivity of the Company’s ore reserves to the long-term weighted average price of platinum and palladium, assuming the relative proportions of the two metals realized at the Company’s mines. It is based on the mine plan and model the Company uses to measure reserve economics, and reflects some reductions in capital spending at lower price levels where reserves are economically constrained. It does not

provide for any adjustments to the planned mining sequence or to the mix of mining methods at lower prices, but instead is derived from a single planning scenario. As such, it should be regarded as indicative rather than definitive.

     The economic analysis of proven and probable reserves at the end of 2009 identified that at a palladium and platinum combined price of about $400 per ounce the stated level of reserves would begin to be reduced by economic constraints. This combined price at which ore reserves become constrained by economics has decreased from $517 per ounce in the analysis performed in 2008 and $454 per ounce shown in 2007. The variation in these threshold prices reflects year-on-year changes in mining costs, current development and production method assumptions, adjustments to ore grade and mine plans, and economic performance due to changing market prices during those periods. The Company has not tested the ore reserves beyond the level shown above because of the expense of accessing and drilling to establish ore reserves and because of the extensive life of a 20.6 million ounce reserve.

IMPAIRMENT OF LONG-LIVED ASSETS

     The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. The estimation of future cash flows takes into account estimates of recoverable ounces, PGM prices (long-term sales contract prices and historical pricing trends or third party projections of future prices rather than prices at a point in time as an indicator of longer-term future prices), production levels, and capital and reclamation expenditures, all based on life-of-mine plans and projections. If the assets are impaired, a calculation of fair market value is performed, and if fair market value is lower than the carrying value of the assets, the assets are reduced to their fair market value.

     The Company determined that there was no material event or change in circumstances requiring the Company to test its long-lived assets for impairment at December 31, 2009. In contrast, during the latter part of 2008 the Company concluded that the economic circumstances in which the Company operates had changed significantly. Therefore, at the end of 2008, the Company assessed whether total estimated undiscounted future cash flows at the Stillwater and the East Boulder Mines would be sufficient to recoup the carrying amount of each asset. Based on the mine plans as of December 31, 2008 and an assessment of long-term pricing, the Company determined that undiscounted future cash flows at the Stillwater Mine were sufficient to return the carrying value, but the undiscounted future cash flows projected at the East Boulder Mine were not sufficient to cover the carrying value there. Consequently, with the assistance of Behre Dolbear, the Company assessed the fair value of the East Boulder Mine assets and concluded that a valuation adjustment was needed at East Boulder. Accordingly, the Company recorded a $67.3 million charge against earnings at December 31, 2008, reducing the carrying value of the East Boulder Mine assets to $161.4 million.

     Assumptions underlying future cash flows are subject to certain risks and uncertainties. Any differences between projections and actual outcomes for key factors such as PGM prices, recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s ability to recover the carrying amounts of its long-lived assets and so could potentially lead to impairment charges in the future.

CURRENT OPERATIONS

     The Company’s operations are located in south central Montana. The Company conducts mining and milling operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine near Big Timber, Montana. Both mines are located on mine claims that follow the apex of the J-M Reef. The Company operates a smelter and base metal refinery, and recycling facilities at Columbus, Montana.

Properties and Facilities — February 2010

     The Company’s corporate headquarters are located in Columbus, Montana near its smelter and refinery facilities.

     The Company’s original long-term development strategy and certain elements of its current planning and mining practices on the J-M Reef ore deposit were founded upon initial feasibility and engineering studies conducted in the 1980’s. Initial mine designs and practices were established in response to available technologies and the particular characteristics and challenges of the J-M Reef ore deposit. The Company’s current development plans, mining methods and ore extraction schedules are designed to provide systematic access to and development of the ore deposit within the framework of current and forecast economic, regulatory and technological considerations as well as the specific characteristics of the J-M Reef ore deposit. Some of the challenges inherent in the development of the J-M Reef include:

•

Surface access limitations (property ownership and environmental sensitivity);

•

Topographic and climatic extremes involving rugged mountainous terrain and substantial elevation differences;

•

Specific configuration of the mineralized zone (narrow — average width 5 feet, depth — up to 1.5 miles of vertical extent, and long — approximately 28 miles in length), dipping downward at an angle varying from near vertical to 38 degrees;

•

A deposit which extends both laterally and to depth from available mine openings, with travel distances underground from portal to working face of up to six miles; and

•

Proven and probable ore reserves extending for a lateral distance of approximately 34,000 feet at the Stillwater Mine and approximately 17,000 feet at the East Boulder Mine — a combined extent underground of approximately 9.7 miles, with active underground travelways and ramps on multiple levels totaling more than 100 miles in extent that must be maintained and supported logistically.

SAFETY

     Mining operations are conducted at the Stillwater Mine and at the East Boulder Mine and involve the use of heavy machinery and drilling and blasting in confined spaces. The pursuit of safety excellence at the Company continues with the utilization since 2001 of the Company’s “G.E.T. (Guide, Educate and Train) Safe” safety and health management systems. Efforts are focused on accident prevention, seeking safer methods of mining and increased employee awareness and training. Areas of specific focus include enhanced work place examinations, safety standards implementation and compliance, accident/incident investigations, near miss reporting and use of loss control representatives who are part of the mining workforce. Employee-led focus teams have been successful in proactively solving many safety related challenges. The Company continues to use focus teams to address specific safety and health related issues. One of these areas in particular has been in the area of compliance with the Mine Safety and Health Administration (MSHA) diesel particulate matter (DPM) standards. At year end, the Company believes all underground operations are in compliance with these stringent standards through the use of; blended bio-diesel fuels, post exhaust treatments, power train advances and high secondary ventilation standards.

     During 2009, the overall Company reportable accident incidence rate increased to 4.1 verses 3.3 at the end of 2008 while the severity rate remained essentially unchanged. The Company believes this increase is related to an increased effort around near miss and minor incident reporting, and thereby, important for fully understanding the source of injuries to the Company’s employees. While up somewhat from 2008, the 2009 results equate to a 67% reduction in incidence rates for Company employees and contractors since the inception of the “G.E.T. Safe” safety management systems in 2001. One area of notable improvement was the East Boulder Operations where their total incident rate dropped by over 61% to a 1.8 total reportable incident rate for the entire mine site. The metallurgical complex in Columbus, Montana, continued to maintain a low incidence rate while being recognized by the Montana Department of Labor and Occupational Safety and Health Administration (OSHA) as a leader in workplace safety. In May of 2009, the Company’s base metal refinery in Columbus, Montana was recognized for thirteen years of operation without a lost-time accident; this accident-free record subsequently has continued through the end of 2009. The analytical laboratory achieved eight years of operation without a lost-time accident during 2009.

     The smelter, base metal refinery and laboratory continue to participate in and support the Montana Department of Labor’s Safety and Health Achievement Recognition Program (SHARP). They have all received SHARP recognition numerous times. The smelter received SHARP recognition in December of 2008. The base metal refinery and laboratory both applied for and received SHARP recognition in 2009.

     The SHARP program recognizes employers who have demonstrated exemplary achievements in workplace safety and health. By meeting the SHARP inspection requirements, these facilities may be exempt from general OSHA inspections for one year. During 2009, employee participation and involvement was further enhanced through the continued implementation of internal safety auditing processes.

EMPLOYEES

     The following table indicates the number of Company employees (excluding contractors) in the respective areas:

		Number of Employees
		at December 31,
SITE		2009				2008				2007
Stillwater Mine			797				869				845
East Boulder Mine			265				261				551
Smelter and Refinery Complex			158				169				161
Administrative Support			53				65				68
Total			1,273				1,364				1,625

     In response to sharply lower market prices for the Company’s principal products, palladium and platinum, during the fourth quarter of 2008 the Company issued a notice at the East Boulder Mine under the WARN Act and restructured its workforce company-wide. Some of the miners at the East Boulder Mine were transferred to the Stillwater Mine to bolster operations there, replacing contractors and provisional employees. Staff and support personnel at all Company locations also were reduced. As part of the same effort, in early January 2009 the Company consolidated its corporate functions in Columbus, Montana, and closed the headquarters office in Billings, Montana.

     All of the Company’s hourly employees at the Stillwater Mine, the East Boulder Mine, the smelter and the base metal refinery are represented by the United Steelworkers of America (USW). The Company is party to a four-year labor agreement expiring on July 1, 2011, that covers substantially all hourly workers at the Stillwater Mine, the smelter and the base metal refinery and provides for annual wage increases of approximately 3.5% per annum. Separately, the labor contract covering all hourly workers at the East Boulder Mine is due to expire on July 1, 2012. See “Business, Risk Factors and Properties — Risk Factors — Limited Availability of Additional Mining Personnel and Uncertainty of Labor Relations May Affect the Company’s Ability to Achieve Its Production Targets.”

STILLWATER MINE

     The Company conducts underground mining operations at its wholly-owned Stillwater Mine, near Nye, Montana. The Stillwater Mine facility accesses, extracts and processes PGM ores from the eastern portion of the J-M Reef using mine openings located in the Stillwater Valley. In addition, the Company owns and maintains ancillary buildings that contain the concentrator, shop and warehouse, changing facilities, headframe, hoist house, paste plant, water treatment, storage facilities and office. All surface structures and tailings management facilities are located within the 2,450 acre Stillwater Mine Operating Permit area. Ore reserves developed at the Stillwater Mine are controlled by patented mining

claims either leased or owned outright by the Company. The mine is located approximately 85 miles southwest of Billings, Montana, and is accessed by a paved road. The mine has adequate water and power from established sources. See “Business, Risk Factors and Properties — Risk Factors — Uncertainty of Title to Properties — The Validity of Unpatented Mining Claims is Subject to Title Risk.”

     The Stillwater Mine accesses and has developed a 5.9-mile-long underground segment of the J-M Reef, between the elevations of 2,000 and 7,300 feet above sea level. Access to the ore at the Stillwater Mine is accomplished by means of a 1,950-foot vertical shaft and by a system of horizontal adits and drifts driven parallel to the strike of the J-M Reef at vertical intervals of between 150 feet and 300 feet. Seven main adits have been driven from surface portals on the west and east slopes of the Stillwater Valley at various elevations between 5,000 and 5,900 feet above sea level. Several additional principal levels have been developed below the 5,000-foot level down to the 3,200-foot elevation, accessed from a vertical shaft and the associated shaft ramp system. Ore from this region of the mine is hauled by truck and/or rail to the shaft, where it is crushed and hoisted out of the mine. The Company is continuing to develop a decline system below the 3,200-foot elevation to access and develop deeper areas in the central part of the mine below those currently serviced by the existing shaft. At the end of 2009, this decline system extended down to the 2,000 foot level.

     The 1,950-foot vertical shaft was constructed between 1994 and 1997 as part of the Company’s plan to increase output from 1,000 to 2,000 tons of ore per day and was sunk adjacent to the concentrator (starting at the 5,000-foot elevation) to increase efficiency of the operation. Ore and any waste rock to be transported to the surface from the off-shaft and deeper areas of the mine are crushed prior to being hoisted up the shaft. The production shaft and underground crushing station reduce haulage times and costs, facilitate the handling of ore and waste and improve the grinding capabilities of the concentrator. Ore from above the 5,000-foot west elevation is hauled to the surface by rail. Waste material not used for backfilling in underground excavations is transported to the surface and placed in permitted waste rock disposal sites.

     The Stillwater Mine currently uses its 29 footwall lateral drifts and 6 primary ramps and vertical excavations to provide personnel and equipment access, supply haulage and drainage, intake and exhaust ventilation systems, muck haulage, backfill plant access, powder storage and/or emergency egress. The footwall lateral and primary ramp systems will continue to provide support for production and ongoing development activities. In addition, certain mine levels are required as an integral component of the ventilation system and serve as required intake and/or exhaust levels, or as parallel splits to maintain electrical ventilation horsepower balance and to meet MSHA requirements. MSHA regulations require the Company to designate alternate (secondary) escapeways from mine workings. These levels, in addition to comprising critical functional components of the ventilation and escapeway system, serve as permanent mine service and utility infrastructure for road and rail transportation, dewatering and backfill pumping facilities. They have been designed and are intended to be used for the life of the mine.

     During 2007, the Company began construction of a second major decline ramp from the 3500 level of the existing shaft with eventual development down to about the 1900-foot elevation. A study that the Company completed during 2006 determined that the most cost-effective access to these lower levels would be via electric truck haulage on a dedicated ramp bringing mined material up to a transfer station on the shaft for hoisting out of the mine. Work on these ramps progressed during 2009, but future development below the 2000 level will not be needed for several years and so was deferred as a cash-conserving measure until the development is actually needed. In the future, the Company expects to install a horizontal rail haulage system on the 2000 level to transport ore and waste material from the deeper mining faces to the electric truck ramps.

     Prior to 1994, almost all of the Company’s mining activities utilized captive cut-and-fill stoping methods. This is a manpower-intensive mining method that extracts the ore body in eight to ten foot high horizontal cuts within the reef, accessed from vertical raises and mined with conventional jackleg drills and slushers. The open space created by the extraction of each cut is backfilled with waste rock and coarse concentrator tailings and becomes the floor for the next level of mining as the process moves upward. Commencing in 1994, the Company introduced two mechanized mining methods: ramp-and-fill and sub-level stoping. Ramp-and-fill is a mining method in which a series of horizontal cuts are extracted from the ore body using mobile equipment. Access to the ore body is from ramps driven within or adjacent to the ore body allowing the use of hydraulic drills and load-haul-dump equipment. Sub-level stoping is a mining method in which blocks of the reef approximately 50 feet high and up to 75 feet in length are extracted in 30-foot intervals utilizing mobile long-hole drills and remote control rubber tired load-haul-dump equipment. The reef is mined in a retreat sequence and mined out areas are filled with development waste or sand backfill as appropriate. Traditionally, captive cut-and-fill has been viewed as being more selective in nature than either ramp-and-fill or sub-level stoping, but it also requires miners with special skills and is generally less productive. Other factors considered in determining the most

appropriate mining method for each area include the amount of ancillary development required as well as the ore grade and ground conditions expected. The Company determines the appropriate mining method to be used on a stope-by-stope basis utilizing an engineering and economic analysis.

