Sibanye Stillwater Limited (SBSW) Q3 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, good afternoon. Thank you for standing by, and welcome to the Stillwater Mining Third Quarter 2013 Results Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Terry Ackerman. Please go ahead.

Thank you, operator. Welcome, everyone, and thank you for joining us today for Stillwater Mining Company's third quarter 2013 results conference call. I am Terry Ackerman, the interim Chief Executive Officer of Stillwater Mining Company. I would like to thank you for your patience this quarter as we have announced results a little later than usual. With me today are several members of our management team, including Greg Wing, Vice President and Chief Operating Officer; Kevin Shiell, Vice President of Mining operations; Kris Koss, Vice President of Human Resources and Safety; Brent Wadman, Vice President of Legal and Corporate Secretary; and Rhonda Ihde, our Corporate Controller. As always, I would like to remind everyone that some statements in this conference call will be forward-looking and therefore, involve uncertainties and risks that could cause actual results differ from our projected results. We discuss these results and uncertainties in more detail in the company's filings with the Securities and Exchange Commission, including those discussed in our third quarter Form 10-Q, which we filed yesterday afternoon. For today's call, following my opening comments, Greg Wing will discuss the financial highlights for the quarter and Kevin Shiell will provide an update on our Montana mining operations. I will then offer some concluding thoughts before we open the line for questions from the analysts and investors. During the third quarter, the operating teams at the Montana mines and processing facilities continued their consistent record of delivering results. This translated into very good financial performance at our core operations during the quarter. Mine production is ahead of plan and the Recycling segment continues at record pace for the year. All 3 of our Montana growth initiatives, Blitz, Graham Creek and the lower Far West, are moving forward on schedule. At Marathon, our primary focus is on the environmental assessment process. We have recently submitted 10 of 11 responses to additional supplemental information requests. Supplemental -- submittal of the final response will trigger a public comment period following by a regulatory review for overall sufficiency of our filings. While we have made considerable progress on updating the feasibility study, our schedule for completion is dependent on insuring any and all conditions of the environmental assessment are addressed and incorporated into the engineering and feasibility update. As we announced in our third quarter results release yesterday, during the quarter, we recognized a non-cash impairment write-down of the Altar property in Argentina. While our drilling efforts have continued to expand the resource boundaries at Altar, the business climate in Argentina of late has clouded the outlook for exploration and mine development there. A number of mining projects in Argentina have been scaled back recently, leading us to conclude that it was appropriate to reassess the carry value of Altar mineral property asset. The company engaged an independent consultant to assist in this process. As a result of our review, during the quarter, the company has reduced the $392.4 million carry value of the Altar mineral property to 200 -- by $290.4 million to a new $102 million carry value. After taking into account the associated change in deferred tax liabilities, the net effect of this Altar write-down was $226.5 million non-cash reduction to third quarter 2013 net income. Before we get into more third quarter details, I'd like to comment on the PGM markets for just a minute. We continue to believe that the supply and demand fundamentals for our primary product, palladium, are very robust. The end markets for palladium continue to be healthy, driven by the growth in automobile production in North America and China. On the supply side, instability and labor unrest remains among the South African PGM suppliers. Evidence of this was seen recently during a strike at one of the major producers there. In addition, press release -- press reports indicate possibility of a more widespread strike over wages among multiple operators in the region. We believe this volatility has provided some additional price support to palladium and platinum. Just yesterday, Johnson Matthey published its platinum 2013 interim review that contains some interesting observations. Johnson Matthey estimates that the supply deficit continued in 2013 for both palladium and platinum markets, with the palladium deficit for 2013 reported to be 740,000 ounces. Johnson Matthey also reported that Russian stock sales of palladium are expected to be only 100,000 ounces for 2013 and contend that no further shipments from Russia stocks are planned. This estimate is less than other market experts believe may have been exported from Russia's stocks this year. We believe these factors are positive for the palladium outlook. On average, combined realized price for the mined palladium, platinum sales during the third quarter was $887 per ounce, up from the $803 per ounce realized during the third quarter of 2012 and up slightly from the $865 per ounce for the second quarter of this year. I will now turn the call over to Greg, to cover our financial highlights. Greg?

