By Dorothy Kosich, Mineweb.com
A U.S. bankruptcy court Wednesday upheld the request of General Motors to drop its existing palladium and rhodium supply agreement with the only U.S.-based PGM miner, Stillwater Mining, while continuing contracts with South African and Russian mining companies.
With the help of U.S. taxpayer dollars aimed at helping save U.S. jobs and give a shot in the arm to the domestic economy, GM received a financial bail-out which has enabled the U.S. auto giant to re-emerge from bankruptcy.
However, as Montana's Gov. Brian Schweitzer and Stillwater executives recently observed, the loss of Montana mining jobs to foreign mining companies as GM accepts billions of dollars in taxpayers' money aimed at preserving U.S. jobs seems "disingenuous".
The loss of the GM agreement will cost the financially struggling Stillwater Mining between $5 million to $10 million annually. However, Stillwater CEO Frank McAllister said the company's cash position remains strong. "While losing our GM supply agreement certainly increases the company's exposure to any sustained decline in PGM prices, I believe the longer-term fundamentals of our industry are favorable and our competitive position is strengthening."
"Despite the absence of the GM agreement, the company will still be able to sell all of its mine production into the market, although obviously we will no longer enjoy the benefit of the GM pricing floors," he added.
However, in a recent note, Standard & Poor's said, "The U.S. automotive industry is a key market for Stillwater and the weak global economic conditions and the substantially reduced demand in the U.S. automotive industry continue to impair the operating results. Overall, the auto industry, mainly GM and Ford Motor Company, consumes virtually 100% of the company's palladium production and 70% of its platinum production."
Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.
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