     The Company processes ore from the Stillwater Mine through a surface concentrator facility (mill) adjacent to the Stillwater Mine shaft. The mill has a permitted design capacity of 3,000 tons per day. During 2009, an average of 1,992 tons of ore and 137 tons of sub-grade material were processed through the mill per calendar day. In addition, on average the mill processed 111 tons per calendar day of smelter slag. Crushed ore is fed into the concentrator, mixed with water and ground to slurry in the concentrator’s mill circuits to liberate the PGM-bearing sulfide minerals from the rock matrix. Various reagents are added to the slurry, which then is agitated in a froth flotation circuit to separate the valuable sulfides from the waste rock. In this circuit, the sulfide minerals are successively floated, recycled, reground and refloated to produce a concentrate suitable for further processing. The flotation concentrate, which represents approximately 1.5% of the original ore weight, is filtered, placed in large bins and then transported by truck 46 miles to the Company’s metallurgical complex in Columbus, Montana. In 2009, 52% of the tailings material from the mill was returned to the mine and used as fill material to provide support for additional mining activities. The balance was placed in tailings containment areas on the surface. No additional steps are necessary to treat any tailings placed back into the mine or into the impoundments, as they are environmentally inert. Tailings are disposed of into the impoundment areas pursuant to the Company’s operating permits. Mill recovery of PGMs is historically about 92%. During 2008, failure of a critical drive gear on part of the fine grinding circuit caused recoveries to temporarily drop down to the 91% range.

     In 1998, the Company received an amendment to its existing operating permit providing for the construction of a lined surface tailings impoundment that would serve the Stillwater Mine for approximately the next 30 years. This facility, located about eight miles from the mine and generally referred to as the Hertzler impoundment, was placed into operation in late 2000. See “Business, Risk Factors and Properties — Current Operations — Regulatory and Environmental Matters — Permitting and Reclamation”.

     During 2009, the Stillwater Mine produced 393,800 ounces of palladium and platinum, 12.7% higher than the 349,400 ounces produced in 2008. This improvement in production was attributable in part to the additional miners transferred to the Stillwater Mine from the East Boulder Mine at the end of 2008, along with somewhat higher ore grades in 2009 and improved productivities. The Stillwater Mine’s total cash costs (a non-GAAP measure) averaged $344 per ounce in 2009 compared to $383 per ounce in 2008. These total cash costs are net of recycling and by-product sales credits — without the benefit of these credits, Stillwater Mine’s total cash costs would have averaged $397 per ounce in 2009 and $516 per ounce in 2008. Analysis of this 22.9% improvement indicates about half was attributable to lower contractor and materials costs in 2009 and most of the remainder to the increased production from improved mining productivities. See “Selected Financial and Operating Data” for further discussion of non-GAAP measures.

EAST BOULDER MINE

     The East Boulder Mine is located in Sweet Grass County, Montana, approximately 32 miles southeast of the town of Big Timber and is accessed by a public road. The East Boulder Mine is fully permitted independently of the Stillwater Mine and comprises a second distinct mining operation accessing the western portion of the J-M Reef. The mine consists of underground mine development and surface support facilities, including a concentrator, shop and warehouse, changing facilities, storage facilities, office and tailings management facility. All mine facilities are wholly owned and operated by the Company. Surface facilities for the East Boulder Mine are situated on unpatented mill site claims maintained on federal lands located within the Gallatin National Forest and administered by the U.S. Forest Service. All surface facilities, including the tailings management complex, are located within a 977-acre operating permit area. Proven and probable ore reserves for the mine are controlled by patented mining claims owned by the Company. Development of the East Boulder Mine began in 1998, and it commenced commercial production effective January 1, 2002.

     From the surface facilities at East Boulder, the J-M reef is accessed by two 18,500-foot long, 15-foot diameter horizontal tunnels driven into the mountain. These tunnels are equipped with rail haulage and intersect the ore body at an elevation 6,450 feet above sea level. Within the mine, the ore body currently is developed from seven levels of horizontal footwall lateral drifts driven parallel to the J-M Reef totaling approximately 37,500 feet in length, and from four primary ramps totaling approximately 16,815 feet of development. The ore body is accessed vertically by ramp systems tying together the footwall laterals and driven approximately every 2,500 feet along the length of the deposit. During 2009, active mining areas were consolidated into five production zones including two areas below the primary 6,450 haulage level.

     The mined ore is transported horizontally out of the East Boulder Mine by rail haulage to the mine portal, where it is processed through the East Boulder concentrator facility, which has a permitted mill capacity of 2,000 tons per day. Concentrates produced in the mill are transported approximately 75 miles to the Company’s metallurgical complex in Columbus, Montana.

     In 2009, approximately 48% of the East Boulder mine tailings material was returned to the mine and used for backfill in mined out voids to provide a foundation upon which additional mining activities can occur. The balance was placed in surface tailings containment areas. In 2008, approximately 57% of the mine tailings were returned to the mine; sandfill activity was reduced significantly in the 2009 mine plan. No additional steps are necessary to treat any tailings placed back into the mine or into the impoundments, as they are environmentally inert and tailings placed into the impoundment areas are disposed of pursuant to the Company’s operating permits. The current impoundment area has an estimated life of approximately 20 years at the original planned production and processing rate of 2,000 tons per day. Mill recovery of the PGMs contained in the ore was about 89% in 2009 and 90% in 2008 and 2007.

     In late 2008, as PGM prices declined, East Boulder Mine’s operating and cash margins turned sharply negative, and mining operations there were suspended while the Company considered its options. After review, only five active mining areas were brought back into service, each staffed by a mining team who were given responsibility to bring cost performance in line with PGM prices. In conjunction with the reorganization, the company-wide workforce was reduced by 218 employees and 32 contractors. In total, staffing at the East Boulder Mine declined from 526 employees at the end of November 2008 to 261 employees at year end 2008 (excluding contractors). Many of the remaining East Boulder miners accepted positions at the Stillwater Mine, which had been short of skilled miners in some areas.

     Along with this reorganization, the mine plan at the East Boulder Mine was changed. Mine development was initially scaled back to a single crew, and the mining team in each of the five active mining areas, were given greater responsibility for supporting their own activities thereby reducing significantly the amount of support labor required by operations. Overall, this restructuring has been effective, with the East Boulder Mine production at 136,100 ounces in 2009, down only 9.0% from the 149,500 ounces produced in 2008 despite the more than 50% reduction in the mine workforce.

     The East Boulder Mine’s total cash costs (a non-GAAP measure) were $407 per ounce in 2009 compared to $456 per ounce in 2008. These total cash costs include the benefit in each period of recycling and by-product credits — if these credits are excluded, the resulting cash costs would have been $471 per ounce in 2009 and $607 per ounce in 2008. The lower costs were driven mostly by reduced labor and materials costs, coupled with a strong improvement in mining productivities. See Part II, Item 6 “Selected Financial and Operating Data” for further discussion of non-GAAP measures.

EXPLORATION AND DEVELOPMENT

     The J-M Reef has been explored from the surface along its entire 28-mile strike length by surface sampling and drilling. Surface exploration drilling consists of an array of over 900 drill holes with a maximum horizontal spacing between holes of 1,000 feet. Exploration activities historically also included driving and then drilling from two exploratory underground adits not currently in active use, the West Fork Adit and the Frog Pond Adit. Comprehensive evaluation of PGM mineralization encountered in the J-M Reef has allowed delineation of indicated ore reserves adjacent to the Stillwater and East Boulder Mines and confirmation of the existence of mineralized material over much of the remaining strike length. Exploration to date has defined sufficient probable ore reserves to sustain mining for a number of years in the future. It is the Company’s practice to systematically convert its established probable ore reserves to the proven ore category as mine development progresses by performing definition drilling and evaluation coincident with planned advances of underground development.

     A key element of the Company’s development activities in the Stillwater Complex consists of ongoing efforts to convert its established probable ore reserves into proven ore reserves by extending the lateral and vertical development of the Stillwater and East Boulder Mines. These ongoing activities involve constructing and extending mine development workings to access established ore reserves and continuously advancing definition drilling, engineering and mine plans to replace depleted ore reserves. During 2009, 2008 and 2007, $25.9 million, $55.9 million and $65.5 million, respectively, were incurred in connection with capitalized mine development and are included in total capital expenditures. Beginning in 2004 the Company undertook an initiative to expand its proven ore reserves to equal 40 months of production at full permitted capacity. This initiative has reached a point where both mines have achieved in excess of 40 months of proven reserves at current production rates. Consequently, the sharply reduced development spending in 2009 should not impair

the long-term viability of the operations at these production rates. Development spending in 2010 is planned to be about $29.8 million, which should be sufficient at planned production rates to maintain the current level of operations.

     The following table outlines measures that are used by the Company to gauge progress on resource development activities:

Location and Development Activity		2009				2008				2007
Stillwater Mine
New Primary Development (equivalent feet)(1)			12,323				25,047				26,033
New Footwall Lateral (equivalent feet)(1)			8,430				10,836				10,987
New Definition drilling (feet)			292,701				358,761				311,607
East Boulder Mine
New Primary Development (equivalent feet)(1)			3,602				9,963				13,015
New Footwall Lateral (equivalent feet)(1)			1,522				4,254				6,283
New Definition drilling (feet)			64,448				140,944				179,845

METALLURGICAL COMPLEX

     Smelter The Company owns a smelter facility and associated real estate located in Columbus, Montana. The smelter facility consists of two electric furnaces, two top blown rotary converters (TBRC’s), a matte granulator and gas handling and solution regeneration systems. The smelter’s capacity is approximately 120 tons of total feed per day.

     During 2009, the Company completed construction of the second smelter furnace at the Columbus facility. The new furnace is intended to accommodate forecasted levels of future processing, mitigate any potential operational risk (virtually all of the Company’s metal production is dependent on the availability of the smelter facility), and allow the Company to continue processing during periodic scheduled maintenance shutdowns. Capital expenditures in 2009 included about $6.5 million toward completion of the second electric furnace which in total cost $21.4 million and was under the projected cost by 15%.

     Concentrates from the mine sites are transported to the smelter, dried, and fed into an electric furnace, commingled with spent catalyst materials collected by the Company’s recycling business segment. The combined feed is melted in the furnace, where the lighter silica-rich slag separates out into a distinct layer that floats on the heavier nickel-copper PGM-rich matte. The matte is tapped from the furnace periodically and granulated. This granulated furnace matte is then re-melted and processed in a TBRC, which extracts iron from the converter matte. The converter matte is poured from the TBRC, granulated and transferred to the base metals refinery for further processing. The granulated converter matte, approximately 6% of the original smelter feed by weight, consists principally of copper and nickel sulfides containing about 1.5% PGMs. The slag is separately tapped from the furnace, cooled and returned to the mine for reprocessing.

     The gases released from the smelting operations are routed through a gas/liquid scrubbing system, which removes approximately 99.8% of the contained sulfur dioxide. Spent scrubbing solution is treated in a process that converts the sulfur dioxide into gypsum, or calcium sulfate, and regenerates clean scrubbing solution. The gypsum is sold for use as a soil amendment by farmers and as a water treatment additive in the coal bed methane industry.

     Base Metal Refinery The Company’s base metal refinery is located on property the Company owns adjacent to the smelter in Columbus, Montana.

     The base metal refinery utilizes the patented Sherritt Process, whereby a sulfuric acid solution dissolves the nickel, copper, cobalt and residual iron in the converter matte. These metals are separated from the PGM-bearing converter matte and the copper and nickel ultimately are marketed as by-products. Iron is precipitated from an iron-copper-nickel-cobalt solution and is returned to the smelter to be processed and removed in the slag. A nickel crystallizer circuit produces a crystalline nickel sulfate by-product containing minor amounts of cobalt, which is marketed under sales contracts with various companies. A copper electrowinning circuit removes copper from solution as cathode copper that is marketed to copper refiners for upgrading to commercial grade material. The removal of these metals upgrades the PGM fraction of the converter matte product substantially from about 1.5% PGMs to approximately 37% PGMs.

     The base metal refinery produces a palladium, platinum and rhodium-rich filter cake, which also contains minor amounts of gold and silver. This filter cake is shipped to third-party precious metal refineries in New Jersey and California under tolling agreements that provide the Company with returns of finished metal. The palladium and platinum metals are returned to the Company’s account as 99.95% purity sponge; rhodium, gold and silver are also returned to the Company’s account. The refined metal is then available for delivery to the Company’s customers. The Company pays its refiners a per-ounce refining charge for the toll processing of the refined filter cake, and they also retain a small percentage of the contained metals.

PGM RECYCLING

     The Company regularly sources spent catalytic converter materials containing PGM metals from third-party suppliers and processes them through its metallurgical complex. Such materials may either be purchased outright or may be processed and returned to the supplier for a tolling fee. The spent catalytic material is collected by the third party suppliers, primarily from automobile repair shops and automobile yards that disassemble old cars for the recycling of their parts. The Company also processes spent PGM catalysts from petroleum refineries and other sources, normally on a tolling basis.

     Upon receipt of the PGM materials for recycling, they are crushed and sampled prior to being commingled with mine concentrates for smelting in the electric furnace. Nickel and copper sulfides which occur naturally in the mine concentrates act as a metallurgical collector to facilitate the chemical extraction of the PGMs from the recycled material.

