UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		for the fiscal year ended December 31, 2010.

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		for the transition period from ___________ to ___________

Commission File Number 1-13053

STILLWATER MINING COMPANY

(Exact name of registrant as specified in its charter)

DELAWARE		81-0480654
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

1321 DISCOVERY DRIVE, BILLINGS, MONTANA 59102
(Address of principal executive offices and zip code)

(406) 373-8700
(Registrant’s telephone number, including area code)

		NAME OF EACH EXCHANGE
TITLE OF EACH CLASS		ON WHICH REGISTERED
Common Stock, $0.01 par value		The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). þ YES o NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o YES þ NO

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ YES o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). o YES þ NO

As of June 30, 2010, assuming a price of $11.62 per share, the closing sale price on the New York Stock Exchange, the aggregate market value of shares of voting and non-voting common equity held by non-affiliates was approximately $515.0 million.

As of February 9, 2011, the Company had outstanding 102,170,164 shares of common stock, par value $0.01 per share.

Certain information required in Part III of this Annual Report on Form 10-K is incorporated herein by reference to the registrant’s Proxy Statement for its 2011 Annual Meeting of Stockholders.

 

 

TABLE OF CONTENTS

GLOSSARY
PART I
ITEMS 1, 1A, AND 2 BUSINESS, RISK FACTORS AND PROPERTIES			7
ITEM 3 LEGAL PROCEEDINGS			48
PART II
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			49
ITEM 6 SELECTED FINANCIAL DATA			50
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			58
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			77
ITEM 8 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			79
ITEM 9A CONTROLS AND PROCEDURES			108
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE			109
ITEM 11 EXECUTIVE COMPENSATION			111
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			111
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE			111
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES			111
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES			111
SIGNATURES			116
EX-10.22
EX-10.52
EX-10.53
EX-10.54
EX-10.55
EX-10.56
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

GLOSSARY OF SELECTED MINING TERMS

The following is a glossary of selected mining terms used in the United States and Canada and referenced in the Form 10-K that may be technical in nature:

Adit		A horizontal tunnel or drive, open to the surface at one end, which is used as an entrance to a mine.
Anorthosite		Igneous rock composed almost wholly of the mineral plagioclase feldspar.
Assay		The analysis of the proportions of metals in ore, or the testing of an ore or mineral for composition, purity, weight, or other properties of commercial interest.
Base metal refinery		A processing facility designed to extract base metals such as copper and nickel from the product stream. The Company’s base metal refinery receives PGM-rich matte material from the smelter, chemically extracts copper, nickel, residual iron and small amounts of other minerals as by-products from the matte, and then ships the remaining filtercake material to third-party precious metal refiners for final processing.
Catalysts		Catalysts are materials that facilitate one or more chemical reactions without being consumed in the reaction themselves. As referenced in this report, platinum group metals serve as catalysts within the catalytic converters used in automotive exhaust and pollution control systems and, where so indicated, within similar applications in petroleum refining or other chemical processes.
Close-spaced drilling		The drilling of holes designed to extract representative samples (“cores”) of rock and assess the mineralization in a target area.
Concentrate		A mineral processing product that generally describes the material that is produced after crushing and grinding ore, effecting significant separation of gangue (waste) minerals from the metal and/or metal minerals, and discarding the waste and minor amounts of metal and/or metal minerals. The resulting “concentrate” of metal and/or metal minerals typically has an order of magnitude higher content of metal and/or metal minerals than the beginning ore material.
Crystallize		Process by which matter becomes crystalline (solid) from a gaseous, fluid or dispersed state. The separation, usually from a liquid phase on cooling, of a solid crystalline phase.
Cut-off grade		The lowest grade of mineralized material that qualifies as ore in a given deposit. The grade above which minerals are considered economically mineable considering the following parameters: estimates over the relevant period of mining costs, ore treatment costs, smelting and refining costs, process and refining recovery rates, royalty expenses, by-product credits, general and administrative costs, and PGM prices.
Decline		A gently sloped underground excavation constructed for purposes of moving mobile equipment, materials, supplies or personnel from surface openings to deeper mine workings or as an alternative to hoisting in a shaft for mobilization of equipment and materials between mine levels.
Dilution		An estimate of the amount of waste or low-grade mineralized rock which will be mined with the ore as part of normal mining practices in extracting an ore body.
Diamond Drilling		Diamond Drilling is a specialized form of boring holes typical during mineral exploration ventures which allows for the recovery of core for support of geologic characterization, grade determination and metallurgical testing.
Drift		A major horizontal access tunnel used for the transportation of ore or waste.
Ductility		Property of a solid material that undergoes more or less plastic deformation before it ruptures. The ability of a material to stretch without fracturing.
Fault		A geologic fracture or a zone of fractures along which there has been displacement of the sides relative to one another parallel to the fracture.