Thanks, Terry. For the third quarter of 2013, we reported a consolidated net loss attributable to our common shareholders of $201.5 million, which is $1.69 per diluted share. And as Terry mentioned, this large loss includes the effect of a non-cash impairment write-down of $290.4 million for the Altar property. The quarterly loss compares to our consolidated net income attributable to common shareholders for the third quarter of last year of $13.1 million or $0.11 per diluted share. Setting aside the non-cash write-down, financially, this year's third quarter results were excellent and without the impairment charge and its associated tax effects, our net income after tax in the quarter would have been about $25 million. Total revenues from Mining and Recycling in this year's third quarter were $280 million, up 55% relative to the third quarter of 2012. This increase in total revenues was driven by higher Recycling volumes and to a lesser extent by higher average palladium prices. Our Recycling segment, in particular, continues on track towards a record year. PGM Recycling revenues for the third quarter of 2013 were $156.8 million, which is more than double the Recycling revenue in the third quarter of last year. So delving into this revenue growth a little bit further, recycled palladium, platinum and rhodium volumes processed through the smelter and refinery totaled 167,500 ounces for the third quarter, which is 74% more than the 96,200 ounces processed in the third quarter of last year. Our Recycling volumes this year have benefited from the addition of several new suppliers who ship recycled material to us for processing. The company's average realization for Recycling sales, again, including palladium, platinum and rhodium, was $1,026 per ounce in the third quarter of this year, up from $985 per ounce in the third quarter of 2012. Another important contributor to these higher Recycling revenues and earnings, late in the second quarter of 2013, we began reprocessing a used brick that was extracted from the furnace during the earlier relining of the #2 smelting furnace in the spring of this year. Our intent was to extract most of the PGM ounces that had been absorbed into or onto that brick over the years. The 167,500 recycled PGM ounces we processed during this year's third quarter included approximately 4,200 PGM ounces allocated to Recycling from this reprocessed furnace brick. And that was in addition to approximately 8,000 ounces allocated to Recycling from furnace brick during the second quarter. Revenue from the sale of these additional 12,200 ounces was all recognized during the third quarter and -- along with a very small amount of associated incremental processing cost. Consequently, Recycling income in the quarter included about $16.3 million of added income from this reprocessed furnace brick. By the way, we also allocated about 7,700 ounces from furnace brick back to the mining operations. We estimate these ounces will benefit earnings in the second half of the year, mostly in the second half of the year by about $6.5 million. And again, those get mixed in with the mining materials, so it's a little bit harder to identify exactly when they're sold. Looking quickly at some of the other income variances in the quarter, marketing expense for this year's third quarter was just $200,000, down sharply from the $1.9 million we spent for marketing in the third quarter of last year. This decrease is in line with our intent to phase out our palladium jewelry marketing program. As we've discussed before, the company plans to remain an active proponent of palladium and platinum applications, particularly on the industrial side and we will maintain our dialogue with the investor community and other participants in the palladium market. We believe Stillwater Mining Company can continue to play an influential role in promoting palladium among these groups. However, in the face of steadily increasing demand for PGMs and catalytic converters, we believe the opportunity for palladium growth in the jewelry sector likely will be constrained. Exploration expenses in the third quarter totaled $2.1 million, which was up slightly from the $1.7 million we expended during the third quarter of last year. The increase this year is due to expanded exploration efforts on properties adjacent to the Marathon project in Canada, exploration costs as the company's Altar property in Argentina has been scaled back this year, reflecting the challenges with the business environment there. Total capital expenditures for the first 9 months of this year were $91.2 million; that compared to $84.7 million for the first 9 months of 2012. About $81 million of the $91 million in this year's spending is attributable to our Montana properties, which includes both the sustaining capital at the mines and development expenditures for our Montana growth projects, Blitz, Graham Creek and the lower Far West development, which we'll talk about in a moment. Finally, our liquidity at the end of September, that includes cash, cash equivalents and highly liquid investments, totaled $464 million, and that doesn't include another $96 million of available and undrawn capacity under our revolving line of credit. So we believe the company is exceptionally well positioned financially to support its growth initiatives going forward. And with that, let me turn the call over to Kevin Shiell, for an update on our Montana mining activities.