     In acquiring recycled automotive catalysts, the Company sometimes advances funds to its suppliers in order to facilitate procurement efforts. During 2009, the Company modified its recycling business model to narrow the amount of advances outstanding to such suppliers while at the same time continuing to support and grow the recycling segment. Total outstanding procurement advances to recycling suppliers totaled $3.6 million at December 31, 2009. In the current business environment, the Company has generally limited working capital advances to new suppliers for material that has been procured and awaiting transit or physically in transit to the Company’s processing facilities.

     Recycled ounces sold in 2009 decreased to 102,000 ounces compared to 275,000 ounces in 2008. In addition to purchased material, the Company processed 128,000 ounces of PGMs on a tolling basis in 2009, up from 126,000 tolled ounces in 2008. In total, recycled volumes fed to the smelter decreased to 251,000 ounces of PGMs in 2009, down 37% from 398,100 ounces in 2008. The decrease in volumes came early in 2009 following the steep drop in PGM prices during the latter half of 2008. As the year 2009 progressed, and PGM prices increased, volumes began to steadily recover.

     The Company records revenue and costs of metals sold for the processing of these recycled materials. Revenues from recycling declined substantially to $81.8 million in 2009, from $475.4 million and $326.4 million in 2008 and 2007, respectively, the result of much lower PGM prices and reduced availability of recycling material in 2009. Costs of metals sold were $76.5 million, $449.5 million and $306.8 million for 2009, 2008 and 2007, respectively — most of these costs are associated with purchasing the recycled material for processing. Earnings from the processing of recycled catalysts in 2009, 2008 and 2007, including financing charges to customers, were $5.9 million, $6.7 million and $26.2 million, respectively. Following the steep drop in PGM prices and doubts as to collectability under various commitments with suppliers, the 2009 and 2008 recycling results included write-downs of $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business.

     Because of the significant quantities of recycling material typically processed through its smelter and base metal refinery and the substantial time required for processing, the Company usually carries large inventories of recycling material in process. Working capital associated with these recycling activities as inventories and advances was $28.6 million and $22.1 million at December 31, 2009 and 2008, respectively.

OTHER PROPERTIES

     The Company owns a warehouse facility in Columbus, Montana and leases office space in Columbus and Billings, Montana. The Company’s corporate office was located in the office space leased in Billings, Montana until early 2009, at which time the corporate office was relocated to Columbus, Montana. The annual expense for office leases totals $0.3 million per year. The Company is still party to the office lease in Billings, Montana, periodically uses it for business meetings, and to date has not been able to sublease the facility on acceptable terms. The Company also owns parcels of

rural land in Stillwater and Sweet Grass Counties, Montana, near its mine sites totaling approximately 4,367 acres and additional properties in the communities of Columbus and Big Timber, Montana, which are used as support facilities.

LONG-TERM FINANCING

Convertible Debentures

     On March 12, 2008, the Company issued and sold $181.5 million aggregate principal amount of senior convertible debentures due 2028 (debentures). The debentures pay interest at 1.875% per annum, payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2008. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. Holders of the debentures may require the Company to repurchase all or a portion of their debentures on March 15, 2013, March 15, 2018 and March 15, 2023, or upon the occurrence of certain events including a change in control. The Company may redeem the debentures for cash beginning on or after March 22, 2013.

     The debentures were sold to an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the private placement exemption afforded by Section 4(2) of the Securities Act. The initial investor offered and resold the debentures to “qualified institutional buyers” under Rule 144A of the Securities Act. An affiliate of MMC Norilsk Nickel, with the approval of the Company’s public directors, purchased $80 million of the debentures, thereby maintaining its majority ownership position in the Company.

     In connection with the issuance of the debentures, the Company agreed to file and maintain an effective shelf registration statement with the Securities and Exchange Commission (SEC) for the resale of the debentures and the common stock issuable upon conversion of the debentures until the earlier of (1) the date the debentures or the common stock issuable upon conversion of the debentures is eligible to be sold to the public pursuant to Rule 144 of the Securities Act or (2) the date on which there are no outstanding registrable securities. Except for the debentures held by Company affiliates, the minimum holding period prescribed in Rule 144 has now elapsed, and management believes the debentures are eligible to be sold to the public in the secondary market.

     During the fourth quarter of 2009, the Company filed a $450 million shelf registration statement. The registration became effective on December 8, 2009, and permits the Company to issue any of various public debt or equity instruments for financing purposes so long as the registration statement remains effective. The Company has no immediate plans to issue securities under the shelf registration, but management believes that the shelf may facilitate access to additional liquidity in the future. However, there is no assurance that debt or equity capital would be available to the Company in the public markets should the Company determine to issue securities under the shelf registration.

     In connection with the issuance of the debentures, the Company incurred $5.1 million of issuance costs, which primarily consisted of investment banking fees, legal and other professional fees. These costs are classified within other noncurrent assets and are being amortized as interest expense using the effective interest method over the term from issuance through the first date that the holders can require repurchase of the debentures, which is March 15, 2013. Amortization expense related to the issuance costs of the debentures was $1.0 million and $0.8 million for 2009 and 2008, respectively, and the interest expense on the debentures was $3.3 million and $2.7 million for 2009 and 2008, respectively. The Company made cash payments of $3.4 million and $1.7 million for interest on the debentures during 2009 and 2008, respectively.

     In October 2009, the Company undertook the exchange of $15 million face amount of the convertible debentures for 1.84 million shares of the Company’s common stock. The debentures so acquired have been retired, leaving $166.5 million face value of the debentures outstanding at December 31, 2009. None of the Company’s convertible debentures held by MMC Norilsk Nickel were involved in the exchange transaction. Because the number of shares issued in this transaction exceeded the 42.5351 shares per $1,000 of face value specified in the bond indenture, accounting principles required that the Company expense the value of the excess shares as an “inducement loss.” Consequently, the Company recorded a loss on the exchange transaction of $8.1 million during the fourth quarter of 2009.

PGM SALES AND HEDGING

Mine Production

     Palladium, platinum, rhodium, gold and silver are sold to a number of consumers and dealers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) of 99.95% purity (rhodium of 99.9%) in sponge-form are transferred upon sale from the Company’s account at third-party refineries to the account of the purchaser. By-product metals are normally sold at market prices to customers, brokers or outside refiners. Copper and nickel by-products, however, are produced at less than commercial grade, so prices for these metals typically reflect a quality discount. By-product sales are included in revenues from mine production. During 2009, 2008 and 2007, total by-product (copper, nickel, gold, silver and mined rhodium) sales were $23.6 million, $36.8 million and $53.8 million, respectively.

     The Company has a sales agreement with Ford Motor Company covering a portion of production from the mines that contains guaranteed floor and ceiling prices for metal delivered. Metal sales under the agreement, when not affected by the guaranteed floor or ceiling prices, are priced at a slight discount to market. Under this sales agreement, the Company currently has committed 80% of its palladium production and 70% of its platinum production from mining through 2010. None of the Company’s palladium or platinum production after 2010 is currently committed. At sufficiently low PGM price levels, the absence of the pricing floors after 2010 could have a material adverse effect on the Company. The Company restructured its operations in order to mitigate this exposure and has reduced its operating costs significantly, but the loss of the Ford agreement will increase the Company’s financial exposure to low PGM prices.

     Metal delivery commitments under the sales agreement generally fluctuate based upon fixed percentages of actual mine production. The agreement also contains termination provisions that allow the purchaser to terminate in the event the Company breaches certain provisions of the agreement and the Company fails to cure the breach within periods ranging from 10 to 30 days of notice by the purchaser. The sales agreement qualifies for the normal sales exception, and consequently, sales under the agreement are not subject to hedge accounting because they require physical delivery and do not settle net. The floors and ceilings embedded within the sales agreement have economic characteristics and risks clearly and closely related to the economic characteristics and risks of the host agreement and so are treated as part of the host agreement, not as separate derivative instruments.

     The Company has historically entered into derivative contracts and hedging arrangements from time to time to manage the effect on the Company’s cash flow of fluctuation in the price of palladium and platinum from mine production. Hedging activities consist of fixed forwards for future delivery of specific quantities of PGMs at specific prices, and financially settled forwards that provide for net cash settlement of forward sales. Gains or losses can occur as a result of hedging strategies if the derivative contracts ultimately settle at prices above or below market. The Company settled its last remaining financially settled forward agreements covering future anticipated platinum sales out of mine production during the second quarter of 2008. Consequently, after June 30, 2008, the Company was no longer party to any further hedges on its mined platinum production. The Company recorded an offset to revenue in 2008 of $12.8 million representing the loss on its platinum hedges during that year. See Note 6 “Derivative Instruments” to the Company’s 2009 audited financial statements for further information.

PGM Recycling

     The Company has capacity available in its smelter and base metal refinery and purchases catalyst materials from third parties for recycling in those facilities to recover PGMs. The Company has entered into sourcing arrangements for catalyst material with several suppliers. Under these sourcing arrangements, the Company may from time to time advance cash to suppliers for purchase and collection of these spent catalyst materials. These advances are reflected as advances on inventory purchases and included in other assets on the Company’s balance sheet until such time as the material has been physically received and title has transferred to the Company. Following the steep drop in PGM prices and doubts as to collectability under various commitments with suppliers, the 2009 and 2008 recycling results included write-downs of $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business. See “Business, Risk Factors and Properties — Risk Factors — Reliance on Third Parties for Sourcing of Recycling Materials and the Concentration of Recycling Sources Creates the Potential for Losses.”

     The Company regularly enters into fixed forward sales related to recycling of catalysts. These fixed forward sales transactions in the recycling business have not been accounted for as derivatives because they qualify as “normal purchases/normal sales” under generally accepted accounting principles. Metals from processing recycled materials are

generally sold forward at the time the material is purchased and they are delivered against the forward sales contracts when the ounces are recovered.

     Between the time the General Motors agreement was amended and renegotiated in August of 2007 and the subsequent rejection of the agreement through the bankruptcy court in July 2009, the Company generally elected to fulfill a portion of its delivery commitments under the amended agreement out of recycled palladium. Consequently, a portion of the Company’s palladium from recycling from time to time was priced using financially settled forward sales, which allowed the Company to price the metal forward. Because these financially settled forward sales inherently settled net, they were not eligible for the normal sales exemption. The Company elected not to designate these financially settled forward sales as hedges. Changes in fair value of these financially settled forwards at the end of each accounting period were reflected in recycling revenue. The corresponding net realized loss on these derivatives in 2009 and 2008 was $0.2 million in each year. There were no financially settled forward contracts outstanding at December 31, 2009.

     All of the Company’s recycling forward sales transactions open at December 31, 2009, will settle at various periods through May 2010. See Note 6 “Derivative Instruments” to the Company’s 2009 audited financial statements for more information. The Company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for metals exceed the Company’s hedged prices by a predetermined margin limit. No margin deposits were required or outstanding as of December 31, 2009 or 2008.

Other

     The Company makes other open market purchases of PGMs from time to time for resale to third parties. The Company recognized revenue of $5.8 million and $20.0 million on ounces purchased in the open market and re-sold for the years ended December 31, 2009 and 2008, respectively. These purchases for resale were essentially breakeven transactions undertaken for the convenience of certain customers.

TITLE AND ROYALTIES

     The Company holds 995 patented and unpatented lode or mill site claims covering approximately 16,000 acres along the apex of the J-M Reef mineral zone and on adjacent federal lands utilized for the Company’s operations facilities. The Company believes that approximately 130 of these claims cover 100% of the known apex of the J-M Reef. The Company’s remaining unpatented claims either adjoin the apex of the J-M Reef or secure sites for surface operations. Prior to the federal moratorium on processing new applications for mining claim patents, the Company had leasehold control on one patented claim under the Mouat Agreement, had been granted patents on 34 of its own claims (a combined total of 735 acres), and had 33 patent applications pending on 135 additional mining claims covering an area of 2,249 acres. The applications included claims owned directly by the Company or held by the Company in leasehold. During the fourth quarter of 2001, 31 new patents were issued to the Company for 126 mining claims covering 2,126 acres. At year-end 2001, patents had been issued for all submitted applications involving the claims owned directly by the Company. In a decision dated April 30, 2002, the Montana State Office of the Bureau of Land Management (BLM) rejected two mineral patent applications submitted prior to July 13, 1993 covering 123 acres in nine mining claims held by the Company in leasehold under the Mouat Agreement. The Company joined with the Mouat interests in appealing the BLM decision to the U.S. Department of the Interior Board of Land Appeals (IBLA). On April 25, 2005, Administrative Judges for the IBLA ruled in favor of the Mouat Interests’ and Company’s appeal and remanded the cases to the BLM with instruction to issue the pending patents. As of the date of this filing, the Certificates of Patent had not yet been issued; however, the Company considers the matter resolved and expects the patents to be granted in due course. The Company presently maintains 825 active unpatented mining and mill site claims. Unpatented mining claims may be located on lands open to mineral appropriation and 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 such claims are more commonly subject to challenges of third parties, regulatory or statutory changes, or contests by the federal government. The validity of an unpatented mining claim or mill site claim, in terms of establishing and maintaining possessory rights, depends on strict compliance with a complex body of federal and state statutory and decision law regarding the location, qualifying discovery of valuable minerals, occupancy and beneficial use by the claimant.

     Of the Company’s 995 controlled claims, 868 are subject to royalties, including 840 subject to a 5% net smelter royalty payable to Franco Nevada U.S. Corporation (formerly Newmont Capital Limited), 143 subject to a 0.35% net smelter royalty payable to the Mouat family, and 115 subject to both royalties. During 2009, 2008 and 2007, the Company incurred royalty expenses of $10.6 million, $14.6 million and $15.7 million, respectively. At December 31, 2009, 100% of the Company’s proven and probable ore reserves were secured by either its control of 161 patented mining

claims or the nine current first-half certified claims pending final action under the April 2005 appeal ruling by the IBLA. Processing facilities at the East Boulder Mine are situated on 127 validated unpatented mill site claims.