Filter cake		The PGM-bearing product that is shipped from the Company’s base metal refinery to a third-party toll refinery for the final extractive stages in the refining process.
Footwall		The underlying side of a fault, ore body, or mine working; especially the wall rock beneath an inclined vein, fault, or reef.
Gabbro rocks (See Mafic/Ultramafic)		A group of dark-colored igneous rocks composed primarily of the minerals plagioclase feldspar and clinopyroxene, with minor orthopyroxene.
Gangue material		The non-metalliferous or waste metalliferous mineral in the ore.
Grade		The average metal content, as determined by assay of a volume of ore. For precious metals, grade is normally expressed as troy ounces per ton of ore or as grams per metric tonne of ore.
Gram		A metric unit measure used in the mining industry. Grades of precious metals for palladium, platinum, gold and silver for the Marathon Project are reported in grams/tonne. A gram is equal to about 0.032 troy ounces.
Hanging wall		The overlying side of a fault, ore body, or mine working; especially the wall rock above an inclined vein, fault, or reef. (Compare “footwall.”)
Hectare		A metric unit measure used in the mining industry. One hectare is equivalent to about 2.47 acres.
Hoist		See shaft.
Jackleg drill		A manually operated rock drill, generally powered by compressed air, used to drill holes for blasting rock and to install ground support hardware.
Kilometer		A metric unit measure used in the mining industry. One kilometer is equivalent to about 0.62 miles.
Lenticular-shaped		Resembling in shape the cross section of a double-convex lens.
Load-haul-dump		A vehicle used underground to scoop up mined material and move it to a central collection or discharge point. Generally called an “LHD” by miners.
Lode claims		Claims to the mineral rights along a lode (vein) structure of mineralized material on Federal land; typically in the U.S. lode claims are 1,500 feet in length and 600 feet wide along the trend of the mineralized material.
Mafic rocks		Igneous rocks composed chiefly of dark, ferromagnesian minerals in addition to lighter-colored feldspars.
Matte		See “PGM-rich matte”.
Matrix		The finer-grained material between the larger particles of a rock or the material surrounding mineral particles.
Meter		A metric unit measure used in the mining industry. One meter is equivalent to about 3.28 feet.
Mill		A processing plant that produces a concentrate of the valuable minerals or metals contained in an ore. The concentrate must then be treated in some other type of plant, such as a smelter, to effect recovery of the pure metal. Term used interchangeably with concentrator.
Mill site claims		Claiming of Federal land for mill site purposes or other operations connected with mining lode claims. Used for nonmineralized land not necessarily contiguous with the vein or lode.
Mineral beneficiation		A treatment process separating the valuable minerals from the host material.