Thanks, Greg. Starting off with production, mine PGM production in this year's third quarter totaled 124,200 ounces, down from the 127,000 ounces produced during the third quarter of 2012. The difference period-on-period is primarily the result of normal variations in mining conditions and the particular stopes available for mining at any point in time. However, at the Stillwater Mine, we continued to experience challenges during the third quarter with ore grades delivered to the mill. Normal grade challenges were compounded by several infrastructure issues, most significant being the loss of the muck pass earlier this year that we mentioned last quarter. During the second and third quarters, we focused on mitigating these infrastructure issues and have recently completed modifications and repairs to the muck pass system. With these efforts mostly behind us, and I say mostly behind us because the pass system is not at 100% of its original design, we are now beginning an evaluation of the impacts from these improvements upon the muck handling capacity and our ability to more tightly manage ore grades at Stillwater Mine. Ore grade trends over the past few weeks have shown the grade at the mining face is now moving in the right direction in alignment with the grades received by the mill. As mentioned in the past, the current robust developed state of both the Stillwater and East Boulder Mines provides operational flexibility that allows us to effectively manage through times like this when they arise. As evidence of this, despite Stillwater Mine's grade issues, our total mine production is ahead of plan for the year and we are increasing our production target for the year. And Terry will discuss that a little bit more in a minute. Consolidated total cash costs for mined ounce averaged $427 for this year's third quarter, down from $496 per ounce reported for the third quarter of last year. As Greg has already mentioned, the decrease is primarily due to the recovery of PGMs from the reprocessed furnace brick. This credit more than offset the effects of lower ore grades at the Stillwater Mine and planned increases in labor and other cost. Montana employees have grown in number by nearly 7% to 1,736 at the end of Q3 this year compared to 1,629 at the end of the third quarter of 2012. The increase in employees is mostly attributable to hiring for the new miner training program in support of the new projects and to accommodate increasing underground travel distances and operations support required as mining operations recede further from their entrances. Next, I'd like to provide a brief update on our 3 Montana development initiatives, which are all, I'm happy to say, moving forward on schedule. The largest of these, Blitz, ultimately will provide primary access to the underground areas east of the existing Stillwater Mine. We plan to develop new mining stopes in this area to offset gradually declining production at the Stillwater Mine and add ounces to our total annual PGM production. The Blitz project will extend underground access to the east from the existing Stillwater Mine by about 4.5 miles on 2 separate levels. One of these development headings is being driven with a TBM or tunnel-boring machine, so far, it has advanced about 3,400 feet. Another parallel heading is being driven roughly 600 feet above the TBM drive using conventional drill and blast methods. Development work in this parallel heading has resulted in approximately 3,500 feet of ramp in the infrastructure development to date. A new surface portal for the Blitz area is also planned that will intersect these 2 primary Blitz tunnels for future ventilation and emergency access in the Blitz project area. The Blitz project will be developed in stages over about 6 years at an estimated cost of about $200 million. Once the key Blitz infrastructure is completed, additional funds will be required to develop mining blocks within the project area. Costs of about $48.8 million have been incurred on the Blitz project to date. The second Montana project, Graham Creek, utilized one of the original East Boulder TBMs to develop about 8,800 feet to the west of the existing East Boulder Mine. The TBM development was completed earlier this year, and work has now shifted into driving 2 new Alimak raises to provide ventilation for the Graham Creek project. The first raise is now complete and the second is expected to be finished during the first half of 2014. And actually, it's about halfway up as we speak. Total cost of the Graham Creek development including associated ventilation raises is estimated to be about $13 million, about $8.8 million has been spent to date. Graham Creek is projected to add about 30,000 ounces per year of PGM production through annual mine output with production beginning late 2014 or early 2015. The third Montana development initiative, lower Far West, consists of accelerating development beneath the existing upper West operations at the Stillwater Mine. Development of the lower Far West began during the first quarter of 2013. To date, approximately 1,800 feet of new footwall lateral and 3,600 feet of total development have been completed on multiple mining levels in the lower Far West development area. Work on extension of the 35 West rail level and other supporting infrastructure is also underway. Incremental cost for lower Far West development is estimated to be about $28 million, with initial production from this area targeted for mid-2016. Once in production, the lower Far West area has potential to contribute up to 45,000 additional ounces per year to the total output of Stillwater Mine. With that, I'll turn the call back over to Terry.