REGULATORY AND ENVIRONMENTAL MATTERS

     General The Company’s business is subject to extensive federal, state and local government controls and regulations, including regulation of mining and exploration which could involve the discharge of materials and contaminants into the environment, disturbance of land, reclamation of disturbed lands, associated potential impacts to threatened or endangered species and other environmental concerns. In particular, statutes including, but not limited to, the Clean Air Act, the Clean Water Act, the Solid Waste Disposal Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act and the National Environmental Policy Act, impose permit requirements, effluent standards, air emission standards, waste handling and disposal restrictions and other design and operational requirements, as well as record keeping and reporting requirements, upon various aspects of mineral exploration, extraction and processing. In addition, the Company’s existing mining operations may become subject to additional environmental control and mitigation requirements if applicable federal, state and local laws and regulations governing environmental protection, land use and species protection are amended or become more stringent in the future. The Company is aware that federal regulation under the Solid Waste Disposal Act governing the manner in which secondary materials and by-products of mineral extraction and beneficiation are handled, stored and reclaimed or reused are subject to frequency review by the agencies which could affect the Company’s facility design, operations, and permitting requirements. See “Business, Risk Factors and Properties — Risk Factors — Changes to Regulations and Compliance with Regulations Could Affect Production, Increase Costs and Cause Delays.”

     The Stillwater Mine and the East Boulder Mine are located on the northern edge of the Absaroka-Beartooth Wilderness Area, about 30 miles north of Yellowstone National Park. Due to the proximity of the Company’s operations to Yellowstone National Park and a wilderness area, the Company’s operations are subject to stringent environmental controls that may adversely impact the Company’s operations. For example, increasingly stringent requirements may be adopted under the Clean Water Act, Clean Air Act or Endangered Species Act which could require installation of environmental controls not required of competitors located overseas. See “Business, Risk Factors and Properties — Risk Factors — Changes to Regulations and Compliance with Regulations Could Affect Production, Increase Costs and Cause Delays.”

     The Company’s past and future activities may also cause it to be subject to liabilities under provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), and analogous state law. Such laws impose strict liability on certain categories of potentially responsible parties including current property owners for releases or threatened releases of hazardous substances into the environment that result in cleanup and other remediation costs.

     Generally compliance with the above statutes requires the Company to obtain permits issued by federal, state and local regulatory agencies and to file various reports, monitor performance and keep records of its operations affecting the environment. Certain permits require periodic renewal or review of their conditions. The Company cannot predict whether it will be able to renew such permits or whether material changes in permit conditions will be imposed. Non-renewal of permits or the imposition of additional conditions could have a material adverse effect on the Company’s financial condition and results of operations. See “Business, Risk Factors and Properties — Risk Factors — If the Company is Unable to Obtain Surety Coverage to Collateralize Its Reclamation Liabilities, Operating Permits May Be Affected.”

     For the past several years, the Company has employed various measures in an effort to protect the health of the Company’s workforce and to comply with much stricter MSHA limits on DPM exposure for the underground miners. These measures have included using catalytic converters, filters, enhanced ventilation regimens, modifying certain mining practices underground, and has experimented with various bio-diesel blends. The new DPM limits were delayed for a time, but ultimately went into effect on May 20, 2008. Compliance with the revised MSHA DPM standards continues to be a challenge within the mining industry. However, as a result of its internal efforts to reduce DPM exposure, recent sampling indicates that the Company has achieved compliance with the new standards at the East Boulder Mine as well as at the Stillwater Mine. No assurance can be given that any lack of compliance in the future will not impact the Company.

     Nitrogen concentrates in groundwater have been elevated above background levels at both the Stillwater Mine and the East Boulder Mine as a result of operational activities and discharges currently authorized under permit. Noncompliance with standards have occurred in some instances and are being addressed by the Company through action plans approved

by the appropriate federal and state regulatory agencies. In view of its good-faith efforts to comply and progress to date in implementing remedial and advanced treatment technologies, the Company does not believe that failure to be in strict compliance will have a material adverse effect on the Company.

     The Company believes that its operations and facilities comply in all material respects with current federal, state and local permits and regulations, and that it holds all necessary permits for its operations at the Stillwater and East Boulder Mines and to complete all of its planned expansion projects. However, compliance with existing and future laws and regulations may require additional control measures and expenditures, which cannot be estimated at this time. Compliance requirements for new mines and mills 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. The cost of complying with future laws and regulations may render currently operating or future properties less profitable and could adversely affect the level of the Company’s ore reserves and, in the worst case, render its mining operations uneconomic.

     Permitting and Reclamation Operating Permits 00118 and 00149 issued by the Montana Department of State Lands encompass approximately 2,475 acres at the Stillwater Mine located in Stillwater County, Montana and 977 acres at the East Boulder Mine located in Sweet Grass County, Montana. The permits delineate lands that may be subject to surface disturbance. At present, approximately 437 acres have been disturbed at the Stillwater Mine, and 210 acres have been disturbed at the East Boulder Mine. The Company employs concurrent reclamation wherever feasible.

     Reclamation regulations affecting the Company’s operations are promulgated and enforced by the Hard Rock Bureau of the Montana Department of Environmental Quality (DEQ). The United States Forest Service (USFS) may impose additional reclamation requirements during the permitting process. For regulatory purposes, reclamation does not mean restoring the land to its pre-mining state. Rather, it means returning the post-mining land to a state which has stability and utility comparable to pre-mining conditions. Major reclamation requirements include stabilization and revegetation of disturbed lands, controlling storm water and drainage from portals and waste rock dumps, removal of roads and structures, treating and the elimination of process solutions, treatment and the elimination of mine water prior to discharge and visual aesthetics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

     Permits governing air and water quality are issued to the Company by the Montana DEQ, which has been delegated such authority by the federal government. Operating permits issued to the Company by the Montana DEQ and the USFS do not have an expiration date but are subject to periodic reviews. The reviews evaluate bonding levels, monitor reclamation progress, and assess compliance with all permit requirements and mitigation measures.

     In April 1996, the Company submitted a permit amendment application for the expansion of the Stillwater Mine. This expansion proposal included siting and construction of a new tailings impoundment and removal of the 2,000 tons of ore per day production cap. During 1997, as a result of this application, the Montana DEQ began preparation of an Environmental Impact Statement (EIS) in order to assess the environmental impacts of the amendment. The Montana DEQ issued the final EIS in 1998, subsequent to review of draft issuances and a public hearing. In November 1998, the Montana DEQ and the USFS issued the Record of Decision. There were no material changes from the original application.

     In the first quarter of 1999, an environmental group filed a complaint against the Montana DEQ challenging the adequacy of the EIS and reclamation provisions developed in connection with the amendment to the permit. The Company was not named in the complaint. In mid-2000, the Company signed an agreement with the group and its affiliates (the “Councils”). Under the terms of the agreement, the Councils withdrew litigation against the Montana DEQ. The Councils also agreed not to file a protest against the renewal of the Company’s water quality permit at the East Boulder Mine. For its part, the Company agreed to programs that reduce traffic flows to both the Stillwater Mine and the East Boulder Mine. In addition, the Company is funding expanded monitoring programs and the development of a watershed partnership for the Boulder River basin to assist residents in improving the quality of surface and ground water. In August of 2005, this agreement was mutually amended to acknowledge the progress made in implementing the agreement and completing and finalizing many of the agreement requirements. Additionally, future commitments were reviewed and amended as appropriate in an effort to bring the agreement current with existing environmental conditions, updated technical data and changes to schedules and monitoring plans resulting from information gathered during the previous 5-year period. The Company estimates the total cost of all the environmental programs associated with the implementation of the agreement to be between $0.2 million and $0.3 million annually.

     Included in the Company’s total capital spending in 2009 were environmental capital expenditures of $1.2 million, primarily related to the ventilation system for the second electric furnace at the smelter in Columbus, Montana. Comparable environmental capital expenditures in 2008 and 2007 were $1.1 million and $0.8 million, respectively. The Company’s environmental operating expenses were $2.7 million, $3.6 million and $2.9 million in 2009, 2008 and 2007, respectively. The Company’s 2010 operating expenditures for environmental compliance (excluding capital expenditures) are expected to total approximately $3.6 million and will be expensed as incurred.

COMPETITION: PALLADIUM AND PLATINUM MARKET

GENERAL

     Palladium and platinum are rare precious metals with unique physical qualities that are used in diverse industrial applications and in the jewelry industry. The development of a less expensive alternative alloy or synthetic material with the same characteristics as PGMs for industrial purposes could reduce demand for the Company’s products and drive down PGM prices. Although the Company is unaware of any such alloy or material, there can be no assurance that none will be developed. Jewelry demand is influenced by a variety of external factors, including fashion trends, metal prices and the general state of the economy. Adverse changes in any of these factors could negatively affect the Company’s financial performance.

     Significant quantities of platinum and palladium are held in inventory by investors, trading houses and government entities. The number of ounces in each of these inventories is not always disclosed publicly, nor is it clear under what circumstances these holdings might be brought to market. For example, in the past, the Russian Federation has held large inventories of palladium as strategic inventory, selling substantial volumes from time to time without warning into the market. Some have suggested that these Russian government inventories are nearly depleted. There is no official disclosure of the size of the Russian inventories or clarity as to plans for future sales. Also, new exchange-traded funds, or ETFs, have been introduced recently that may enable more investors to participate in the PGM markets, potentially resulting in more metal being held in inventory. The overhang from these significant investment holdings of platinum and palladium makes it more difficult to predict accurately future supply and demand for these metals and may contribute to added PGM price volatility.

     The Company competes with other suppliers of PGMs, some of which are significantly larger than the Company and have access to greater mineral reserves and financial and commercial resources. Some significant suppliers produce platinum in greater quantities than palladium and thus currently enjoy average per ounce revenue greater than the Company. Some significant suppliers of PGMs produce palladium and platinum as by-products of other production. See “Global Supply” below. New mines may open over the next several years, increasing supply. Furthermore, the volume of PGMs recovered through recycling scrap sources, mostly spent automotive and industrial catalysts, is increasing. There can be no assurance that the Company will be successful in competing with these existing and emerging PGM producers. See “Business, Risk Factors and Properties — Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

GLOBAL DEMAND

     The unique physical qualities of PGMs include: (1) a high melting point; (2) excellent conductivity and ductility; (3) a high level of resistance to corrosion; (4) strength and durability; and (5) strong catalytic properties.

     Johnson Matthey reports that demand for palladium (net of recycling volumes) likely decreased by approximately 3.76% to 6.52 million ounces during 2009. Their Platinum 2009 Interim Review Report published in November 2009 (Johnson Matthey or the Johnson Matthey report), projected that 2009 palladium demand decreased from 2008 as a result of the general economic downturn, particularly in automotive demand, although partially offset by stronger investor interest in palladium. They projected that growth in automotive demand in China would partially offset the downturn in the U.S. and Western Europe.

     The largest application for palladium is in automotive catalytic converters. In 2009, this industry consumed approximately 2.9 million ounces (net of recycling), or about 45% of the worldwide palladium demand. (Johnson Matthey estimates that an additional 950,000 palladium ounces generated from recycling also were consumed in catalytic converters during 2009, down from 1.1 million ounces in 2008.) Overall, net consumption of palladium in catalytic converters is off by about 12% from 2008. Industrial demand for palladium includes applications in electronics and the chemical industry; Johnson Matthey indicates year-on-year demand for industrial palladium declined nearly 7.6% to about

1.3 million ounces. Johnson Matthey estimates that approximately 1.0 million ounces, or about 15% of 2009 palladium demand, was consumed in the production of electronic components for personal computers, cellular telephones, facsimile machines and other devices. Jewelry demand for 2009 was projected by Johnson Matthey to increase by about 7.6% over the previous year to about 0.92 million ounces. The increased jewelry demand reflects Johnson Matthey’s view that recycling of palladium jewelry in China has now fallen off, so a higher percentage of sales there now represent new demand. Johnson Matthey also reported that dentistry continues to be a major user of palladium for gold-based dental alloys, and that dental demand remained about flat at approximately 0.6 million ounces, or 9.3% of total palladium demand for 2009. According to Johnson Matthey, investment demand increased sharply in 2009 to an estimated 635,000 ounces, about 9.7% of total 2009 palladium demand; that compares to investment demand of about 420,000 ounces in 2008, representing about 6.2% of total 2008 demand.

     According to Johnson Matthey, demand for palladium in the next several years is expected to continue growing, driven primarily by recovery in the automotive sector, stock replenishment and increasing use of palladium in diesel catalytic converters. Over the past several years, the pricing disparity between platinum and palladium has driven research into substituting palladium for platinum in diesel catalytic converters, whereby the palladium content reportedly now can be increased to as much as 50% of the total PGMs in diesel catalytic converters being produced today. Jewelry consumption is maturing in China, but interest in palladium continues to grow in other markets, particularly with the introduction of a palladium hallmark during 2009 in the United Kingdom. The effect of the introduction in early 2010 of new exchange-traded funds in New York for platinum and palladium on the demand for these metals remains to be determined.

     Johnson Matthey estimates that palladium supplied into the market, including sales out of Russian government inventories, exceeded demand by about 655,000 ounces in 2009. Prices for palladium in 2009, based on London Bullion Market Association afternoon postings, ranged from a low of $179 per ounce on January 15, 2009 to end 2009 at a high of $393 per ounce.

     Charts reproduced from the Johnson Matthey Platinum 2009 Interim Review. Permission to reproduce was neither sought nor obtained.