Mineralization		The concentration of metals and their compounds in rocks, and the processes involved therein.
Mineralized material		A mineralized body which has been delineated by appropriately spaced drilling and/or underground sampling to support a general estimate of available tonnage and average grade of metals. Such a deposit does not qualify as a reserve until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility.
Mouat Agreement		Mining and Processing Agreement dated March 16, 1984 regarding the Mouat family. The Mouat royalty stems back to the formation of Stillwater Mining Company at which time claims staked by the Mouats’ forebears in 1876 were leased to Stillwater Mining Company.
Net smelter royalty		A share of revenue paid by the Company to the owner of a royalty interest generally calculated based on the imputed value of the PGM concentrate delivered to the smelter. At Stillwater Mining Company, royalties are calculated on the mineral production subject to each royalty as a percentage of the revenue received by the Company after deducting treatment, refining and transportation charges paid to third parties, and certain other costs incurred in connection with processing the concentrate at the Columbus smelter.
Norite		Coarse-grained igneous rock composed of the minerals plagioclase feldspar and orthopyroxene.
Ore		That part of a mineral deposit which could be economically and legally extracted or produced at the time of reserve determination.
Outcrop		The part of a rock formation that appears at the earth’s surface often protruding above the surrounding ground.
PGM		The platinum group metals collectively and in any combination of palladium, platinum, rhodium, ruthenium, osmium, and iridium. Reference to PGM grades for the Company’s mine operations include measured quantities of palladium and platinum only. References to PGM grades associated with recycle materials typically include palladium, platinum and rhodium.
PGM-rich matte		Matte is an intermediate product of smelting; an impure metallic sulfide mixture made by melting sulfide ore concentrates. PGM rich matte is a matte with an elevated level of platinum group metals.
Probable (indicated) reserves		Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
Proven (measured) reserves		Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established.
Recovery		The percentage of contained metal actually extracted from ore in the course of processing such ore.
Reef		A layer precipitated within the Stillwater Layered Igneous Complex enriched in platinum group metal-bearing minerals, chalcopyrite, pyrrhotite, pentlandite, and other sulfide materials. The J-M Reef, which the Company mines, occurs at a regular stratigraphic position within the Stillwater Complex. Note: this use of “reef” is uncommon and originated in South Africa where it is used to describe the PGM-bearing Merensky, UG2, and other similar layers in the Bushveld Complex.
Refining		The final stage of metal production in which residual impurities are removed from the metal.

Reserves		That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
Recycling materials		Spent PGM-bearing materials collected for reprocessing from automotive, petroleum, chemical, medical, food and other catalysts. Additionally, PGMs for recycling may be sourced from scrap electronics and thermocouples, old jewelry and materials used in manufacturing glass.
Scrubber		A treatment system for industrial waste gases that extracts environmentally deleterious components prior to venting to the atmosphere. The Company’s scrubber system at the smelter and base metal refinery primarily removes sulfur dioxide – which is converted in the scrubber into environmentally benign gypsum (calcium sulfate) – and captures any particulates in the stack gas.
Shaft		A vertical or steeply inclined excavation for the purposes of opening and servicing an underground mine. It is usually equipped with a hoist at the top which lowers and raises a conveyance for handling personnel and materials.
Slag		Slag is a nonmetallic product resulting from the mutual dissolution of flux and nonmetallic impurities during smelting. A silica rich slag is a smelting slag that contains a relatively high level of silica.
Sill		(1) With respect to a mine opening, the base or floor of the excavated area (stope); (2) With respect to intrusive rock, a tabular intrusive unit that is conformable with surrounding rock layers.
Slusher		(1) An electric double-drum winch with two steel ropes attached to an open-bottomed scoop that transports (drags) ore from the rock face to a loading point, where the ore is discharged. (2) A very selective mining method in which small ore stopes are mined using a slusher.
Smelting		Heating ore or concentrate material with suitable flux materials at high temperatures creating a fusion of these materials to produce a melt consisting of two layers with a slag of the flux and gangue (waste) minerals on top and molten impure metals below. This generally produces an unfinished product (matte) requiring refining.
Sponge		A granular (shot) form of PGM. Commonly, the form required for manufacture of many PGM-based chemicals and catalysts.
Stope		A localized area of underground excavation from which ore is extracted.
Strike		The course, direction or bearing of a vein or a layer of rock.
Tailings		That portion of the mined material that remains after the valuable minerals have been extracted.
TBRC		A “top-blown rotary converter,” a rotating furnace vessel which processes PGM-rich matte received from the smelter furnace, removing iron from the molten material by injecting a stream of oxygen. This process converts iron sulfides into an iron oxide slag which floats to the surface for separation.
Tonne		A metric unit measure used in the mining industry. One tonne is equal to about 1.1 short tons or 2204.6 pounds. Tonnages for the Marathon Project are reported in tonne.
Tolling		Processing of material owned by others for a fee without taking title to the material.
Troy ounce		A unit measure used in the precious metals industry. A troy ounce is equal to about 31.10 grams. The amounts of palladium and platinum produced and/or sold by the Company are reported in troy ounces. There are 12 troy ounces to a troy pound.
Ultramafic rocks		Igneous rocks composed chiefly of dark, ferromagnesian minerals in the absence of significant lighter-colored feldspars.

