Sibanye Stillwater Limited (SBSW) Q2 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Stillwater Mining Company Second Quarter 2012 Results Conference Call. [Operator Instructions] And as a reminder, this call is being recorded. I'd now like to turn the conference over to Mr. Frank McAllister. Please go ahead, sir.

Well, thank you, operator. Welcome, everyone, and thank you for joining us today for Stillwater Mining Company's Second Quarter 2012 Results Conference Call. As the operator indicated, I'm Frank McAllister, the Chairman and CEO of Stillwater Mining Company. And with me today are several members of our management team, including John Stark, our Executive Vice President, Chief Commercial Officer; Greg Wing, Vice President and Chief Financial Officer; Terry Ackerman, Vice President of Corporate Development; Kevin Shiell, Vice President of Mining Operations; and Kris Koss, Vice President of Human Resources. We also have with us Ralph Green, our Vice President of Exploration; and Rhonda Ihde, our Corporate Controller. As always, I'd like to first remind everyone that some statements in this conference call will be forward-looking, and therefore, involve uncertainties or risks that could cause actual results to differ from our projected results. We discuss these risks and uncertainties in more detail in the company's filings with the Securities and Exchange Commission, including those discussed in our second quarter Form 10-Q, which will be filed later this afternoon. Stillwater had an all-around good second quarter for 2012. Earnings were decent. Safety was excellent. Mine production was good and matched expectations. Costs were in line with forecast. Ore grades were good. Mine development was on plan and recycling business performed well. In addition, we continue to see good progress with all of our development projects. And we completed our transaction with Mitsubishi Corporation wherein they acquired a 25% interest in the Marathon project. That said, PGM prices are experiencing the same market uncertainty and turbulence as are other metals right now. Our total combined average sales realization for the second quarter for mined palladium and platinum was $850 per ounce on a weighted basis compared to $875 per ounce for the first quarter of this year and $964 per ounce reported for the second quarter of last year. Platinum and palladium prices ended the second quarter on a downward trend, and today's combined average price based upon spot prices is only about $774 per ounce. While there may be continued volatility in the PGM markets over the near term, we remain very bullish on the longer-term outlook for PGMs and for palladium in particular. The supply and demand fundamentals for PGMs remain robust. Various industry experts, including the some of you listening today, has stated that the outlook for palladium is the most attractive of all precious metals. Even with the present uncertainty in the world economy, current worldwide automobile production has stayed relatively strong and analysts continue to project significant automobile production growth for the foreseeable future. Several industry analysts have projected that total worldwide light vehicle production will surpass an annual build rate of over 100 million vehicles in early 2015. And by the way, total vehicle production will exceed 100 million by next year. So essentially, all of the new vehicles being built or equipped with catalytic converters, which require palladium and platinum. And while PGM demand is expected to increase steadily, there is increasing concern about constraints on PGM's supply growth, particularly from South Africa. We believe Stillwater is in an enviable position to benefit from the favorable longer-term fundamentals in this market. Now let me comment briefly on our financial results. For the second quarter of 2012, we reported net income attributable to common shareholders of $18.2 million or $0.15 per diluted share. This is down from $42.7 million or $0.39 per diluted share reported for the second quarter last year when metal prices were significantly higher. Exploration expense in the second quarter was $2 million. The drill season at Altar and high Andean mountains ended in April with the onset of the winter snows. Although this is a little earlier than usual, we were able to complete our full drilling program, as well as some additional definitional holes prior to demobilizing. Our year-to-date total exploration expense is $12.1 million, and we had no exploration expenditures in the first half of 2011. Total revenues from mining and recycling for the second quarter were $212.8 million compared to $222.6 million reported for the second quarter of 2011. For the first 6 months of this year, the company's net income attributable to common shareholders was $20.6 million or $0.18 per fully diluted share compared to net income of $78.9 million or $0.73 per diluted share for the same period last year. Mined PGM production in this year's second quarter totaled 133,400 ounces, up 10% from 120,800 ounces produced in the 2012's first quarter but 6.5% lower than the strong 142,700 ounces produced during the second quarter of last year. These changes in production from period to period are primarily the result of normal variations in mining conditions and in the array of stopes available for mining time to time. Mine production for the first 6 months of the year totaled 254,200 PGM ounces compared to 273,800 ounces for the same period last year. And after reviewing our year-to-date mine production and the outlook for the third and fourth quarter, we have concluded to maintain our mined palladium and platinum production guidance of 500,000 mined ounces for the year. Total cash costs per ounce, a non-GAAP measure of extraction efficiency, averaged $454 for the quarter, up from $384 per ounce reported for the second quarter last year. This increase is on