     Johnson Matthey reports that 2009 demand for platinum (net of recycling volumes) probably declined by 4.4% to about 5.9 million ounces in 2009 from 6.2 million ounces in 2008. (Johnson Matthey estimates that platinum supplied from recycling totaled 800,000 ounces in 2009, down from 1.1 million ounces in 2008.) Platinum purchases by the auto catalyst sector (net of recycling volumes) declined during 2009 by 34.9% to 1.68 million ounces, driven principally by sharply lower demand for diesel-powered automobiles in Europe. Johnson Matthey anticipates that diesel demand will recover in the future as the European economy improves.

     Jewelry demand for platinum in 2009 was driven by restocking during 2009, with demand for platinum in the jewelry sector up year on year by 79.5% to 2.45 million ounces, reflecting the impact much lower platinum prices in 2009. Industrial uses of platinum include the production of data storage disks, fiberglass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells. Johnson Matthey projects that industrial consumption of platinum during 2009 declined by about 35%, reflecting the impact of the worldwide economic downturn during the (year).

     In Johnson Matthey’s view, the outlook for platinum demand is dependent on the timing of a worldwide economic recovery, which should gradually restore some of the automotive and industrial demand for the metal. The inventory restocking in the jewelry industry during 2009 is unlikely to be repeated in the immediate future. However, with the arrival of a platinum ETF in the United States, investment demand could strengthen somewhat during 2010.

     Johnson Matthey estimates that platinum supplied to the market in 2009 exceeded demand by about 0.14 million ounces. The price of platinum during 2009, based on London Bullion Market Association afternoon postings, ranged from a high of $1,494 per ounce, reached on December 3, 2009, compared to a low of $918 per ounce on January 15, 2009, and closed the year trading at $1,461 per ounce. See “Business, Risk Factors and Properties – Risk Factors – Users of PGMs May Reduce Their Consumption and Substitute Other Materials for Palladium and Platinum.”

GLOBAL SUPPLY

     On the supply side, Johnson Matthey noted that their tally of 2009 PGM supply includes about 960,000 ounces of palladium transferred out of Russian state inventories during the year into Switzerland and then subsequently sold. Johnson Matthey acknowledges that, going forward, these Russian inventory sales constitute a significant uncertainty in projecting annual palladium supply. Including these state transfers, Johnson Matthey reports that palladium supplied to market in 2009 of 7.175 million ounces declined by just 1.85% from 2008 levels.

     The leading global sources of palladium and platinum production are mines located in the Republic of South Africa and the Russian Federation. The Johnson Matthey report estimates that South Africa provided approximately 35.3% of the palladium and 78.0% of the platinum sold worldwide during 2009. The same report also estimates that the Russian Federation, both as a by-product of nickel production from Norilsk Nickel and from transfers out of government inventories, provided approximately 49.6% of the palladium and approximately 12.3% of the platinum sold worldwide in 2009 (see charts below). (In preparing these estimates, Johnson Matthey treats PGM recycling volumes as an offset against demand, rather than as new supply.)

     Charts reproduced from the Johnson Matthey Platinum 2009 Interim Review. Permission to reproduce was neither sought nor obtained.

     Supply numbers provided by Johnson Matthey are for metals entering the market and do not necessarily represent metals produced during the years shown. For palladium this may constitute a significant year-to-year difference because of unpredictable releases out of the substantial inventories held by the Russian Federation, as well as those held by the auto companies and investors. For platinum this inventory effect is less significant, as inventories held by governments or private institutions have not been as material recently. According to Johnson Matthey, annual worldwide mine production of palladium for 2009 is estimated at 6.5 million ounces, down from about 6.6 million ounces in 2008. Annual worldwide production of platinum for 2009 is estimated at 6.1 million ounces, up slightly from about 5.9 million ounces in 2008, mostly reflecting production issues during 2008 in South Africa.

     Johnson Matthey comments that the outlook for palladium in the future is sensitive to activity from the Russian state inventories. Their outlook assumes that there will be additional Russian inventory sales during 2010, which likely would create a surplus of palladium in the markets yet again. However, they also note that investors seem to be aware of the imbalance between palladium mine production and demand, and some appear to anticipate supply imbalances over the longer term if the Russian inventory sales end. They also note that investor holdings of both platinum and palladium have buoyed the market during 2009, but their effect is less certain going forward.

     In addition to mine sources, PGMs are recovered from automotive catalytic converters acquired from scrap dealers. A growing industry has developed in the collection and recovery of PGMs from scrap sources, including automotive catalytic converters, electronic and communications equipment and petroleum catalysts. Volumes were affected by the lower PGM prices during the first half of 2009 but strengthened fairly steadily throughout the year as prices improved. Johnson Matthey estimates 2009 worldwide recoveries from recycling provided 955,000 million ounces of palladium and 800,000 ounces of platinum, down from 1.12 million ounces each of palladium and platinum in 2008.

PRICES

     Stillwater Mining Company’s revenue and earnings depend significantly on world palladium and platinum market prices. The Company has no direct control over these prices, but is working to foster PGM demand growth by encouraging new uses for these metals. PGM prices can fluctuate widely. The Company does have the ability to hedge prices and has contractual floor prices that tend to mitigate some of the price exposure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Revenue” and “Factors That May Affect Future Results and Financial Condition.” The volatility of palladium and platinum prices is illustrated in the following table of the London Bullion Market Association afternoon postings of annual high, low and average prices per ounce since 1999. The accompanying charts also demonstrate this volatility. See “Business, Risk Factors and Properties — Risk Factors — Vulnerability to Metals Price Volatility — Changes in Supply and Demand Could Reduce Market Prices,” in the following section.

		PALLADIUM												PLATINUM
YEAR		HIGH				LOW				AVERAGE				HIGH				LOW				AVERAGE
1999		$	454			$	285			$	358			$	457			$	342			$	377
2000		$	970			$	433			$	680			$	622			$	414			$	544
2001		$	1,090			$	315			$	604			$	640			$	415			$	529
2002		$	435			$	222			$	338			$	607			$	453			$	539
2003		$	269			$	148			$	201			$	840			$	603			$	691
2004		$	333			$	178			$	230			$	936			$	767			$	846
2005		$	295			$	172			$	201			$	1,012			$	844			$	897
2006		$	404			$	261			$	320			$	1,355			$	982			$	1,143
2007		$	382			$	320			$	355			$	1,544			$	1,118			$	1,303
2008		$	582			$	164			$	352			$	2,273			$	763			$	1,576
2009		$	393			$	179			$	264			$	1,494			$	918			$	1,204
2010*		$	462			$	395			$	434			$	1,627			$	1,475			$	1,563

AVAILABLE INFORMATION

     The Company’s Internet Website is http://www.stillwatermining.com. The Company makes available, free of charge, through its Internet Website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, corporate proxy statements, and any amendments to those reports, as soon as reasonably practicable after the Company

electronically files such materials with, or furnishes them to, the Securities & Exchange Commission. These documents will also be provided free of charge in print, upon request.

RISK FACTORS

     Set forth below are certain risks faced by the Company.

THE WORLDWIDE FINANCIAL AND CREDIT CRISES CREATE VULNERABILITY FOR THE COMPANY

     The Company has been affected by the world financial crisis, which continues to affect — directly and indirectly — a number of financial and commodity markets. In light of world events and the sharp decrease in PGM prices during the fourth quarter of 2008, the Company restructured its operations in an effort to conserve cash and reduce anticipated losses. The restructuring of the Company’s operations resulted in dramatic changes and essentially reduced the scope of its mining operations while also reducing its mining costs. The Company recognizes that its combined exposures to low PGM prices, the upcoming expiration of its remaining automobile agreement that contains pricing floors and the fluctuating demand for its products create substantial risks for the Company. Consequently, the Company’s management believes that it is in the interests of shareholders for management to continue to focus at this stage on controlling expenditures and improving productivity, rather than trying to grow overall mine production. However, even with this emphasis, there can be no assurance that the Company will succeed in maintaining the cost reductions it has already achieved or that it will be able to achieve further efficiencies.

     The Company’s primary business remains in the mining of PGM’s. As a comparatively low-margin producer, given the Company’s palladium to platinum ratio, over the years management has continued to focus on ways to lower its costs. In the low PGM price environment that prevailed through much of 2009, management restructured the business to focus on maintaining cash and remaining in a position to take advantage of improved pricing, if and when that should occur. Thus, the Company operated during 2009 in preservation mode in order to minimize cash costs, maintain operations at its mines and keep employed its skilled set of miners. While PGM prices have strengthened recently and the Company’s mining costs have declined, any return to lower PGM prices could still impair the Company’s operating margins and cash flow.

     As a result of the sale of an issue of convertible debentures in March 2008, the Company raised approximately $181.5 million, the proceeds of which were used to eliminate an outstanding bank credit agreement balance and for general corporate purposes. As of the end of 2009, the Company had on hand approximately $201.2 million of cash and highly liquid investments, up from $180.8 million at the end of 2008. The Company is seeking to maintain its current liquidity in the face of the current financial crisis, but no assurances can be given that the Company will be successful. The Company has not succeeded in the current environment in securing a successor revolving credit agreement. Absent a line of credit, the Company is therefore vulnerable if its cash position weakens.

     The Company’s convertible debenture offering includes a provision that allows the debenture holders to redeem their holdings at par on certain future dates or upon occurrence of certain other events, including a change of control of the Company. Approximately 51.5% of the Company’s common shares are controlled by MMC Norilsk Nickel, a Russian mining company. Should MMC Norilsk Nickel elect to sell its entire shareholding, that transfer would likely be considered a change in control for purposes of the Company’s debenture offering. Upon such a change of control, all or any part of the debenture offering could be redeemed by the holders for repayment at face value. While at December 31, 2009, the Company had sufficient liquidity available to be able to meet such a requirement, given the volatility of PGM markets there can be no assurance upon the occurrence of a change of control in the future that the Company would have adequate liquidity available to meet the demands of the debenture holders.

     The world financial crisis also had a negative effect on the Company’s recycling segment, which in stronger markets has proven to be a profitable ancillary business that utilizes available capacity in the smelting and refining facilities. Following the steep drop in PGM prices and amid doubts as to collectability under various commitments with suppliers, at the end of 2008 the Company wrote off $26.0 million of advances to suppliers in its recycling business. The Company has since restructured its recycling business model to reduce its financial exposure in this business, while at the same time continuing to support and foster the recycling segment. While the Company now believes that it has substantially reduced its exposures within this business, there can be no assurance that it will not incur losses in the future on these activities.

VULNERABILITY TO METALS PRICE VOLATILITY-CHANGES IN SUPPLY AND DEMAND COULD REDUCE MARKET PRICES

     Because the Company’s sole source of revenue is the sale of platinum group metals, changes in the market price of platinum group metals may significantly affect profitability. Many factors beyond the Company’s control influence the market prices of these metals. These factors include global supply and demand, speculative activities, international political and economic conditions, currency exchange rates, and production levels and costs in other PGM-producing countries, principally Russia and South Africa.

     Over the last few years, the market price of palladium has been extremely volatile. After reaching a record high price level of $1,090 per ounce in January 2001, the price of palladium declined over a 27-month period until hitting a low of $148 per ounce in April 2003. Thereafter, the price gradually recovered, posting a high of $582 per ounce in April 2008 and then declining sharply to a low of $164 per ounce in December 2008. Palladium prices recovered during 2009, ending the year at $393 per ounce. As of February 17, 2010, the market price of palladium (based on the London Bullion Market Association afternoon fixing) was $440 per ounce.

     The market price of platinum trended generally upward from $440 per ounce at the end of 2001 to $1,530 at the end of 2007. In late January 2008, following the announcement of electrical power shortages in South Africa, the price rose sharply, peaking in March at $2,273 per ounce in London. Thereafter, the price declined steeply as the economy deteriorated in the second half of 2008, hitting a low of $756 per ounce before ending 2008 at $898 per ounce. During 2009, prices generally recovered, and platinum ended the year quoted in London at $1,461 per ounce. As of February 17, 2010, the London Bullion Market Association afternoon fixing for platinum was $1,542 per ounce.

     A prolonged or significant economic contraction in the United States or worldwide could put further downward pressure on market prices of PGMs, particularly if demand for PGMs continued to decline in connection with reduced automobile demand and more restricted availability of investment credit. If other producers or investors release substantial volumes of platinum group metals from stockpiles or otherwise, the increased supply could reduce the prices of palladium and platinum. Changes in currency exchange rates, and particularly a significant weakening of the South African rand, could reduce relative costs of production and improve the competitive cost position of South African PGM producers. This in turn could make additional PGM investment attractive in South Africa and reduce the worldwide competitiveness of the Company’s North American operations.

     Reductions in PGM prices would adversely affect the Company’s revenues, profits and cash flows. Protracted periods of low metal prices could significantly reduce revenues and the availability of required development funds, particularly after the Company’s remaining supply agreement expires at the end of 2010, to levels that could cause portions of the Company’s ore reserves and production plan to become uneconomic. This could cause substantial reductions to PGM production or suspension of mining operations, impair asset values, and reduce the Company’s proven and probable ore reserves. See “Business, Risk Factors and Properties — Competition: Palladium and Platinum Market” for further explanation of these factors.

     Extended periods of high commodity prices may create economic dislocations that may be destabilizing to PGM supply and demand and ultimately to the broader markets. Periods of high PGM market prices generally are beneficial to the Company’s current financial performance. However, strong PGM prices also create economic pressure to identify or create alternate technologies that ultimately could depress future long-term demand for PGMs, and at the same time may incentivize development of otherwise marginal mining properties. Similarly, markets for PGM jewelry are primarily driven by discretionary spending that tends to decline during periods of high prices and may drive the industry toward developing new, more affordable jewelry materials. See “Risk Factors — Users of PGMs May Reduce Their Consumption and Substitute Other Materials for Palladium and Platinum” for additional discussion of these risks.

THE COMPANY DEPENDS UPON A FEW CUSTOMERS AND ITS SALES AND OPERATIONS COULD SUFFER IF IT LOSES ANY OF THEM

     The Company is party to a sales agreement with Ford Motor Company for palladium and platinum produced from its mines which is scheduled to expire at the end of 2010. The Company’s revenues for the year ended December 31, 2009, included 77.8% from mine production. For more information about the Company’s sales agreements, see “Business, Risk Factors and Properties — Current Operations — PGM Sales and Hedging Activities.” For additional discussion of hedging risks, see “Risk Factors — Hedging and Sales Agreements Could Limit the Realization of Higher Metal Prices.”

     As a result of this sales agreement, the Company is subject to the customer’s compliance with the terms of the agreement, its ability to terminate or suspend the agreement and the customer’s willingness and ability to pay. The loss of

this agreement would likely require the Company to sell at prevailing market prices, which might expose it to lower metal prices as compared to the floor prices in the sales agreement. In the event the Company becomes involved in a disagreement with its customer or one of the counterparties to its forward sales, their compliance with the associated agreements may be at risk. In such an event, the Company’s operating plans could be threatened. Thus, termination or breach by a customer could adversely impact the Company’s operations and financial results.

     In July 2009, General Motors Corporation rejected in bankruptcy its supply agreement with the Company. Shortly afterward, PGM prices increased sufficiently that the Company was not sustaining any current losses as a result of losing the contractual floor prices in the General Motors agreement. However, loss of the floor prices also increases the Company’s potential exposure to a future downturn in PGM prices, and as a result the Company is now more vulnerable to fluctuations in underlying PGM prices. The agreement also provided a firm sales commitment for a portion of the Company’s mine production, and while terminal markets exist for platinum and palladium that allow the Company to sell its production at market prices, without the agreement there can be no certainty that the Company will be able to sell its production during a time of significant market disruption

     The loss of the Ford agreement when it expires at the end of 2010 (or before then under extenuating circumstances) could require the Company to sell all its mined PGMs at prevailing market prices, which at times might expose the Company to lower metal prices as compared to the floor prices under the agreement. Thus, termination of the Ford supply agreement could have a material adverse effect on the Company.

     The Company also enters into fixed forward sales and from time to time financially settled forward contracts for metal produced from recycling of catalysts, normally at the time the catalyst material is purchased. For the Company’s fixed forward sales related to recycling of catalysts, the Company is subject to the customers’ compliance with the terms of the agreements, their ability to terminate or suspend the agreements and their willingness and ability to pay. The loss of any of these agreements or failure of a counterparty to perform could require the Company to sell or purchase the contracted metal at a loss in the open market. The Company’s revenues for the year ended December 31, 2009, included 20.7% from recycling sales and 1.5% from other sales.

FAILURE TO RENEW SALES AGREEMENTS FOR OUNCES PRODUCED FROM MINE PRODUCTION COULD RESULT IN CURTAILMENT OR CLOSURE OF OPERATIONS

     The Company’s sales agreement with Ford Motor Company in total represented about 53.4% of the Company’s 2009 revenues. The agreement applies to a portion of the ounces from the Company’s mine production through December 2010. Under the agreement, the Company currently has committed 80% of its mined palladium production and 70% of its mined platinum production through 2010. Metal sales are priced at a modest discount to market, with floor and ceiling prices that apply to all or a portion of the sales. Accordingly, the Company benefits if the market price drops below the floor price of the agreement but is unable to realize the full market price if the market price exceeds the ceiling price of the agreement. The Ford agreement will expire at the end of 2010. Once this agreement expires, if it is not renewed or replaced with an agreement having similar provisions, the Company will be directly dependent on PGM market prices, without the price protection or risk due to the floors and ceilings in the current Ford agreement. Should the Company be unable to renew the Ford agreement on similar terms and if the market price of PGMs subsequently proves insufficient to cover the Company’s operating and capital costs of production, then the Company’s operations might have to be curtailed, suspended or closed.

RELIANCE ON THIRD PARTIES FOR SOURCING OF RECYCLING MATERIALS AND THE CONCENTRATION OF RECYCLING SOURCES CREATES THE POTENTIAL FOR LOSSES

     The Company has available smelter and base metal refinery capacity and purchases catalyst materials from third parties for recycling activities to recover PGMs. The Company has entered into sourcing arrangements for catalyst material with several suppliers, one of which provides most of the Company’s catalyst for recycling. The Company is subject to the suppliers’ compliance with the terms of these arrangements and their ability to terminate or suspend the agreement. Should one of these sourcing arrangements be terminated, the Company could suffer a loss of profitability as a result of the termination. This loss could negatively affect the Company’s business, financial condition and results of operations. Similarly, these suppliers source material from various third parties in a competitive market, and there can be no assurance of the suppliers’ continuing ability to source material on behalf of the Company at current volumes and prices. Any continuing issue associated with the suppliers’ ability to source material could have an adverse effect on the Company’s profitability.

     Under these sourcing arrangements, the Company may from time to time advance cash to support the purchase and collection of these spent catalyst materials. These advances are reflected as advances on inventory purchases and included in other assets on the Company’s balance sheet until such time as the material has been received and title has transferred to the Company. In some cases, the Company has a security interest in the materials that the suppliers have procured but the Company has not yet received. However, a portion of the advances are unsecured and the unsecured portion of these advances is fully at risk.

     Following the sharp decline in PGM prices during the second half of 2008, the volume of spent catalyst material received from the Company’s recycling suppliers diminished significantly. This was an industry-wide trend in which some of the suppliers incurred significant inventory losses, and a few even exited the business. Following the decline in PGM prices and doubts as to collectability under various commitments with suppliers, the 2009 and 2008 recycling results included write-downs of $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business. Subsequently, the Company has restructured its recycling business model in an effort to reduce the need for unsecured advances. However, there can be no assurance that the Company will not incur additional recycling losses in the future.

AN EXTENDED PERIOD OF LOW RECYCLING VOLUMES AND WEAK PGM PRICES COULD PUT THE COMPANY’S OPERATIONS AT ADDITIONAL RISK

     The Company’s recycling segment generates supplemental earnings and cash flow to help support the economics of the mining business when PGM prices are low. The recycling segment in turn depends upon the copper and nickel produced in mine concentrates to extract the PGMs in recycled material within the Company’s processing facilities. The economics of the recycling segment to a large extent have been regarded as incremental within the processing operations, with the result that recycling volumes have attracted only an incremental share of the processing costs.

     Volumes of recycling materials available in the marketplace diminished substantially in response to the drop in PGM prices in late 2008 and early 2009. These lower recycling volumes result in less earnings and cash flow from the recycling segment, and therefore less economic support for the mining operations. Should it become necessary at any point to reduce or suspend operations at the mines, the proportion of processing costs allocated to the recycling segment would increase substantially, making the recycling segment less profitable. Further, the ability to operate the smelter and refinery without significant volumes of mine concentrates has never been demonstrated and would likely require modification to the processing facilities. There is no assurance that the recycling facilities can operate profitably in the absence of significant mine concentrates, or that capital would be available to complete necessary modifications to the processing facilities.

THE COMPANY MAY BE COMPETITIVELY DISADVANTAGED AS A PRIMARY PGM PRODUCER WITH A PREPONDERANCE OF PALLADIUM.

     The Company’s products compete in a global market place with the products of other primary producers of PGMs and with companies that produce PGMs as a by-product. In many cases, the other primary producers mine ore reserves with a higher ratio of platinum to palladium than the Company and as a result enjoy higher average realizations per ounce than Stillwater Mining Company. The Company also competes with mining companies that produce PGMs as a by-product of their primary commodity, principally nickel.

     Because the Company’s U.S. based cost structure is denominated in dollars, in periods when the U.S. dollar is relatively strong, the Company’s competitors may still operate profitably, while the Company may not. Furthermore, non-primary producers of PGMs who regard PGMs as a by-product will generally continue to produce and sell PGMs when prices are low, as PGMs are not their principal commodity.

ACHIEVEMENT OF THE COMPANY’S PRODUCTION GOALS IS SUBJECT TO UNCERTAINTIES

     Based on the complexity and uncertainty involved in operating underground mines, it is challenging to provide accurate production and cost forecasts. The Company cannot be certain that either the Stillwater or the East Boulder Mine will achieve the production levels forecasted or that the expected operating cost levels will be achieved or that funding will be available from internal and external sources in requisite amounts or on acceptable terms to sustain the necessary ongoing development work. Failure to achieve the Company’s production forecast negatively affects the Company’s revenues, profits and cash flows. As the extent of underground operations continues to expand at depth and horizontally, it is likely that operating costs will increase unless employee productivity is increased commensurately.

Also, as additional underground infrastructure is constructed, amortization expense may increase unless additional ore reserves are identified. Such increased costs could adversely affect the Company’s profitability.

     The East Boulder Mine commenced commercial operations in 2002 and has never reached its original planned 2,000 ton-per-day operating rate on a sustainable basis. Ore grades at the East Boulder Mine also are typically lower than comparable grades at the Stillwater Mine. Partially as a result thereof, production costs per ounce at the East Boulder Mine have been significantly higher than originally expected. The Company has put in place various operating plans and programs that are intended to reduce production costs at both the East Boulder and Stillwater Mines, however, there can be no assurance that these plans and programs will be implemented effectively, and actual production, cash operating costs and economic returns achieved in the future may differ significantly from those currently estimated or those established in future studies and estimates. At the East Boulder Mine, total cash costs per PGM ounce (a non-GAAP measure) decreased to $407 in 2009, from $456 in 2008. While the lower East Boulder costs followed upon some specific operating changes at the mine, there is no certainty that the improved efficiencies will be maintained in the future.

     During 2007 and 2008, attrition rates at the Stillwater and East Boulder Mines exceeded already high historical experience, resulting in shortages of skilled miners and disruptions to mining efficiency. With the more difficult economic conditions during 2009, the Company saw these attrition rates decline to levels well below the historical trend, with accompanying improvements in productivity. While the Company believes that the improvements in productivity realized during 2009 were attributable to more than just a more stable workforce, if the economy recovers significantly in the future, the competition for skilled miners may resume and the Company may see its employee attrition rates climb. This in turn could prove disruptive to the Company’s workforce and result in lower productivity. See “Risk Factors — Limited Availability of Additional Mining Personnel and Uncertainty of Labor Relations May Affect the Company’s Ability to Achieve Its Production Targets” below for further discussion of this and related issues.

ORE RESERVES ARE VERY DIFFICULT TO ESTIMATE AND ORE RESERVE ESTIMATES MAY REQUIRE ADJUSTMENT IN THE FUTURE; CHANGES IN ORE GRADES, MINING PRACTICES AND ECONOMIC FACTORS COULD MATERIALLY AFFECT THE COMPANY’S PRODUCTION AND REPORTED RESULTS

     Ore reserve estimates are necessarily imprecise and depend to some extent on statistical inferences drawn from limited drilling, which may prove unreliable. Reported ore reserves are comprised of a proven component and a probable component. (See Glossary for definitions.) For proven ore reserves, distances between samples can range from 25 to 100 feet, but are typically spaced at 50-foot intervals both horizontally and vertically. The sample data for proven ore reserves consists of survey data, lithologic data and assay results. The Company enters this data into a 3-dimensional modeling software package, where it is analyzed to produce a 3-dimensional solid block model of the resource. The assay values are further analyzed by a geostatistical modeling technique (kriging) to establish a grade distribution within the 3-dimensional block model. Dilution is then applied to the model and a diluted tonnage and grade is calculated for each block.

     Probable ore reserves are based on longer projections, up to a maximum radius of 1,000 feet beyond the limit of existing drill-hole sample intercepts of the J-M Reef obtained from surface and underground drilling. Statistical modeling and established continuity of the J-M Reef as determined from results of mining activity to date support the Company’s technical confidence in estimates of tonnage and grade over this projection distance. Where appropriate, projections for the probable ore reserve determination are constrained by any known or anticipated restrictive geologic features. The probable ore reserve estimate of tons and grade is based on the projection of factors calculated from adjacent proven ore reserve blocks or from diamond drilling data where available. The factors consist of a probable area, proven yield in tons per foot of footwall lateral, average grade and percent mineable. The area is calculated based on projections up to a maximum of 1,000-feet from known drill contacts; the proven yield (in tons per foot of footwall lateral) and grade are calculated based on long-term proven ore reserve results in adjacent areas; and the percent mineable is calculated based on long-term experience from actual mining in adjacent areas. Contained ounces are calculated based on area divided by 300 (square feet) times proven yield in tons per foot of footwall lateral times grade (ounces per ton) times percent mineable (%). As a result, probable ore reserve estimates are less reliable than estimates of proven ore reserves. Both proven and probable ore reserve projections are also limited where appropriate by certain modifying factors, including geologic evidence, economic criteria and mining constraints.

     Actual period-to-period conversion of probable ore reserves to proven ore reserves may result in increases or decreases to the total reported amount of ore reserves. Conversion, an indicator of the success in upgrading probable ore reserves to proven ore reserves, is evaluated annually as described under “Business, Risk Factors, and Properties — Proven

and Probable Ore Reserves”. Conversion rates are affected by a number of factors, including geological variability, quantity of tonnage represented by the period drilling, applicable mining methods and changes in safe mining practices, economic considerations and new regulatory requirements.

     The following table illustrates the conversion rates of probable to proven ore reserve tons realized by year from 2000 through 2009:

		Historic
Year ended		Weighted
December 31,		Average (2)				2009				2008				2007				2006				2005				2004				2003				2002				2001				2000
(in percent)
Stillwater Mine			90				83				74				68				94				101				62				52				71				104				111
East Boulder Mine (1)			95				24				71				107				91				110				125				86				91				88				*

     Ore reserve estimates are expressions of professional judgment based on knowledge, experience and industry practice. The Company cannot be certain that its estimated ore reserves are accurate, and future conversion and production experience could differ materially from such estimates. Should the Company encounter mineralization or formations at any of its mines or projects different from those predicted by drilling, sampling and similar examinations, reserve estimates may have to be adjusted and mining plans may have to be altered in a way that might adversely affect the Company’s operations. Declines in the market prices of platinum group metals may render the mining of some or all of the Company’s 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 with any mining operation. The Company cannot provide assurance that any particular quantity of metal may be recovered from the ore reserves. Moreover, short-term factors relating to the ore reserves, such as the availability of production workplaces, the need for additional development of the ore body or the processing of new or different ore types or grades, may impair the Company’s profitability in any particular accounting period.