Thanks, Kevin. In preparing our 2014 budget, we have made some adjustments to our 2013 guidance as indicated in our press release. I'd like to recap those numbers for you. After reviewing our year-to-date mine production and the mine plans for the rest of the year, we have concluded to increase our mined palladium and platinum production guidance to a range of 505,000 to 515,000 ounces. This is an increase from our original guidance of 500,000 ounces and implies likely mine production of between 122,000 and 132,000 ounces in this year's fourth quarter. Based on the performance so far this year, we have reduced guidance for 2013 consolidated total cash cost per mined ounce from $560 per ounce to a range of $530 to $540 per ounce. Through the 9 months in 2013, total cash costs have averaged $495 per ounce impacted by the reprocessed brick as mentioned earlier by Kevin. In our calculation of total cash costs, credits from recycled earnings and byproduct sales are offset against total cash cost. Last quarter, capital expenditure guidance for 2013 was reduced from $173 million to a range of $145 million to $155 million. The level of consolidated capital expenditure to date 2013 has remained considerably lower than planned. As a result, we have reduced the capital expenditure outlook for 2013 further to a range of $125 million to $135 million. Much of the spending reduction represents deferral into future periods of commitments originally planned for 2013. In summary, Stillwater had another good quarter. Mine production was on track and the Recycling segment is having a record year. With due recognition of the write-down for the Altar mineral property, the underlying financial results for the third quarter were good. The developed state of our Montana mining operations is in excellent shape, allowing production development targets to remain on or ahead of plan. The fundamentals for palladium are as robust as ever, and we believe Stillwater and our shareholders will benefit from that. I would like -- now like to open the call for questions, operator.

[Operator Instructions] Our first question today comes from the line of John Bridges, representing JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: Congratulations on the results. I was just wondering -- and also the expanded production target for this year. Is there any particular reason why you feel confident enough to lift that target?

I'll give Kevin a chance to comment on my comment, but I believe that the group has managed well the challenges we've had this year, and we believe that we're going to see continued good performance for the rest of the year.

I would add that we addressed a lot of the concerns around the ore grade. We're seeing better results and that adds to the confidence that we may have going forward in Q4. Although, it's not a certainty, I would stress that some of the things you see in costs and so on, indicate a level of conservatism still, hence we're going to go through and look for another quarter of performance before we feel we've got this completely behind us. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. And perhaps a related question, East Boulder picked up its ounces very nicely to help out with south -- with Stillwater. Is that a sustainable level now, or did they sprint through the quarter for you?

No, actually, this is attributable to the Graham Creek effort and not so much that we're mining resource out of Graham Creek yet, but the additional ventilation we were able to use and all of this began to pay off and we reallocated a lot of our resources and equipment and manpower over to the east -- excuse me, west side of the mine. Little bit better grades there, grades have been on our side this year and the productivity capacity operation is greatly improved. And that's going to be the case going forward. We're ramping up as we speak. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. Another just one more final one. The margins on the Recycling -- they move around quite a bit. Could you give us any guidance as to what we should expect or what we should model going forward?

John, I'll take that one if I may. I think -- generally speaking, and again, understand that the Recycling consists of lots of different arrangements with lots of different suppliers, then each has their own terms. But directionally, I think overall, we see a margin in the 3% to 4% range. Historically, it was somewhat higher, but when rhodium prices came down in 2008, 2009, those margins slimmed up and I think that 3% to 4%, although it doesn't sound impressive considering there's no capital investment to speak of in that business, it's an incremental business. And we turned the -- those margins 4, 5x a year. It turns out to be a really nice business. So I think the 3% to 4% margin is probably a pretty -- on sales, that is, is a pretty good indicator.

Our next question today comes from the line of Sam Crittenden with RBC.

Question on cash cost. Just curious, the benefit from the furnace re-bricking, was that kind of in line with what you were thinking at the beginning of the year when you gave your $560 an ounce budget or was the benefit from that a little bit better which may have led to the lower cash costs?

Well, in all honesty, we didn't quite know what to expect because we had done something differently when we commissioned the furnace in 2009. We had started it up with a bath that had copper in it. And the hope was that any porosity in the refractory brick would absorb that copper and then it maybe wouldn't absorb any PGMs. In practice, we found that it did absorb some for a number of reasons, probably some of it is just the copper didn't fill it all up, but also there were ups and downs in the furnace and there may have been opportunities in some of those downs for it to run in between the bricks. Putting all that together, though, I think the number that we estimated is that of all the ounces that were put through there over the 4 years, less than 0.5% of the metal was absorbed into or onto the brick. So to answer your question, we really didn't know what to expect. We hadn't budgeted really much of anything. And we hadn't taken that into account to any significant degree in our cost estimates. So it was, so to speak, gravy in terms of what we learned when we pulled the furnace apart.

Okay, that's helpful, Greg. I'm just getting at what kind of level we would expect cash costs to return to in 2014 without the benefit of that. I guess, would it be kind of the $560 level plus or minus then?

$560 or maybe a little higher. We're kind of in the middle of our budgeting process at this point. So it's a little bit early to give that guidance. But I don't -- and again, Kevin, I turn to you if you have any different thoughts, but my thoughts would be that the $560 isn't out of line with the direction we're headed in the future. And there's probably an upward bias towards that over time. At least until our production increases.

Okay. And then I guess, the same with production, I mean that ebbs and flows as well, and does this kind of increased level you're at now, is that sustainable or we'll wait and see what happens in 2014?

We believe it's sustainable.

Okay. And then quickly on the timing of the Marathon feasibility study and excuse me if you said this already, just curious what your latest thoughts on the timing of that would be?

I tried to stay away from direct guidance, as you probably caught. Our challenge is as we try to maneuver through the environmental assessment and review process, we keep finding ourselves having to address potential new issues. An example of that is almost a year ago, we were challenged on the number of water bodies we were going to affect with the waste rock piles and so we went back and reengineered a different design to try to mitigate that. So every time we get indications of those types of things that will have to be dealt with or we know will be part of the permitting requirements, we have to go back and reengineer and reestimate and we get nervous about putting something out that we're going to have to come back and change again. So we're trying to manage that in parallel and hopefully, we get through this review period that we're in now, which is going to hopefully trigger the public comment period in the first part of the year, we'll be able to come out with an update to the economics and the direction of the project.

Okay. And then just a broader question on the Recycling market, obviously you've seen your volumes pick up, do you think that's partly due to the prices being relatively high, especially for palladium or is there something else that's changed out there that you're seeing more material coming in?

I think obviously, when prices are robust, we do see the market get stronger. There have been some press reports though that there has been some shifting around in the market, 1 supplier is kind of being reallocated, if you will, and I think that we picked up a portion of that reallocation. So to some extent, I think our growth in Recycling maybe isn't indicative of -- it's more a market share issue than the total market growing by as much as we've seen.

Well, I think as you alluded to, with the prices becoming more solid and moving up, that's going to encourage people to go out and take a look at the rest of the Recycling material that's currently not being collected.

[Operator Instructions] And next, we'll go to the line of Sam Dubinsky with Wells Fargo.

Just a few quick ones. You lowered your cash production costs and I know some of the benefits of the recycled brick are rolling off, but it still implies a pretty decent ramp in Q4. And also I know you said potentially $560 is not out of line in 2014. What is driving sort of the big uptick in cash cost and I have a couple of follow-up ones.

Well, first of all, as we'd taken a look at the fourth quarter, we probably were a bit conservative on that, and maybe that comment's been made already. But directionally, we are probably looking at costs for the year or for the quarter in the $570 to $580 range, something like that, and as Kevin and I have talked about that, there are some -- there's a lot of secondary development, which we do expense, that will be going in the second -- in the fourth quarter. We'll probably ramp that up a little bit. There are 3 or 4 elements that contribute to costs sort of steadily going up at this stage. Obviously, our production has been relatively flat. Once we see these other elements begin to contribute to production growth, that tends to bring the cost per ounce down a little bit. But inherently, obviously, aside from inflation, we have just the fact that the mine underground, it's getting further and further from the portal every period. And while that's -- the impact of that is small in any 1 quarter, probably over the course of the year, it contributes to 4% or 5% just in the logistics of having to move people and material a little bit further all the time. We have talked about the fact that we have a new miner development program going on. At any point in time, we have about 50 new hires or new miners being trained. We also pull some people out of production in order to be able to support that as trainers. So that -- if there's a period of low productivity, when those people first come in and then gradually, they begin to contribute, so over time, that has tended to boost costs. But again, directionally, we're looking closely at costs. And we anticipate that the growth that we've seen over the last couple of years will begin to slow down as we move forward, particularly as some of these growth initiatives begin to pay off. So I hope that's helpful.

Okay, great. And then just a follow-up, I believe in the past auto suppliers were discussing 2014 contracts as early as the beginning of 2013. Are you fully contracted for 2014 yet? And are there any discussions for '15? Then I have one last one.

There are some discussions in progress, but we haven't reached agreement on anything yet. We're not too concerned about that. There's clearly an interest on the part of our suppliers to take material -- or our customers to take material. But also to the extent that we have material available that over and above the -- what's contracted, there's no problem at all selling it in the market. There are ready terminal markets for our metals.

Okay, great. Just my last one. I believe PGM pricing probably should be a bit stronger than it is today, just given the fact we've had some strikes in South Africa and healthy auto sales. If you just sort of bifurcate in your mind, what are the greatest issues that are weighing on pricing? Is it just ETF liquidations or is it FX related? What are the factors you think that are keeping the market back?

Actually, again, this turns into opinion really quickly. But it would seem to me that the big challenge probably are some inventories that are out there and perhaps, we don't have insight into all of them. But one of the things that some analysts have pointed out and again, I don't know any more than anybody else does on this, but it looks like if you look at the rate of auto growth in China and you look at the growth in, particularly, palladium consumption in China, the 2 seem to be off trend a bit, which suggest that they might be drawing down some inventories that they built up, maybe a couple of years ago when prices were quite a bit lower. So we have to work through those. Clearly those are completely opaque. There's no ability to, at least on our part, to figure out how much is there. But again, we are believers in the long-term dynamics. Clearly, you do see in the medium term things like inventory issues, but we do work through those and we are believers that a steadily growing demand and relatively constrained supply add up to a tightening of markets over time.

I think one other point -- it's obviously an opinion, is, while South Africa is primarily a platinum producer or viewed that way, palladium is also a very important component of their cost structure. And I think sometimes that is undervalued in the market.

And next, we'll go to the line of Aaron Glick with Churchill Capital.

Guys, just wondering what your plans were for optimizing the value of the Altar asset? And if you had any thoughts around timing when we could see that materialize? Any additional detail, I think, would be really helpful.

I think the first step was to address what we consider to be some concerns around the business environment in Argentina and that was at the foundation of the impairment we took. I think what you'll see as we move forward is we'll continue to have a presence there. It will be thoughtful, and it will be focused on the next steps. We're in the process, as we, I believe, communicated before to providing an update from all our drilling work and we hope to do that shortly. And hopefully from that, you'll be able to gleam some direction for it.

Okay. And then another, have you guys given any thought to share repurchases here with your stock trading around these levels?

Again, understand that we have a new board that is still, again, they're looking at a lot of issues at once here as they gain familiarity with the company. In all honesty, I don't think they've gotten around to addressing that at this point. So again, the short answer is -- it's certainly some thought is being given to it. But that isn't any commitment that they will do that going forward. It's just -- that will be up to the board.

And just a follow-up on the Altar project. Is there any thought given to keeping this on as a long-term asset?

I think right now we're -- we'll be holding it. And I think you'll have to give us some time to sort out the longer-term guidance that will be coming hopefully as we get into the new year.

The next question comes from the line of Kalpesh Patel with Barclays.

Just wanted to ask a question regarding the cash cost guidance. So in the new guidance as you said in your call was $570 million to $580 million from the fourth quarter. Does that include benefits from more brick sales or brick revenues in the fourth quarter?