plan, driven primarily by higher labor cost as a result of wage increases in the new labor contracts that became effective last year and added hiring in part to support the company's new miner training program and in part to provide staff for the company's development projects. The number of employees has been increased to 1,599 at the end of the second quarter, up from 1,470 at the end of June last year. Total cash costs for the first 6 months of 2012 averaged $482 per ounce compared to $410 per ounce from the same period last year. Cash costs so far this year are in line with our plans, and we are maintaining our full year 2012 total cash cost guidance of $500 per mined ounce. Even with the projected cost increases this year, our cash costs are still extremely competitive compared to our industry peers, which are primarily in South Africa. Total capital expenditures for the second quarter this year totaled $36.6 million compared to $23.1 million recorded for the second quarter last year. For the first 6 months of the year, total capital expenditures totaled $59.3 million, up from $46.3 million for the same period last year. Total capital spending to date this year is very close to planned. Consequently, we are maintaining our full year capital spending guidance of $135 million. $135 million plan for 2012 includes about $80 million for sustaining capital expenditures at the Montana mines, $23 million for the Blitz and Graham Creek development projects, $10 million for our Metallurgical Complex in Columbus, Montana and $22 million for the Marathon project. I should point out that the Mitsubishi transaction will shift 25% of the capital costs of the Marathon development off of Stillwater onto the participation of Mitsubishi. In addition to capital expenditures, the company has projected exploration spending of about $27 million during 2012, most of which is for exploration at Altar. As I mentioned earlier, total exploration expense year to date are $12.1 million. The remaining 2012 spending at Altar will include completing metallurgical analysis related to the 2011-2012 drilling season, along with fourth quarter Altar spending for mobilization and initial drilling costs related to the 2012-2013 drilling season there. I'd observed that during the 2011 to 2012 drilling season, drilling at Altar was increased from a projected 25,000-meter program to 27,280 meters as drilling progress and costs came in better than expected. This favorable program execution may result in lowering our exploration spending for 2012. As discussed in past calls, we have significant flexibility in both our capital spending and exploration programs. The current low PGM prices are obviously putting pressure on our earnings this year, and should they remain low, we may need to make changes to the rate of our project spending as the year progresses. The company's performance also continues to benefit from our recycling operations. We recycle palladium and platinum and rhodium catalysts from automotive catalytic converters and other industrial sources through our smelter in Montana. Recycling material we processed for the quarter totaled 123,100 ounces of PGMs, up significantly from 107,300 ounces recycled in the first quarter but down slightly from 125,200 ounces we processed during the second quarter of 2011. Sorry for all the numbers, but they're important to us. Recent weaker PGM prices will likely affect the volumes of recycled material available for processing as the current quarter progresses. The company's recycling operations recorded revenues of $96.6 million and contributed net income of $3.7 million for the 2012 second quarter. Recycling revenues for the second quarter of 2011 were $82.9 million with net income of $3.4 million. Recycled material processed during the second quarter including tolled ounces averaged 20.9 tons per day, essentially even with the 21 tons per day processed in the second quarter last year. Now before I move on to an update on our projects, I'd like to spend a couple of minutes discussing our balance sheet. We ended the second quarter with available liquidity, which we define as total cash, cash equivalents plus highly liquid short-term investments of $255.1 million, an increase from $158.6 million at the end of last year. Our cash balance includes $49.7 million that is held in Canada on behalf of the Marathon PGM copper project and related properties and so is not available for corporate purposes other than the Marathon project. Total outstanding debt at the end of second quarter was $203.1 million, an increase from $196 million at the end of 2011. The company's debt includes $166.5 million in convertible debentures, and holders of these debentures will have the ability to redeem the notes at par in March of 2013. We are considering financing or refinancing these debentures, but in our view, current financing conditions are not particularly attractive. We have sufficient cash on hand to repay these redeemed notes without a prior refinancing, if necessary. Now moving on to our development projects. We have continued to advance our Marathon PGM copper project in Canada during 2012. Early in the second quarter, we finalized the sale of a 25% of the Stillwater Canada Inc. subsidiary that holds the Marathon project and some related properties to Mitsubishi Corporation for $81.25 million. In addition, Mitsubishi also contributed $13.6 million to satisfy their portion of the initial cash call for the project. We're very pleased to partner with Mitsubishi in developing Marathon and believe the new arrangement will benefit Marathon project in many ways. In another important step forward at Marathon, we recently completed our environmental assessment of the Marathon project and submitted it to the applicable Canadian authorities. The submission will be reviewed by a joint federal, provincial review panel, and over the next several months, this review