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STILLWATER MINE AT CENTER OF WHITE HOUSE CONTROVERSY
Domestic Mine article August/September 2009

Barack Obama expected criticism on his mining policies. However, he never expected to receive it from a Democratic governor; Brian Schweitzer of Montana. "When it comes to protecting the industries of the Midwest it's buy American first," Schweitzer said. "When it comes to Montana, they say buy anywhere but Montana." The White House refused to comment.

The controversy surrounds the Stillwater Mine in Montana, which is one of the largest platinum group (PGM) mines and the only mine of its sort in the United States. The White House controlled General Motors has cancelled its contract to buy platinum and palladium from Stillwater for the manufacture of catalytic converters. All the palladium and 70 percent of the platinum produced by Stillwater's mines had gone to GM and Ford Motor Co. The GM contract was to run until 2012.
The contract was a benefit to both the auto companies and Stillwater. The contract set minimum prices and guaranteed the amount to be delivered. GM and Ford benefited by having a guaranteed domestic source of PGMs instead of relying on unstable sources in Russia and South Africa. These price guarantees, in turn, allowed Stillwater to make long term business plans. With palladium prices below the guaranteed floor price in the contract, GM wanted to use its bankruptcy proceedings to abrogate the deal so they could buy on the international market.

STILLWATER HISTORY

Although the Stillwater PGM mine is a relatively new operation, the region has a long mining history. Since the late 1800s, the Stillwater complex and adjacent rocks were known to contain copper, nickel and chromium. In 1883, Jack Nye and brothers Jimmy and Jonas Hedges found the sulfide rich rocks in Mountain View, Benbow and Initial Creek areas. Nye traveled to Minneapolis and submitted his findings. On the basis of those findings, the Stillwater Mining Company was incorporated in the summer of 1884 and a mining project commenced in 1885. On September 10, 1885, Nye sold to the Stillwater Mining Company his quartz claims in the Benbow and Initial Creek areas and a placer claim in the Stillwater River Valley. On October 2, 1885, he sold quartz claims in the Verdigris Creek area and additional placer claims to Stillwater. Two weeks later, Stillwater sold these claims to the Minneapolis Mining and Smelting Company.

But, no one suspected that the area would contain PGMs until nearly a century later. In 1961, H. K. Conn of the Johns-Manville Corporation attended the Commonwealth Mining Congress in South Africa and visited the Rustenburg platinum mines on one of his tours. This visit sparked his imagination that there might be a zone similar to the Merensky Reef in the Stillwater area. Nothing was done until 1967, when E.L. Mann and S. G. Ellingwood visited the Stillwater area and initiated a modest program of soil sampling and reconnaissance mapping. Results were generally disappointing, and Johns-Manville might well have walked away from the area after the first summer, were it not for one set of samples showing small amounts of platinum and palladium. Field exploration continued each year, with only minimal encouragement until 1973, when Johnson-Manville geologists discovered the major Stillwater PGM zone, commonly referred to now as the J-M Reef.

But, the discovery of platinum and palladium didn't mean Stillwater could immediately start mining. The Stillwater mine is in pristine country just 35 miles north of Yellowstone National Park and three miles from Absaroka Beartooth Wilderness Area. The Stillwater River, which bisects the mine operation and the ore body is considered one of the best trout streams in Montana. As a result, environmental concerns kept delaying constructing the mine. It took several years and a growing platinum shortage before the environmental studies were completed and permits granted. The final go ahead was given in 1986.

Today, the Stillwater Mine works two deposits. The Stillwater operation accesses the eastern portion of the J-M Reef, a segment more than 6 miles long. The J-M Reef is accessed by a 1.950-foot vertical shaft, and by a system of horizontal adits and drifts. However, the Stillwater operation was running out of PGMs, so the mine made the decision in the 1990s to open a new operation at East Boulder. This operation accesses the western part of the J-M Reef. Construction of the East Boulder Mine began in 1999. Two 3.5 mile long portals were bored to access the ore. Most of the major above-ground facilities and infrastructure were completed in 2000, and commercial production began in 2003.

Since East Boulder has higher costs, when PGM prices plummeted last year, Stillwater decided to temporarily suspend operations. When it reopened, it was with a smaller workforce that used a new, decentralized team-based approach that was responsible for its own mining performance and own support. As a result of this and other changes, Stillwater experienced a 20% reduction in per-ton cash mining costs, higher mining efficiencies, and improved ore grade.

Although the White House/GM decision could impair Stillwater's financial outlook, GM may find itself in trouble in the future. Worldwide PGM production is declining thanks in part to mine problems in South Africa and Russia. In addition, the slowing economy has reduced platinum recycling from old automobiles as consumers keep their old cars instead of buying new vehicles. Since PGM stockpiles are thin, a major mine shutdown in either South Africa or Russia could cause PGM prices to skyrocket as shortages hit manufacturers. If that's the case, the White House/GM decision to buy overseas could receive even more criticism in the future.