It -- almost none. There's a little bit of brick that was allocated to the mining sector -- mining segment that may flow into the fourth quarter, but that will be very minimal. Other than that, it's all been sold in the third quarter.

The next question comes from the line of Daniel McConvey with Rossport Investments.

This question has been mainly answered, but the -- in Recycling, the majority of the increase, 70% increase, relates to -- just a question, a reallocation probably from scrap that formally went offshore that might be staying onshore. Is that fair?

I think, Daniel, that's our understanding, yes. By the way, it's not all due to that, we have picked up some market share generally but that, we've seen a piece of that, I think.

Okay. Second, in your CapEx deferrals, are you finding anything that's actually being saved? Just any positive surprises in terms of your CapEx reduction, or is almost all of that deferral on products, et cetera.

I'll give you a couple of thoughts and maybe Kevin wants to add. I think it's a combination that we've been surprised and pleased with some performance that's helped keep our spending down. I think as far as deferrals, I think we tend to be a little more aggressive in our beliefs of what we can take on and that usually results in deferring things to future periods. Kevin, any thoughts?

Some of it has been driven by the capitalized development that was suspended for about 6 weeks during the midpoint of the year because of the ore grade issue and the muck passes. And part of what's going to happen in Q4, Dan, is to make up some of that lost ground and actually increase our capitalized development rate by about 7%. So a couple of other things that have happened, equipment delays in the schedule and unfortunately a lot of those are slipping into Q4 now. We have some positive savings on the Blitz drilling on the surface. We ended up using a lot less helicopter support, saved a couple of million dollars there. All in all, those things add up to about $14 million variance on the mines.

Our next question comes from the line of John Tumazos with John Tumazos Independent.

This is John Tumazos. Concerning the palladium and platinum prices this year, in a sense they're pretty good with palladium up 10% and platinum only down 1% or 2%, in view of gold and silver, and 800 tons being sold out of gold ETFs and that preventing PGMs from doing better. How far along do you think the progress is in unlinking platinum and palladium from gold? Do you think you're in a strong enough position to start to have administered prices like a producer price? Where you just quote your own price in the market, say a price that would give you a 20% ROE or 4x as much as you earn this year. And first question. Some of the auto companies might look at the numbers and get nervous about supply. Second question, why is rhodium, which doesn't have a commodities exchange price, down so much more, where the gold price falling doesn't directly hit rhodium on futures exchanges the same way.

Well, those are some ponderable questions. I think as we look at platinum and palladium with regard to gold, there are some similarities clearly in, if you look at correlations, for example, with the dollar-euro exchange rate, John. Clearly, gold is somewhat driven by those and our metals are somewhat driven by those as well. So there is that correlation that goes on. At the same time, we have the advantage over gold I think in that palladium and platinum are viewed to a large extent as industrial metals as well as having a precious metal component. And so while the precious metal component may trade on currency, the industrial tends to trade more on underlying demand. As you correctly point out, platinum in particular, I think, has benefited from some ETF activity this year, with the Absa ETF that opened up in South Africa and absorbed probably about 700,000 ounces of platinum. In a market that -- with Europe being so -- the European auto market being so depressed is clearly oversupplied at the moment, even with the challenges in South Africa. In terms of naming our own price, recognize, first of all, that we're probably if you average out platinum and palladium, about 5% of that total market. So while prices are set at the margin, I'm not sure that we're in a position to do that. At the same time, we do find that these markets are a little bit tighter as we negotiate and that's favorable to us. And so there may be some opportunity to push terms a little bit as we move ahead.

In terms of rhodium?

On rhodium, again, I don't think we follow it quite as closely as we do some of these other metals, but again, understanding is that -- you know what, I'm not sure I know why it's weaker than the -- than it has been on the past. Clearly, there was a speculative element. That's a -- the size of the rhodium market is about 1/10 the size of platinum or palladium in terms of new mine supply. There clearly was a speculative component in that at one point, it doesn't seem like that's quite as big a driver in the market of late. There was a fair amount of liquidation in 2009 and 2010 that drilled the price down very quickly from about $10,000 an ounce to $1,000 an ounce over about a 6-week period. But again, other than the fact that there doesn't seem to be a strong bid on the metal at this point, which is sort of circular, I'm not quite sure why it remains so weak.

Just encouraging that China has now gone 2 straight months with almost 2 million vehicle sales in each month.

Yes.

So that the historical database for correlation size is obsolete because the structure of the market is changing, as jewelry and investors get crowded out, which are the gold price-sensitive segments, as opposed to industrial. Europe isn't back yet but the U.S. is better, et cetera, so that looking forward, hopefully, it's a different world, and I'm as optimistic as you are.

[Operator Instructions] And our next question comes from the line of Andy Schopick [ph], private investor.

Just a couple of quick follow-up financial type of questions. Recognizing that no decisions have been made and that you're considering various options to improve shareholder value perhaps, do you have philosophically a preference for share repurchases over initiating, say, a common stock dividend?

Well, again, I think I'd be getting ahead of us. I can give you my personal opinions, but I don't know that, that drives the board's decisions. So maybe, it's better if I don't go there. But again, in an industry that is as cyclical as a company like Stillwater is, I think that buying back shares may be a bit problematic compared to, say, paying a dividend. But again, you're hearing my personal opinion and that may or may not have any relation to what the board would think.

Understood. Let me ask you a question about the current debt structure, or given the current debt structure, is there any material prospects for reducing debt in the year ahead any further?

Well, I think the short answer is I don't know. But the board clearly will be looking at that or is looking at that as part of what the opportunities are there -- in as part of their overall review of -- again, gradually, I think, over time, I think they'll get to every aspect of the company, which is a healthy thing, I think.

Okay, final thing I just wanted to ask is, with respect to the current inventories that are carried on the balance sheet, what is the primary composition of those inventories? How much of it's related to Recycling, if you can?

Our Recycling inventories, in very round numbers, tend to be around $100 million. Most of the rest of it would be either in late stage processing or finished goods. And we probably have about $20 million -- between $20 million and $25 million of warehouse type materials and supplies, if you will.

Okay, so it's primarily related to Recycling?

Correct, yes.

Our next question is from the line of John Bridges with JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: Yes, I was a bit worried with Johnson Matthey leaving the business of talking about the metals that we'd have a bit of a vacuum, but Greg, I think you're filling in very well.

Thank you. I hope I'm accurate. John D. Bridges - JP Morgan Chase & Co, Research Division: Yes, always. I don't know if this has been asked, but the CEO search process is going on. Terry, what's the status of that? When do we expect any news?

No, I don't have a timing, but I know that there -- it's a key focus of the board. And I hope to -- hope, like many people, to hear something in that regard here shortly.

Next, we have a follow-up from John Tumazos with John Tumazos Independent Research.

John Tumazos again. Could you give us sort of a compare and contrast on Marathon, which is not impaired, versus Altar? We know that Ontario is a much nicer place to do business than Argentina, but the nickel price is lower, wages are rising in the Canadian mining industry yet. And it's good that it's not impaired, but could you sort of give us an update on how robust it might be?

I am guarded in speaking to how robust is, but I think one of the key things for us is it is a significant PGM component, which marries up nicely with what we're trying to refocus on as to what our mining company. The -- you hit on a couple of key things. The environment for mining in Ontario to date, while there's regulatory challenges, which we see all over the world, there is a process and an approach that we're comfortable with. We see some opportunities that you mentioned wage increases, we're also seeing an opportunity with reduced activity in certain sectors of availability of people, construction, equipment. So the infrastructure is very close to the site. It has a lot of favorable components that I think, unlike Altar, which is in a very remote region, require -- will require a lot of significant infrastructure, this Marathon has positive characteristics. So there's -- on a one for one, I'd say that they're completely different. The Marathon, obviously, will -- is closer to becoming a project and hopefully, we can give some evidence of that here in the near term. I don't know if I answered your question, but we're very positive on trying to do business in Ontario.

Gentlemen, there are no further questions queuing up at this time.

Okay, operator, well thank you very much, everyone, for joining us today. And our operator will give you some guidance on replay for this call.