panel will coordinate an assessment of the project with local communities, organizations and others in the Marathon area that may be affected by the project. We anticipate that this review process may take up to 1 year to complete, after which the panel will submit its conclusions to the government. Assuming a favorable discussion and decision, once the process is complete, we can move to the formal permitting phase of the project. Now in conjunction with today's earnings result, we issued a separate exploration reports showing drill results for the 2011-2012 drilling season, essentially December through about April, December of 2011 through about April of 2012, at our Altar copper-gold project in Argentina. The drilling season there corresponds to the summer in high Andes, which begins in the fourth quarter as soon as the roads are passable and ends with the first snowstorms in April or May. This season's drilling program at Altar included 70 new or deepened core holes totaling about 27,280 meters of new drilling. The assays and the QA/QC for the new drill cores are now complete, and today's report provides the detailed results of these assays hole by hole. When we started this year's drilling program at the end of last year, we were focused on 3 key areas: the Altar East zone, the Altar Central zone at depth, and the Quebrada De La Mina or QDM area. Through this year's drill results, we have been able to confirm, expand and further delineate the extent of the copper and gold mineralization at Altar East. We've been able to evaluate the deep copper mineralization at Altar Central and better define the gold mineralization in the Quebrada De La Mina area. As previously explained, additional drilling will be required to determine the full scope of the Altar deposit. Currently, metallurgical testing is being conducted on the new drill core, which will be completed later this year. And further details are available on the Altar exploration report -- or in the Altar exploration report, which is available on the company website. Our Blitz and Graham Creek projects are moving forward on plan. The Blitz project will include developing 2 underground drifts that will extend about 23,000 feet to the east on the existing Stillwater mine. One of the Blitz drifts [ph] will be driven -- utilizing a new tunnel-boring machine, and the other parallel drift, parallel but at a higher elevation, will be constructed using conventional drilling blast methods. We also plan to excavate a decline from the surface at the far eastern end of the Blitz development to provide ventilation and access for workers and materials. The underground launch chamber for the Blitz TBM has been completed, and assembly of the TBM is nearing completion. We anticipate that the TBM will be conditioned by the end of the third quarter. The Blitz project is expected to take until about 2016 to complete at a total cost of approximately $180 million. On the Graham Creek project, we'll develop an 8,200-foot tunnel extending to the west from the existing East Boulder Mine infrastructure. This project is utilizing an existing TBM, or tunnel-boring machine, that was already in the mine, and the TBM drive for the Graham Creek project began last year. The TBM is on target to complete 8,200 feet of new primary access during the second quarter of 2013 -- or I should say by the second quarter of 2013. After this event is completed, a vertical ventilation shaft will be driven to the surface. The estimated cost of the Graham Creek project is about $8 million to be spent over about 4 years. Definitional drilling along both of these new developments will provide a better understanding of the geology of the J-M Reef in these areas. And depending upon the outcome of the Blitz and Graham Creek projects, potential production could either serve to extend the ultimate life of the Stillwater and East Boulder Mines or possibly increase production rates from the mines. It still remains to be determined just exactly what that outcome will be. Many of you already have seen the company's new corporate sustainability report that we issued at the end of the second quarter. We're very excited about this report, and we consider what sustainability should mean in the context of the mining industry and how sustainability can be achieved. Stillwater is focused on operating responsibly in all aspects of our business, including safety, environmental stewardship, community relations and sustainability. The report includes key initiatives and performance measures in these areas, and I'd encourage you to review the report. I would appreciate any feedback that you might have, including what else we might be able to include in the report to give a better result for our shareholders and those who are interested. I'd just comment we've sent copies of the report to all the schools across Montana, great schools, intermediate schools, high schools and colleges, and we're anxious to have their feedback as well. The full report is accessible through the company's website, or if you would prefer a hard copy, we can get that to you as well. Now before I conclude my prepared remarks, I'd like to briefly comment on our safety record. The company's safety incident rate, measured in terms of reportable incidents per 200,000 hours worked, that reached rate of 2.2 during the first half of 2012 compared to 3.3 for the comparable period last year. This is a very significant improvement. I truly appreciate the focus of all our employees on safety, and we're excited about the core safety initiative that's been put together by the National Mining Association, which we are an early-on participant. I thank you and to all of our employees for their hard work and dedication to our company's successes, and I'd like to now open up the call for questions. So operator, with that if you've got people that would like to ask questions, we'll take them at this time.