Vein		A mineralized zone having regular development in length, width and depth that clearly separates it from neighboring rock.
Wall rock		The rock adjacent to, enclosing, or including a vein, layer, or dissemination of ore minerals. See “Hanging wall” and “Footwall” above.

PART I

ITEMS 1, 1A, AND 2
BUSINESS, RISK FACTORS AND PROPERTIES

INTRODUCTION AND CURRENT OPERATIONS

     Stillwater Mining Company (the Company) is engaged in the development, extraction, processing, refining and marketing of palladium, platinum and associated metals (platinum group metals or PGMs) from a geological formation in south central Montana known as the J-M Reef and from the recycling of spent catalytic converters. The J-M Reef is the only known significant primary source of platinum group metals inside the United States and one of the significant resources outside South Africa and Russia. Associated by-product metals at the Company’s operations include significant amounts of nickel and copper and minor amounts of gold, silver and rhodium. The J-M Reef is a narrow but extensive mineralized zone containing PGMs, which has been traced over a strike length of approximately 28 miles.

     The Company conducts mining operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine near Big Timber, Montana. Ore extraction at both mines takes place within the J-M Reef. The Company operates concentrating plants at each mining operation to upgrade the mined production into a concentrate form. The Company operates a smelter and base metal refinery at Columbus, Montana which further upgrades the mined concentrates into a PGM-rich filter cake. The filter cake is shipped to third-party custom refiners for final refining before the contained PGMs are sold to third parties.

     In the fourth quarter of 2010, the Company announced two new expansion projects along the J-M Reef. The first of these, known as the Blitz project, will develop new underground drifts on two levels from the current Stillwater Mine toward the eastern extremity of the reef. The other project, known as Graham Creek, will develop about 8,200 feet toward the west from the existing East Boulder Mine infrastructure, using a tunnel.

     Besides processing mine concentrates, the Company also recycles spent catalyst material at the smelter and base metal refinery to recover the contained PGMs — palladium, platinum and rhodium. The Company currently has catalyst sourcing arrangements with various suppliers who ship spent catalysts to the Company for processing to recover the PGMs. The Company smelts and refines the spent catalysts within the same process stream as the mined production.

     PGMs are rare precious metals with unique physical properties that are used in diverse industrial applications and in jewelry. The largest use for PGMs currently is in the automotive industry for the production of catalysts that reduce harmful automobile emissions. Besides being used in catalytic converters, palladium is used in jewelry, in the production of electronic components for personal computers, cellular telephones and facsimile machines, as well as in dental applications and in petroleum and industrial catalysts. Platinum’s largest use after catalytic converters is for jewelry. Industrial uses for platinum, in addition to automobile and industrial catalysts, include the manufacturing of data storage disks, fiberglass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells. Rhodium, produced in the Company’s recycling operations and to a limited extent as a by-product from mining, also is used in automotive catalytic converters to reduce nitrogen oxides and in jewelry as a plating agent to provide brightness.