AN EXTENDED PERIOD OF LOW PGM PRICES COULD RESULT IN A REDUCTION OF ORE RESERVES AND POTENTIAL FURTHER ASSET IMPAIRMENT CHARGE

     The Company reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amounts of its assets may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. Estimations of future cash flows take into account estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contracts prices, price trends and related factors), production levels and capital and reclamation expenditures, all based on life-of-mine plans and projections.

     If the Company determines that the carrying value of a long-lived asset is not recoverable and the asset is impaired, then the Company must determine the fair value of the impaired asset. If fair value is lower than the carrying value of the assets, then the carrying value must be adjusted down to the fair value. If the fair value of the impaired asset is not readily determinable through equivalent or comparable market price information, the Company normally engages the services of third-party valuation experts to develop or corroborate fair value assessments.

     Were the Company to experience a prolonged period of low PGM prices adversely affecting the determination of ore reserves, the Company could face one or more impairment adjustments. Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between projections and actual outcomes for key factors such as PGM prices, recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s ability to recover the carrying amounts of its long-lived assets, potentially resulting in impairment charges in the future. The Company has estimated that as of December 31, 2009, the combined long-term PGM market price level below which ore reserves start to be constrained economically is about $400 per ounce. See “Business, Risk Factors and Properties — Proven and Probable Ore Reserves” for a chart illustration.

     Lower prices also can affect the economic justification of ore reserves, and the Company has reviewed its ore reserves at December 31, 2009. As in past years, the Company also engaged Behre Dolbear as third-party independent geological experts to review and express their opinion on the Company’s reserve calculations. The Company performs its

ore reserve economic assessment using a twelve-quarter trailing price in order to level out short-term volatility in metals prices, viewing the twelve-quarter trailing average as a reasonable surrogate for long-term future PGM prices over the period when the reserves will be mined. The Company’s combined twelve-quarter trailing weighted average price for platinum and palladium at December 31, 2009, was about $556 per ounce. At this price, the Company’s geologic ore reserves at each mine can be shown to generate (undiscounted) positive cash flow over the life of the reserve. Consequently, the Company’s ore reserves were not constrained economically at December 31, 2009.

     It is important to note that, if PGM prices were to fall for an extended period, the trailing twelve-quarter price will gradually decline. Following the Company’s methodology, there can be no assurance that the Company’s reported proven and probable ore reserves will not be constrained economically in the future.

USERS OF PGMS MAY REDUCE THEIR CONSUMPTION AND SUBSTITUTE OTHER MATERIALS FOR PALLADIUM AND PLATINUM

     High PGM prices may lead users of PGMs to substitute other materials for palladium and platinum or to reduce the amounts they consume. The automobile, jewelry, electronics and dental industries are the largest consumers of palladium. All of these applications are sensitive to prices. In response to supply concerns and high market prices for palladium, some automobile manufacturers in the past have sought alternatives to palladium and so reduced their palladium purchases. There has been some substitution of other metals for palladium in the automobile, electronics and dental applications. High platinum prices likewise tend to reduce demand by driving users toward alternative metals. The principal demand for platinum is in the automobile and chemical industries and for jewelry. Substitution in all of these industries may increase significantly if PGM market prices rise or if supply becomes unreliable. Significant substitution for any reason, in the absence of alternative uses for PGMs being identified, could result in a material and sustained PGM price decrease, which would negatively affect the Company’s revenues and profitability.

     High PGM prices also drive users toward ever more efficient utilization of PGMs. In the past, the development of new flow geometries and substrate configurations have resulted in “thrifting down” the amount of PGMs in catalytic converters required to meet emission standards. Recently, apparently in response to high PGM prices, certain PGM consumers have announced new nanotechnology applications that may allow further significant reductions in the volume of PGMs required in each catalytic converter. These emerging applications could tend to drive down PGM demand in the future and result in lower PGM prices.

     To the extent existing and future environmental regulations tend to create disincentives for the use of internal combustion engines, demand for platinum and palladium in automotive catalytic converters could be reduced. This in turn could drive down PGM prices and could impair the Company’s financial performance.

IF THE COMPANY IS UNABLE TO OBTAIN SURETY COVERAGE TO COLLATERALIZE ITS RECLAMATION LIABILITIES, OPERATING PERMITS MAY BE AFFECTED

     The Company is required to post surety bonds, letters of credit, cash or other acceptable financial instruments to guarantee the future performance of reclamation activities at the Stillwater and East Boulder Mines. The total availability of bonding capacity from the U.S. insurance industry has declined in recent years. During 2008, the State of Montana increased the required bonding levels at the Company’s mining operations and may require an additional increase in the future. The aggregate surety amount in place at the East Boulder Mine was $13.7 million at the end of 2009, comprised of $6.2 million of surety bonds and a $7.5 million letter of credit. At December 31, 2009, the Stillwater Mine carried reclamation bonds totaling $19.5 million, including an increase of $10.0 million voluntarily put in place during the fourth quarter of 2008, pending the outcome of the current EIS being completed by the State of Montana. Should increased bonding requirements be imposed in the future and the Company finds itself unable to obtain the required bonds or otherwise provide acceptable surety, the ability to operate under existing operating permits would likely be curtailed, which could have a significant adverse affect on the Company’s operations.

MINING RISKS AND POTENTIAL INADEQUACY OF INSURANCE COVERAGE — THE COMPANY’S BUSINESS IS SUBJECT TO SIGNIFICANT RISKS THAT MAY NOT BE COVERED BY INSURANCE

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

•

unusual and unexpected rock formations affecting ore or wall rock characteristics,

•		ground or slope failures,
•		cave-ins, ground water influx, rock bursts and other mining or ground-related problems,
•		environmental hazards,
•		industrial accidents,
•		organized labor disputes or work slow-downs,
•		metallurgical and other processing, smelting or refining problems,
•		wild fires, flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of God,
•		mechanical equipment failure and facility performance problems, and
•		availability and cost of critical materials, equipment and skilled manpower.

     Such risks could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining or processing, monetary losses and possible legal liability. Several fatal accidents and other non-fatal serious injuries have occurred at the Company’s mines since operations began in 1986. Future industrial accidents or occupational disease occurrences could have a material adverse effect on the Company’s business and operations. The Company cannot be certain that its insurance will cover certain risks associated with mining or that it will be able to maintain insurance to cover these risks at economically feasible premiums. The Company might also become subject to liability for environmental damage or other hazards which may be uninsurable or for which it may elect not to insure because of premium costs or commercial impracticality. Such events could result in a prolonged interruption in operations that would have a negative effect on the Company’s ability to generate revenues, profits, and cash flow.

HEDGING AND SALES AGREEMENTS COULD LIMIT THE REALIZATION OF HIGHER METAL PRICES

     The Company enters into derivative contracts and other hedging arrangements from time to time in an effort to reduce the negative effect of price changes on its cash flow. These arrangements typically consist of contracts that require the Company to deliver specific quantities of metal, or to financially settle the obligation in the future at specific prices. The Company may also hedge pricing through the sale of call options and the purchase of put options. See “Business, Risk Factors and Properties — Current Operations — PGM Sales and Hedging Activities” for a discussion of the Company’s hedge positions. While hedging transactions are intended to reduce the negative effects of price decreases, they have also prevented the Company at times from benefiting fully from price increases. If PGM prices are above the price at which future production has been hedged, the Company will experience an opportunity loss upon settlement.

     The Company has a sales agreement that provides for a floor price and a ceiling price for sales of a portion of its production. To the extent PGM prices exceed the ceiling price of the sales agreement, the Company will not receive full market price at the time of sale. For a description of this agreement, see “Business, Risk Factors and Properties — Current Operations — PGM Sales and Hedging Activities”.

CHANGES TO REGULATIONS AND COMPLIANCE WITH REGULATIONS COULD AFFECT PRODUCTION, INCREASE COSTS AND CAUSE DELAYS

     The Company’s business is subject to extensive federal, state and local environmental controls and regulations, including regulations associated with the implementation of the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Metals Mines Reclamation Act and numerous permit stipulations as documented in the Record of Decision for each operating entity. This body of laws is continually changing and, as a general matter, is becoming more restrictive. Compliance with these regulations requires the Company to obtain permits issued by federal, state and local regulatory agencies. Certain permits require periodic renewal and/or review of the Company’s performance. The Company cannot predict whether it 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 eliminate or severely restrict the Company’s ability to conduct its operations. See “Business, Risk Factors and Properties — Current Operations —

Regulatory and Environmental Matters.”

     Compliance with existing and future environmental laws and regulations may require additional control measures and expenditures, which the Company cannot reasonably predict. Environmental compliance requirements for new or expanded mining operations 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 and mining and processing facilities at the East Boulder Mine. Private parties may pursue legal challenges of the Company’s permits. See “Business, Risk Factors and Properties — Current Operations — Regulatory and Environmental Matters.”

     The Company’s 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, smelting and refining operations and taxes. Compliance with these and other laws and regulations, including requirements implemented under guidance from of the Department of Homeland Security, could require additional capital outlays, which could negatively impact the Company’s cash flow.

     The Company’s mining operations are located adjacent to the Absaroka-Beartooth Wilderness Area and are situated approximately 30 miles from the northern boundary of Yellowstone National Park. While the Company works closely and cooperatively with local environmental organizations, the Montana Department of Environmental Quality and the United States Forest Service, there can be no assurance that future political or regulatory efforts will not further restrict or seek to terminate the Company’s operations in this sensitive area.

     For the past several years, the Company has been experimenting with various bio-diesel blends and modifying some of its mining practices underground in an effort to comply with more restrictive MSHA limits on DPM exposure for underground miners. These new limits were delayed for a time, but they ultimately went into effect on May 20, 2008. Compliance with the revised MSHA DPM standards continues to be a challenge within the mining industry. However, as a result of its internal efforts to reduce DPM exposure, recent sampling indicates that the Company has achieved compliance with the new standards at the East Boulder Mine and is nearly in compliance with them at the Stillwater Mine.

     The Company is attempting to achieve full compliance with the standards and continues to consult with the applicable governmental agencies. No assurance can be given that any lack of compliance will not impact the Company. However, in view of its good-faith efforts to comply and progress to date, the Company does not believe that failure to be in strict compliance will have a material adverse effect on the Company.

     Various legislative initiatives have been introduced and, in some cases, enacted mandating additional safety and health measures for mining employees and providing stronger penalties for failure to comply. The Company believes it has a highly effective safety program in place for its employees, but there can be no assurance that the Company will be in compliance with future legislated initiatives nor that the Company will not incur significant penalties under these initiatives.

THE COMPANY’S CREDIT RATING IS BELOW INVESTMENT GRADE, POTENTIALLY LIMITING FUTURE CREDIT AVAILABILITY AND INCREASING POTENTIAL BORROWING COSTS

     In December 2007, Moody’s Investor Service lowered Stillwater Mining Company’s rating from B1 to B2, and during 2008 it was lowered to Caa1. Standard and Poor’s in December 2008 lowered the Company’s corporate rating from B+ to B-, and then in December 2009, citing stable liquidity and higher PGM prices, increased the corporate rating to B. Comments from both agencies regularly express concern with the Company’s lack of diversity, pending termination of the Ford Motor Company agreement, relatively high mining costs and volatile pricing environment. The Company’s low credit ratings will likely make it more difficult and more costly to obtain some forms of third-party financing in the future. Although the Company believes it has adequate liquidity available at the current time, should the Company need to access the credit markets in the future, the Company’s comparatively low credit rating would likely be an impediment to obtaining additional debt or lines of credit. In the credit environment existing in 2009, the Company has not been able to secure a revolving credit agreement upon reasonable terms. Should the Company require additional credit capacity in the future and be unable to obtain it, the Company might not be able to meet its obligations as they come due and so could be compelled to restructure or seek protection from creditors.

LIMITED AVAILABILITY OF ADDITIONAL MINING PERSONNEL AND UNCERTAINTY OF LABOR RELATIONS MAY AFFECT THE COMPANY’S ABILITY TO ACHIEVE ITS PRODUCTION TARGETS

     The Company’s operations depend significantly on the availability of qualified miners. Historically, the Company has experienced periods of high turnover with respect to its miners, particularly during the strong metal markets of 2007 and early 2008. In addition, the Company must compete for individuals skilled in the operation and development of underground mining properties. The number of such persons is limited, and significant competition exists to obtain their skills. The Company cannot be certain that it will be able to maintain an adequate supply of miners and other personnel or that its labor expenses will not increase as a result of a shortage in supply of such workers. Failure to maintain an adequate supply of miners could result in lower mine production and impair the Company’s financial performance.

     The Company had 1,273 employees at December 31, 2009. About 661 employees located at the Stillwater Mine and 122 employees at the Columbus processing facilities are covered by a collective bargaining agreement with USW Local 11-0001, expiring July 1, 2011. As of December 31, 2009, about 211 employees at the East Boulder Mine were covered by a separate collective bargaining agreement with USW Local 11-0001, which will expire on July 1, 2012. There is no assurance that the Company can achieve a timely or satisfactory renewal of either of these agreements as they expire. A strike or other work stoppage by the Company’s represented employees could result in a significant disruption of the Company’s operations and higher ongoing labor costs.

     In response to the limited availability of skilled underground miners, beginning in 2005 the Company initiated a new miner training program whereby it has from time to time hired individuals largely inexperienced in mining and providing intensive, supervised training in skills critical to underground mining in the Company’s operations. This training program requires dedicating significant time and personnel to the training effort, and consequently was scaled back significantly during 2009. These new and less experienced miners, even after training, generally will require several years of experience to achieve the productivity level of the Company’s regular mining workforce. There is no assurance that these new miners will achieve the assumed level of productivity as they gain experience, nor that the Company will be able to retain these new workers in the face of other employment opportunities.

UNCERTAINTY OF TITLE TO PROPERTIES — THE VALIDITY OF UNPATENTED MINING CLAIMS IS SUBJECT TO TITLE RISK

     The Company has a number of unpatented mining and mill site claims. See “Business, Risk Factors and Properties — Current Operations —Title and Royalties.” The validity of unpatented mining claims on public lands is often uncertain and possessory rights of claimants may be subject to challenge. Unpatented mining claims may be located on lands open to appropriation of mineral rights and 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 vulnerable to challenges by third parties or the federal government. The validity of an unpatented mining claim or mill site, in terms of its location and its maintenance, depends on strict compliance with a complex body of federal and state statutory and decisional law and, for unpatented mining claims, the existence of a discovery of valuable minerals. In addition, few public records exist to definitively control the issues of validity and ownership of unpatented mining claims or mill sites. While the Company pays annual maintenance fees and has obtained mineral title reports and legal opinions for some of the unpatented mining claims or mill sites in accordance with the mining laws and what the Company believes is standard industry practice, the Company cannot be certain that the mining laws will not be changed nor that the Company’s possessory rights to any of its unpatented claims may not be deemed defective and challenged. Any change in the mining law could include the imposition of a federal royalty provision on unpatented claims, which could have an adverse effect on the Company’s economic performance.

THE COMPLEXITY OF PROCESSING PLATINUM GROUP METALS POSES OPERATIONAL AND ENVIRONMENTAL RISKS IN ADDITION TO TYPICAL MINING RISKS

     The Company’s processing facilities include concentrators at each mine site that grind the ore and extract the contained metal sulfides, and a smelter and base metal refinery located in Columbus, Montana. These processes ultimately produce a PGM filter cake that is shipped for final refining to third party refiners. The Columbus operations involve pyrometallurgical and hydrometallurgical processes that utilize high temperatures, pressures, caustic chemicals and acids to extract PGMs and other metals from the concentrator matte. These processes also generate waste gases that are scrubbed to eliminate sulfur dioxide emissions. While the environmental and safety performance of these facilities to date has been outstanding, there can be no assurance that incidents such as solution spills, sulfur dioxide discharges, explosions or accidents involving hot metals and product spills in transportation will not occur in the future. Such

incidents potentially could result in more stringent environmental or operating restrictions on these facilities and additional expenses to the Company, which could have a negative impact on its results of operations and cash flows. Further, the Company processes virtually all of its metals through these processing facilities, and any incident interrupting processing operations for an extended period would have a material adverse effect on the Company’s performance.

ITEM 3

LEGAL PROCEEDINGS

     The Company is involved in various claims and legal actions arising in the ordinary course of business, primarily employee lawsuits and employee injury claims. In the opinion of management, the ultimate disposition of these types of matters is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

     On June 1, 2009, General Motors Corporation, filed for bankruptcy protection. The filing had been widely anticipated, and at the time of the filing, the Company had no receivables outstanding with General Motors. Subsequently, however, General Motors filed a petition with the bankruptcy court seeking to reject its executory agreement with the Company, effective July 7, 2009. The Company in turn filed an objection with the court to the General Motors petition on July 16, 2009. Following a hearing in bankruptcy court on July 22, 2009, the court approved the General Motors petition, thereby nullifying the Company’s supply agreement, which was scheduled to expire on December 31, 2012 with retroactive effect from July 7, 2009. The Company has filed a proof claim (damages) with the Court. No appeal was filed.

ITEM 4

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not Applicable

PART II

ITEM 5

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PERFORMANCE GRAPH

     The following chart compares the yearly percentage change in the Company’s cumulative total stockholder return on Common Stock, with the cumulative total return on the following indices, assuming an initial investment of $100 on December 31, 2004 and the reinvestment of all dividends: (i) the Russell 2000 and (ii) the Peer Group. The performance shown is not necessarily indicative of future performance.

Cumulative Total Return

		12/31/05				12/31/06				12/31/07				12/31/08				12/31/09
Stillwater Mining Company		$	102.75			$	110.92			$	85.79			$	43.87			$	84.19
Russell 2000			104.55				123.76				121.82				80.66				102.58
Peer Group			185.75				314.05				403.52				160.63				306.97

     Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings made under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this report or future filings made by the Company under those statutes, the preceding stock performance graph is not to be incorporated by reference into any such prior filings, nor shall such graph or report be incorporated by reference into any future filings made by the Company under those statutes. The Peer Group referenced above includes Stillwater Mining Company, Anglo Platinum Limited, Impala Platinum Holdings Limited, Lonmin PLC, and North American Palladium Limited.

ITEM 6

SELECTED FINANCIAL DATA

(in thousands, except per share and current ratio data)		2009				2008				2007				2006				2005
INCOME STATEMENT DATA
Revenues
Mine production (2)		$	306,892			$	360,364			$	331,277			$	334,834			$	285,641
PGM recycling			81,788				475,388				326,394				269,941				90,695
Sales of palladium received in Norilsk Nickel transaction			—				—				—				17,637				87,309
Other			5,752				19,980				15,365				33,366				65,252
Total revenues		$	394,432			$	855,732			$	673,036			$	655,778			$	528,897
Costs and Expenses
Costs of metals sold:
Mine production (2)			209,140				283,793				256,942				242,612				211,606
PGM recycling (3)			76,483				449,497				306,757				249,861				84,336
Sales of palladium received in Norilsk Nickel transaction			—				—				—				10,785				74,542
Other			5,741				19,892				14,289				32,300				65,163
Total costs of metals sold			291,364				753,182				577,988				535,558				435,647
Depreciation and amortization
Mine production			70,239				82,792				82,396				83,583				79,032
PGM recycling			178				192				142				100				55
Total depreciation and amortization			70,417				82,984				82,538				83,683				79,087
General and administrative			28,926				70,816				28,285				28,018				20,333
Impairment of property, plant and equipment			—				67,254				—				—				—
Operating income (loss)		$	3,725			$	(118,504	)		$	(15,775	)		$	8,519			$	(6,170	)
Induced conversion loss		$	(8,097	)		$	—			$	—			$	—			$	—
Total income tax benefit (provision)		$	30			$	32			$	—			$	(10	)		$	(13	)
Net income (loss)		$	(9,218	)		$	(116,943	)		$	(15,103	)		$	8,512			$	(12,688	)
Other comprehensive income (loss), net of tax		$	70			$	5,865			$	9,578			$	1,799			$	(12,437	)
Comprehensive income (loss)		$	(9,148	)		$	(111,078	)		$	(5,525	)		$	10,311			$	(25,125	)
Pro-forma net income (loss) assuming the new amortization method is applied retroactively (1)		$	(9,218	)		$	(116,943	)		$	(15,103	)		$	8,512			$	(12,688	)
Weighted average common shares outstanding
Basic			94,852				93,025				92,016				91,260				90,702
Diluted			94,852				93,025				92,016				91,580				90,702
Basic earnings (loss) per share		$	(0.10	)		$	(1.26	)		$	(0.16	)		$	0.09			$	(0.14	)
Diluted earnings (loss) per share		$	(0.10	)		$	(1.26	)		$	(0.16	)		$	0.09			$	(0.14	)
Pro-forma amounts assuming the new amortization method is applied retroactively (1)
Basic earnings (loss) per share		$	(0.10	)		$	(1.26	)		$	(0.16	)		$	0.09			$	(0.14	)
Diluted earnings (loss) per share		$	(0.10	)		$	(1.26	)		$	(0.16	)		$	0.09			$	(0.14	)
CASH FLOW DATA
Net cash provided by operating activities		$	59,672			$	114,243			$	56,422			$	96,963			$	141,134
Net cash used in investing activities		$	(54,723	)		$	(74,567	)		$	(80,967	)		$	(78,909	)		$	(134,261	)
Net cash (used in) provided by financing activities		$	(88	)		$	60,683			$	(2,379	)		$	(9,954	)		$	(22,665	)

ITEM 6

SELECTED FINANCIAL DATA

(Continued)

(in thousands, except per share and current ratio data)		2009				2008				2007				2006				2005
BALANCE SHEET DATA
Cash and cash equivalents		$	166,656			$	161,795			$	61,436			$	88,360			$	80,260
Inventories		$	88,544			$	72,178			$	119,586			$	108,664			$	87,820
Total current assets		$	318,598			$	282,535			$	259,854			$	286,108			$	270,097
Property, plant and equipment, net		$	358,866			$	393,412			$	465,054			$	460,328			$	445,199
Total assets		$	724,772			$	723,029			$	743,330			$	757,792			$	722,643
Current portion of long-term debt and capital lease obligations		$	—			$	97			$	1,209			$	1,674			$	1,776
Portion of debt repayable upon liquidation of finished palladium in inventory		$	—			$	—			$	—			$	—			$	7,324
Total current liabilities		$	49,476			$	55,108			$	68,974			$	85,590			$	69,087
Long-term debt and capital lease obligations		$	195,977			$	210,947			$	126,841			$	129,007			$	132,307
Total liabilities		$	278,384			$	301,735			$	225,003			$	243,467			$	227,913
Stockholders’ equity		$	446,388			$	421,294			$	518,327			$	514,325			$	494,730
Working capital		$	269,122			$	229,213			$	190,880			$	200,518			$	201,010
Current ratio			6.4				5.2				3.8				3.3				3.9

OPERATING AND COST DATA

(in thousands, except per ounce and per ton costs)		2009				2008				2007				2006				2005
Consolidated:
Ounces produced:
Palladium			407				384				413				463				428
Platinum			123				115				124				138				126
Total			530				499				537				601				554
Tons milled			1,086				1,060				1,169				1,289				1,206
Mill head grade (ounce per ton)			0.52				0.50				0.50				0.51				0.50
Sub-grade tons milled (1)			98				146				75				62				80
Sub-grade mill head grade (ounce per ton)			0.20				0.17				0.12				0.13				0.15
Total tons milled (1)			1,184				1,206				1,244				1,351				1,286
Combined mill head grade (ounce per ton)			0.50				0.46				0.48				0.49				0.48
Total mill recovery (%)			91				91				91				91				91
Total operating costs per ounce (Non-GAAP) (2) (8)		$	310			$	336			$	268			$	239			$	277
Total cash costs per ounce (Non-GAAP) (2) (8)		$	360			$	405			$	330			$	294			$	322
Total production costs per ounce (Non-GAAP) (2) (8)		$	495			$	569			$	487			$	431			$	470
Total operating costs per ton milled (Non-GAAP) (2) (8)		$	139			$	139			$	116			$	106			$	119
Total cash costs per ton milled (Non-GAAP) (2) (8)		$	161			$	167			$	143			$	131			$	139
Total production costs per ton milled (Non-GAAP) (2) (8)		$	222			$	236			$	210			$	192			$	202
Stillwater Mine:
Ounces produced:
Palladium			302				268				274				314				293
Platinum			92				81				85				95				88
Total			394				349				359				409				381
Tons milled			727				690				640				739				710
Mill head grade (ounce per ton)			0.58				0.54				0.60				0.60				0.57
Sub-grade tons milled (1)			50				78				75				62				80
Sub-grade mill head grade (ounce per ton)			0.20				0.16				0.12				0.13				0.15
Total tons milled (1)			777				768				715				801				790
Combined mill head grade (ounce per ton)			0.56				0.51				0.55				0.56				0.53
Total mill recovery (%)			92				91				92				92				92
Total operating costs per ounce (Non-GAAP) (2) (8)		$	297			$	318			$	233			$	227			$	269
Total cash costs per ounce (Non-GAAP) (2) (8)		$	344			$	383			$	294			$	280			$	313
Total production costs per ounce (Non-GAAP) (2) (8)		$	469			$	521			$	425			$	400			$	453
Total operating costs per ton milled (Non-GAAP) (2) (8)		$	150			$	144			$	117			$	116			$	130
Total cash costs per ton milled (Non-GAAP) (2) (8)		$	174			$	174			$	147			$	143			$	151
Total production costs per ton milled (Non-GAAP) (2) (8)		$	238			$	237			$	214			$	204			$	218
East Boulder Mine:
Ounces produced:
Palladium			105				116				139				149				135
Platinum			31				34				39				43				38
Total			136				150				178				192				173
Tons milled			359				370				529				550				496
Mill head grade (ounce per ton)			0.40				0.42				0.38				0.39				0.40
Sub-grade tons milled (1)			48				68				—				—				—
Sub-grade mill head grade (ounce per ton)			0.20				0.19				—				—				—
Total tons milled (1)			407				438				529				550				496
Combined mill head grade (ounce per ton)			0.38				0.38				0.38				0.39				0.40
Total mill recovery (%)			89				90				90				89				89
Total operating costs per ounce (Non-GAAP) (2) (8)		$	347			$	378			$	338			$	264			$	295
Total cash costs per ounce (Non-GAAP) (2) (8)		$	407			$	456			$	404			$	324			$	343
Total production costs per ounce (Non-GAAP) (2) (8)		$	572			$	682			$	613			$	498			$	508
Total operating costs per ton milled (Non-GAAP) (2) (8)		$	116			$	130			$	114			$	92			$	103
Total cash costs per ton milled (Non-GAAP) (2) (8)		$	136			$	156			$	136			$	113			$	120
Total production costs per ton milled (Non-GAAP) (2) (8)		$	191			$	234			$	206			$	174			$	177