[Operator Instructions] And we'll go to the line of David Gagliano with Barclays.

Just a few questions. Given the comments about deferring, delaying the projects, I was wondering if you could prioritize for us like the list of deferrals and potential CapEx impact associated with these deferrals.

David, we're right in the midst of reviewing that. Let me just talk in general. Obviously, we've got the 4 projects that are critical to us: Marathon, Altar, and then we've got the 2 here in Montana, that being the Graham Creek and the Blitz projects. Obviously, the ones that have the most [indiscernible] opportunity for us for production would be the Altar -- excuse me, got that wrong, the Graham Creek and Blitz projects. And they're literally underway at this point in time in terms of moving ahead. So we would be -- have greater reluctance to cut back on them, but we do have the capacity to do that if we were to do so. Obviously, Marathon is going to be somewhat dependent upon the permitting process, and to a certain extent, we'll just have to play that through to determine just exactly what it would be there. One of the issues there is an early-on ordering of equipment to make sure we've got lead times in place. And the question there is, is that the appropriate thing or not. And so those are some of the questions that are there. And at Altar, I just suggest that our spending is coming in just a bit less and our effort going a little bit more than we had expected with our spending. So to a certain extent, there may be just sort of a natural reduction in what we would spend down there even if we were to do the same thing. But we need to sort of finalize our review down there and see what we're doing. So I guess what I'm saying, David, I'm not giving you an answer. How is that for a -- because we don't have that answer yet, but we are looking at it carefully. With respect to operations, there's also, quite frankly, some opportunity to trim some of the spending there. But we would be reluctant to do that because every time you do that, you wind up reducing your developed state. When you reduce your developed state, you wind up getting yourself into a jam with respect to just how -- where you're going to produce. And so I just stated in terms of those priorities but not give you any numbers because we don't know yet.

Okay, understandable. Not that it's a huge issue, but I thought the exploration spending at Altar was supposed to be front-end loaded because of the timing of the drilling season. Yet obviously, the Q2 exploration expense number was very low, and it sounded to me like in the comment that Q3 and Q4 is going to be higher. I'm just curious, what's prompted that change?