     Through the end of 2010, the Company was party to a ten-year sales agreement with Ford Motor Company (Ford) that in recent years committed 80% of the Company’s mined palladium and 70% of its mined platinum for delivery to Ford. This agreement expired at the end of 2010. The expired Ford supply agreement included certain price floors and caps designed to limit the parties’ exposure to fluctuations in PGM market prices. Except for ounces priced at the floor or cap, the contract provided that metal deliveries were to be priced at a small discount to the trailing month’s average London price for PGMs.

     Until July of 2009, the Company also had a supply agreement with General Motors Corporation (GM) that committed the Company to deliver 20% of its mined palladium each month to GM. The GM agreement also included a floor price and provided for a small discount to market on deliveries not affected by the floor price. On July 22, 2009, as part of the GM bankruptcy proceedings, the bankruptcy court approved a GM petition to reject its obligations under the supply agreement, thereby nullifying the agreement with retroactive effect from July 7, 2009.

     Effective January 1, 2011, the Company has entered into a new three-year supply agreement with GM that provides for fixed quantities of palladium to be delivered to GM each month. The new agreement does not include price floors or caps, but provides for pricing at a small discount to a trailing market price. The specific commercial provisions of the

agreement are contractually confidential. The Company is continuing to negotiate potential supply arrangements with other large PGM consumers and in the meantime is selling its remaining mine production under month-to-month and spot sales agreements.

     At December 31, 2010, the Company had proven and probable ore reserves at its Montana operations, of approximately 41.0 million tons with an average in-situ grade of 0.49 ounces of palladium and platinum per ore ton, containing approximately 19.9 million ounces of palladium and platinum at an in-situ ratio of about 3.57 parts palladium to one part platinum. At December 31, 2010, the Company had proven and probable ore reserves at its recently acquired Marathon Development Project in Ontario, Canada, of approximately 91.4 million tonnes with an average in-situ grade of 1.068 grams of palladium and platinum per ore tonne and 0.247% copper, containing approximately 3.1 million ounces of palladium and platinum at an in-situ ratio of about 3.53 parts palladium to one platinum and 498 million pounds of copper. See “Business, Risk Factors, and Properties — Proven and Probable Ore Reserves”.

2010 — In Review:

•		The Company reported net income of $50.4 million, or $0.51 per diluted share, for the year ended December 31, 2010, compared to a net loss of $8.7 million, or $0.09 per diluted share, in 2009. Contributing to the net income in 2010 were higher PGM prices and recycling sales volumes, along with continued attention to controlling costs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Year Ended December 31, 2010 Compared to Year Ended December 31, 2009.”
•		In 2010, the Company’s mining operations produced a total of 485,100 ounces of palladium and platinum, 8.5% less than the 529,900 ounces produced in 2009. The lower ounce production was primarily attributable to lower realized ore grades than planned in the off-shaft portion of the Stillwater Mine. Total consolidated cash cost per ounce (a non-GAAP measure of extraction efficiency) averaged $397 in 2010, compared with $360 in 2009, due in part to the lower ore grades and ounces produced. Mine production for 2011 is projected at about 500,000 combined ounces of palladium and platinum. Total consolidated cash costs per ounce (a non-GAAP measure) for 2011 currently are projected to be slightly higher than 2010 at around $430 per ounce. See Part II, Item 6 “Selected Financial Data” for further discussion of non-GAAP measures.
•		The Company’s revenues, in terms of dollars and ounces sold, for 2010, 2009 and 2008 were:

Year ended December 31,		Sales Revenues																				Troy Ounces Sold
(in thousands)		Palladium				Platinum				Rhodium				Other(1)				Total				Palladium				Platinum				Rhodium				Other(3)				Total
2010
Mine production		$	186,749			$	166,313			$	3,880			$	24,102			$	381,044				377				112				2				14				505
PGM recycling			36,893				95,911				30,470				5,338				168,612				81				62				13				—				156
Other (2)			6,222				—				—				—				6,222				13				—				—				—				13
Total		$	229,864			$	262,224			$	34,350			$	29,440			$	555,878				471				174				15				14				674
2009
Mine production		$	143,514			$	139,733			$	6,453			$	17,192			$	306,892				393				123				4				15				535
PGM recycling			14,947				45,736				18,666				2,439				81,788				53				40				9				—				102
Other (2)			2,679				3,028				45				—				5,752				12				3				—				—				15
Total		$	161,140			$	188,497			$	25,164			$	19,631			$	394,432				458				166				13				15				652
2008
Mine production		$	163,433			$	160,171			$	16,474			$	20,286			$	360,364				399				115				2				19				535
PGM recycling			47,760				227,358				197,469				2,801				475,388				119				131				25				—				275
Other (2)			19,980				—				—				—				19,980				49				—				—				—				49
Total		$	231,173			$	387,529			$	213,943			$	23,087			$	855,732				567				246				27				19				859

•

Revenues from PGM recycling grew 106% during 2010, increasing to $168.6 million in 2010, from $81.8 million in 2009, a direct result of higher PGM prices and an increase in volumes processed. Recycled ounces sold in 2010 totaled 156,100 ounces, an increase of 53.0% compared to the 102,000 ounces sold in 2009. The Company’s combined average realization on recycling sales (which include palladium, platinum and rhodium) increased to

		$1,046 per ounce in 2010 from $779 per ounce in 2009, reflecting higher PGM prices. In addition to purchased material, the Company processed 235,900 ounces of PGMs on a tolling basis in 2010, up from 128,000 tolled ounces in 2009. Recycled volumes fed to the smelter totaled 399,400 ounces of PGMs in 2010, up 59.1% from 251,000 ounces in 2009; the result of higher availability of recycling materials in the market in 2010. Recycling volumes gradually strengthened as 2010 progressed. Working capital associated with recycling activities in the form of inventories and advances was $41.5 million and $29.0 million at December 31, 2010 and 2009, respectively. Total outstanding procurement advances to recycling suppliers totaled $6.1 million at December 31, 2010. The year-end advance balance reflects the write-down of $0.6 million and $0.5 million against advances on inventory purchases during 2010 and 2009, respectively.
•		On November 30, 2010, the Company acquired the PGM assets of Marathon PGM Corporation, a Canadian exploration company, using $63.6 million in cash and 3.88 million Stillwater common shares. The transaction was valued at US$173.4 million (which included $36.0 million of deferred income tax liability assumed). In conjunction with this acquisition, on November 17, 2010, the Company established Stillwater Canada Inc., a wholly-owned Canadian subsidiary. The principal property acquired is a large PGM and copper deposit located near the town of Marathon, Ontario, Canada. The Marathon deposit is currently in the permitting stage and will not be in production for several years. Cost to develop the Marathon property is currently expected to be between $400 million and $450 million.
•		On December 13, 2010, MMC Norilsk Nickel, the Company’s majority shareholder, announced that it had completed the sale through an underwritten offering to the public of all its equity interest in the Company. As a result, the Company’s public float of common shares more than doubled to about 101.9 million shares, sharply increasing the Company’s trading liquidity without any dilution of the existing shareholders. MMC Norilsk Nickel continues to hold $80 million of the Company’s 1.875% Senior Convertible Debentures due in 2028.

     The Company’s 2010 capital expenditures for its existing operations totaled $50.3 million, an increase from $39.5 million in 2009. Capital spending in 2010 reflected an increase in development spending at the mines, purchases of equipment and completion of some critical infrastructure projects. Capitalized development expenditures for the operating mines totaled $32.2 million in 2010, up from $25.9 million in 2009. Major infrastructure projects during 2010 included completing a new recycling crushing and sampling facility in Columbus and work on the Kiruna electric truck system at the Stillwater Mine. In addition, the Company spent $137.1 million in cash and shares during 2010 to acquire the PGM assets (including a well defined project in Canada) of Marathon PGM Corporation, a Canadian exploration company. