But Stillwater Mining Co.’s stock price has increased by 8 percent since the first of the year, powered largely by record prices for platinum and palladium.
Stillwater’s shares took a big jump on Jan. 25 after two major South African platinum and palladium producers, Anglo Platinum Ltd. and Northam Platinum Ltd., halted production because of power blackouts. Anglo Platinum, the world’s largest producer, resumed production last Wednesday. But prices for platinum and other precious metals have continued their rally.
Stillwater Mining Co. is the only United States supplier of platinum and palladium. SMC stock rose $2.32 a share Friday to close at $12.77.
The short-term volatility caused by the blackout in South Africa hasn’t had a direct impact on Stillwater Mining. But the company is moving forward with its long-range program to increase production.
Production has nearly tripled in the past decade, from 220,000 ounces of palladium/platinum produced in 1995 to 601,000 ounces produced in 2006, said John Beaudry, SMC’s public affairs manager.
Platinum and palladium recovered by recycling automotive catalytic converters has increased sevenfold, from 50,000 ounces in 2002 to 349,000 ounces in 2006, he said.
The rally in precious metals has sent people flocking to coin dealers and pawnshops, eager to turn their jewelry, coins, watches and gold fillings into quick cash.
But the Main Street gold rush doesn’t necessarily signal a return to boom times for Montana’s mining industry, officials said.
Robin McCulloch, a staff field agent of the Montana Bureau of Mines and Geology and a professor at Montana Tech, said higher metals prices will help expand the life of Montana’s existing gold mines. But he doesn’t anticipate any significant increase in new exploration or development.
Consolidation in the mining industry, a shortage of engineers and geologists, and an uncertain regulatory climate all stack the cards against new mine development, he said.
“The idea of flipping a switch and the boom days returning n it ain’t going to happen,” McCulloch said.
McCulloch said a lack of exploration is another issue confronting Montana’s mining industry.
Beaudry said SMC continues to explore for new reserves within the Stillwater Complex and has diversified by acquiring an interest in Pacific NorthWest Capital Corp. and Benton Resource Corp., both of Canada.
Today’s higher gold prices may extend the life of some mines, such as the Golden Sunlight Mine near Whitehall and the Montana Tunnels mine south of Helena, McCulloch said.
“When there’s a big ramp-up in price, most of the time what was waste last year is ore this year,” McCulloch said. “Their reserves are expanded and it may allow them to broaden their pit, but there’s only so far they can go.”
McCulloch said Montana’s metal mining industry is challenged by higher production costs and a shortage of capital. In Butte, a shortage of tires for large mining trucks is putting a damper on copper production.
“Tires that used to cost about $10,000 apiece are now $65,000, and they’re rationed,” McCulloch said. “Labor that used to cost $12 to $14 an hour is now up to $42 an hour plus benefits and bonuses.”
Nevada mining companies that recruit in Butte often hire away experienced miners by offering higher pay and better benefits, McCulloch said.
David Russell, president of Apollo Gold Corp., a 50 percent owner in the Montana Tunnels mine, said higher prices for gold and other metals help the mine’s profitability. But the revenue boost is offset by higher prices for diesel fuel, labor and other costs.
“It’s nice to have gold above $900 an ounce, but it also means that fuel prices are going up too,” Russell said. “If you watch commodities, the price of oil, gold and grain are all moving together.”
Three years ago, Montana Tunnels sought regulatory permission to expand. A 45-day public comment period for the environmental impact statement for the proposed mine expansion will begin this month, Russell said.
“Barring any problems, we should have the permit sometime this year,” Russell said. If the expansion is approved, Montana Tunnels should continue to operate at least until 2014.
Apollo Gold ceased production at Montana Tunnels in 2005 for safety reasons, but production resumed about a year ago.
The Golden Sunlight mine had been scheduled to close by the end of 2008, but the company recently sought permission to expand its pit, which could extend the mine’s lifetime by five years.
Gold’s climb to its lofty perch has been a long time coming. In 1980, gold prices soared briefly to a record of $875 per ounce. That price translates to more than $2,000 per ounce in today’s inflation-adjusted dollars.
But if you bought gold at $800 per ounce in 1980, you would have lost money if you had sold it during the next 20 years as prices fluctuated in the range of $300 to $500 per ounce. Prices remained below $500 until about two years ago, when gold began a sustained climb. Prices rose steadily in 2007, from $625 an ounce in January and approaching $900 at year’s end.
Gold finally topped the $900 threshold on Jan. 11 and has remained in that range ever since. Experts say interest in gold often soars during uncertain economic times and when inflation ticks up. But mining industry officials say prices for other metals such as zinc, copper and platinum-palladium have undergone similar increases, in part because of skyrocketing demand for industrial metals brought on by economic expansion in China and India.
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