Well, actually Q1 is the heavy loading. The $10 million in Q1 was the heavy one. And I guess I'd say, look, we stuck our toe in the water down there. And we were estimating sort of on the aggressive side, understanding that we were still sort of trying to understand just exactly what the program would be. We have designed the program very carefully. The execution of the program was superb. When I went down there in March, I recognized that we were under budget in terms of spending but we were over our drilling target. And I told the guys with some budget that we would have an opportunity of perhaps increasing that drilling, that we should do so if it would help identify where wanted to go for the next season. So we actually increased it by about 10%. Still did it within the season. Still did it within our budget. And so our execution was extraordinary, and the drill results have been the same. So I think perhaps a little bit of a high side, if you will, on the spending side or, if you will, better execution than we had hoped for. But again, it was our first effort down there, and so I don't fault us or blame us for what we did. I think it was probably just we were being careful. The spending in the third and fourth quarter, some of this for metallurgical testing. And then the setup time, we're going to have to get drill rigs and other equipment up the roads in December. Hopefully, the roads will be opened by that time so that we can move them up the roads. If not, it will be sort of like this last year where there was minimal spending in the fourth quarter of 2011. I think it's about $2.5 million in 2011 in December. And we could see a bit more than that this year in December if, in fact, we're able to get up the roads and get on our way, and then obviously, be back in January and March of 2013. So I think the spending is about like we might have expected it, but it's coming in under. Our spending might be at the $20 million rate this year instead of what we have said earlier at $25 million. But we're getting all of the bang for our buck and even more, and we are excited about how it's turned out.

That's helpful. And then very last question, not a huge one. And again, just filling in some of the blanks. I'm curious, what are you spending $10 million on at the recycling facility this year? And is that an ongoing CapEx? Or is that a onetime in 2012?

Well, there are 2 or 3 things we're doing there. John, I'm going to let you speak to that, and maybe you can provide better information. It's not a continuing spending, no, David. But I'll let John explain exactly what we're doing.

Yes. We're reconditioning and changing our #1 furnace, which has not been in production for the last few years and making it into a slight cleaning furnace. So that's a good share of what the capital costs are this year, which will not be provided -- usually, we probably on a sustaining basis, our expenses down there would be $3 million to $4 million a year. The other projects, we're constructing and building. And we're also doing a little bit of work in base metal refinery, improving some of the tanks. So I guess that would be the main thrust.

And we'll go to the line of John Bridges with JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: Well, David, I've got my best questions. I'll see what else I can come up with. And so I noticed the grade of Stillwater was up significantly this quarter. Is that sustainable level? Or what's going on?

I'm not going to get back into my McAllister ballroom in this, John, of 10 years ago, but I'm going to let Kevin to speak to the grade.

Well, if you remember in Q1, it was also down. So when you look at things in aggregate, it's really tracking above what we would expect. And as we move through this, it's going to mask the model at the end of the year rather more online with what our reserve has been. So we're sticking with our 500,000-ounce guidance, and there's a reason for that. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. In your text, you spoke about some unusual things going on at the mine during the quarter. What was that all about?

John, say again? I'm missing you a little bit. John D. Bridges - JP Morgan Chase & Co, Research Division: In your report, you spoke about some unusual things going on at the mine during the quarter, fluctuations in mining conditions.

Yes, there are 2 or 3 things. Let me speak in general. I'm going to have Kevin speak to it specifically. First of all, we started off on a rather aggressive program with respect to the industry initiative on core safety that I referred briefly to in the opening remarks. This is a very intensive, very important initiative that we're taking extraordinarily seriously, and I'd have to say the reception by all of our team, when I say team, I mean, right down to all the miners, has been great. But nevertheless, that doesn't mean that you see the film and everybody is onboard. You have to work on this for a protracted period of time, and it has to be a sustained program. So that's one of the things that's going on. I guess the other thing, Kevin, would be simply the efforts going on over at the Blitz, which are taking some of the time and effort of the people. Aside from that, are -- any other things that...

There's just been an enhanced focus on training overall, communicating what it is we're trying to achieve with the core safety objectives. We've added some people. There's about a half-dozen people there specifically focused on that objective and evaluating what's been going on in the past, looking at our existing systems, what works for us today, what needs to be looked at again and maybe modified and then communicating these things and getting everyone to understand what we're trying to achieve, why, how it fits and actually how it benefits them. So it's a massive communication process that's going on. And it's a large crew, so it's no small undertaking.

John, I think borrowing partly what Kevin just said, there's a couple of things here that sort of have driven our cost up significantly on plan, and one of them is when you get to a point where you sort of used up the labor that might be available in the marketplace and you now have to worry about having sufficient miners going forward, not just for our existing mine but for the new projects that we have underway, then you've got to build those miners. And that's part of what's going on. But the second thing is, is you have to have additional staff in order to staff up those projects as well. So there's 2 efforts going on here, both of which are critical. And they sort of overlap themselves, and I think that's probably where we're talking about some of the things going on at the mine. A lot of effort, a lot activity going on at the mine. Our team up there is performing absolutely superbly. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. How many guys have you got who came over from Lucky Friday?

We had about 8, actually. And unfortunately, the majority of those have gone home now since they're Lucky Friday is not recalling their people. We have one last, to my knowledge. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. So impact has come through already. On my PDF of Altar, it doesn't -- you can't identify where the individual drill holes are on the plan view. Is that a fault of my copy? Or is that not available?

I'm going to let [indiscernible] speak to that.

One of the problems was trying to put all that information on that very small map. It was very illegible and hard to read. And those can be made available, and we can put that out there.

We'll get them on the website, John, so you can see it and make a better definition of it. John D. Bridges - JP Morgan Chase & Co, Research Division: Yes, I'd just like to get some idea as to the scale. Have you just calculated the tonnage you identified so far of mineralized material?

We have not. That's yet to come. And -- but the important thing is the scope of this thing is quite large. And if you were unable, based upon what we put out there, to identify the scope of this, then we will put out some additional material so that everybody can understand the scope. John D. Bridges - JP Morgan Chase & Co, Research Division: I'd just like to be able to pull out where the richer holes are and just contour it a little bit.

Understood. And we want you to do that.

And we'll go to the line of Richard Garchitorena with Crédit Suisse. Richard Garchitorena - Crédit Suisse AG, Research Division: So yes, just a couple of follow-up questions here. One, in terms of the guidance for the year, is that really -- second half is really just a reflection of, as you mentioned, lower ore grades in the third and fourth quarter, and that's going to basically be the reason for the unchanged guidance to the cash cost? Or is there anything else that we should be thinking about?

Let me have Kevin speak to that.

Really, the risk opportunities are very similar when you compare the first half to the second half. The thing that's really different is we are making a shift manpower-wise once these projects start, which will be kicking off probably mid-September, that point in time. We'll have to reallocate some miners. And we have a plan in place to manage all that, but the plan on paper is exactly a plan on paper. It's not that good. So you actually get the execution. So there is some risk there, and that's one of the reasons we're sticking with the guidance of 500,000. Richard Garchitorena - Crédit Suisse AG, Research Division: Okay, great. And then just touching on the CapEx potential changes going forward. Is there anything we should think about it terms of Mitsubishi? Are they just -- you're still the primary, obviously, the primary owner of Marathon. But in terms of major CapEx decisions going forward, is there something that may come into play?

No, there's nothing there. It's just simply -- I think there are 2 things to focus on. One is obviously the permitting and how long the permitting might take place. And then the second thing would be when we, as a partnership, can make the decisions as to the longer lead time items. And both those things are, I guess, at this point in time, a little bit nebulous. I have to comment that we do have underway right now is the final engineering study that will be put in place. We would expect that to be finalized by the end of this year, early next year and obviously, that's going to provide us with greater guidance and greater direction as to both the permit process that we have to have that in place before we can actually begin to file the permits. So the EIS is underway, but we don't have that yet until the study is finalized and the recommendation is made to the government. And then obviously, we would move into the permits. So the engineering is important to that. And at that point in time, obviously, we'll have a better definition for shareholders to understand. Terry, anything else to add there?

I think that's fair. I think right now, our focus has been on standing up any additional information that the panel and the regulatory groups need so that we can move that toward because the timeline doesn't start until they complete that initial testing. Richard Garchitorena - Crédit Suisse AG, Research Division: Okay, great. And my final question on Altar, you mentioned that you'll be providing an update on resources. Should we expect that by the end of this year? Or year-end 2012 is probably a better estimate?

Well, at this point in time, we're not certain whether an updated inventory update or resource is going to be of any use to everybody. What we're doing is providing as much of the drill hole result data and assays as possible. We'll be looking at a resource, but whether or not we actually make that public, it's just -- we're not certain if that's going to make a lot of sense right now.

[Operator Instructions] We'll go to the line of Sam Crittenden with RBC Capital Markets.

Most of my questions have been answered, but a couple of follow-ups. On the Altar drilling, you did, did anything surprise you compared to the geological model that Peregrine had put in place and anything sort of stand out there?

I'm going to turn that over to Ralph Green, and I'm going to see what he says. I've been following this very, very carefully, but Ralph is the master on this.

Thanks for the question. I think the short answer would be that we recognized some common characteristics with what's considered the classic Andean porphyry copper models. And -- but we also recognized that Altar is a multiple intrusive complex and that there was likely more than one center or central mineralizing event within that complex. Our modifications or fine-tuning of the model that was being employed previously was the reason for our objectives or principal objectives this year. And as we mentioned in our release, I think we've taken a great deal of risks out of our exploration models. We're more convinced that we're dealing with something quite extraordinary at Altar. And we're anxious to continue to de-risk it and move it forward.

Okay, great. And then a question on Stillwater. I'm just curious if you're seeing any change in your trends in sort of turnover or applications coming into the mine. Has anything changed over the last couple of months?

As to geology or as to people?

People.

I'm going to let Kevin speak to that.

Actually, we have had an increase in applicants recently. So that's a positive trend. Our attrition has been relatively consistent throughout the year. It's roughly 15%, which is a bit above what we had last year. But we're pretty much in a change situation right now. Whenever you're trying to change things and driving change throughout an organization, it tends to unsettle some people, and that's a little bit of what's been driving that, I think. But it's beginning to stabilize a little bit better, and hopefully, by year end, that will settle out somewhat below that mark.

To add to that, the change that's been made is good, and those who are finally recognizing that change is good are settled down and liked it.

Maybe we'd even have a couple of comebacks.

And we'll go to Andy Shopek [ph], private investor.

Frank, based on what you've achieved to date and the current guidance that you have for your total cash cost of $500 per mined-outs for the full year of 2012, it implies that you'll see cash cost rising to perhaps 550, 600 over the next 6 months. I'm wondering if you can, at this time, give us any guidance on where you expect your current cash cost to peak and whether you have any indication in 2013, whether they'll continue to rise or whether they'll flatten or maybe even come down again based on current plans.

Great questions. First of all, you're right if you do the arithmetic, you'd suspect our cash costs for the last half of the year are going to be well over $500, just average out to get the 500. We are working very hard to make sure that we keep our cash costs in line, and I wouldn't disagree with you that they may be above $500 in the last half in order for that $500 guidance to be right. On the other hand, we got a remarkable -- you've opened up the opportunity for me to talk about costs and talk about relative costs in the industry. There's a chart that had been put out by JPMorgan, which is just dynamite, if you will, and it's out in the last 4, 5 weeks, in a report that was put together by their South African team. And the report shows all the mines down in South Africa on a platinum-equivalent basis. So what they've done is they've taken all palladium and copper and nickel and chrome or whatever else by-products they might have and converted those into platinum-equivalent ounces. And then they divide the total ounces of actual platinum plus the equivalent ounces of platinum in their cost and come up with the cost. And that average cost down there at this point in time is $1,654. $1,654. The current price of palladium today -- of platinum today is $1,403. Our cost in that calculation is $1,295. So the $500 I'm talking about obviously gets converted into a platinum-equivalent cost where we've eliminated the palladium and converted that into platinum-equivalent ounces. We do that with the copper and gold and the silver and nickel as well, and we come up with $1,295. So we're down in the lower quartile of costs of the overall industry. Now there's a couple of dynamics that go on here. First of all is you've got the palladium price trading at 40% to 45% of the price of platinum today because people in the industries that use platinum and palladium, if they can use palladium or if they can use platinum, obviously, the cost is going to drive them to use palladium. And that's what's happening in the capital and the converter industry. So you've kind of got this price pool from the move from platinum to palladium on the palladium price, and we see the projections that many other people that are on the phone here today of the price of palladium actually moving up further against the price of platinum to where some are projecting within the 50% to 60% of range. And that will bring our costs down even further because we have 3x as much palladium as we do platinum. And down there in South Africa, they only have half an ounce of palladium to every ounce of platinum. So you can understand the dynamic that this is creating. The second dynamic of this is you can't continue to produce at a loss. When you've got a breakeven price in South Africa going forward in the 2012 projections that JPMorgan is making $1,654, the current price is $1,403, that means that some of those operations down there are hurting dramatically right now and something will have to happen. Now obviously, that being said, there's going to be social decisions they have to make, which they don't want to make, and I recognize them. We've dealt with them here. We've dealt with them here, and that's not a good thing to have to do. But at the end of the day, you can't keep producing at a loss because your shareholders will move away from you, and you don't have any money to do it with. So essentially, something is going to have to happen, and if that happens, you're then going to have a shortage of platinum in the world and we're going to wind up with prices moving up and pulling the palladium price up. Right now, we're still enjoying a profit margin, and we see this dynamic sorted out there right now. So yes, our costs will move up because we are subjected to labor increases. We've got a labor increase that was negotiated last year of 5% for the first 2 years, 4% for the next 2 years. We've got costs that go up. But frankly, at this point in time, our energy costs are down a bit because oil prices are off a bit. So they're off a bit from where they where. But electric prices are going to continue to be in the sort of the range where they are right now despite the fact that we've got a lot of natural gas and we've got a lot of electricity that's being generated from that. And then the other thing is there's sort of a cost push on inflation on a lot of other parts that we use. So yes, our costs are going to go up. We've got 50% of our costs are labor, and when you've got a cost push on that in 4% to 5%, well, you're going to have that cost go up. We've added labor. I think we probably are about where we might be. But when we start manning up to -- mine out of the Graham Creek or out of the Blitz area, we might have to actually add a few more people at that point in time as well. So a little bit of a moving target. And I haven't answered your question because I don't have a specific answer I can give you. But I think I've sort of given you some of the dynamics that might help.

Well, Frank, I do appreciate the discussion. And clearly, I think most of us are familiar with the many challenges that the mining industry is facing in South Africa. And certainly, that only argues more for jurisdiction such as yours and the value that perhaps is going to be created. But my concern is whether or not the current trends of rising costs of production, whether they will continue to rise over the course of the following calendar year or whether you would expect them to begin to level out or whether there are any initiatives that might even bring them down over the course of the next calendar year.

That's a fair question. And Andy, let me give you a better answer to that. And the answer is we added significant employees during the year 2012. That brought our costs up quite dramatically from what they were in 2011. We wouldn't expect that to continue for the year 2013. So the increase -- the rate of increase is going to diminish. Sorry for not getting that clarity to you to start with.

And our final question is from John Bridges with JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: I thought I heard somebody talk about the Altar being quite extraordinary. And I just wondered if you could sort of pin down a little bit as to what you think you've got down there.

Let me turn that back to Ralph.

Yes, John, well, in our evaluations of the concepts and our pretty ambitious drilling program this year, as we try to further define what was going on in the Altar system, one thing that we suspected early on and have confirmed by the drilling is that there's -- with the various mineralizing centers that are the components of the large Altar porphyry complex, that we have seen a pretty interesting and beneficial gold endowment to certain of those mineralizing porphyries that were not previously defined in the resource. I think as you review the results from drilling in the East porphyry, for example, you'll see a significantly different gold endowment, positive gold endowment, with that mineralizing center as compared to the Central Altar system that constituted the majority of the previous resource. And we're continuing to get interesting geologic insight as we continue with our program, including some pleasant surprises that we anticipate following up on in this coming season.

John, one of the things that's kind of exciting is that they've got these drills down there. They're down 1 kilometer, and we're still in the mineralization. I know that's deep, but nevertheless, it sort of signifies the size of this thing that it could be. John D. Bridges - JP Morgan Chase & Co, Research Division: Well, the depth, but you're in a bit of a valley there, so that's going to give you quite a big strip, I would think.

It could be, except on the East side. The East side is actually up on the East side, and it's a different configuration than being down in the valley. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. I look forward to seeing those drill holes not on a map.

We have no further questions.

I just -- in closing, not to hold everybody on the call, but we appreciate everybody being on the call today. And operator, we'll turn it back to you.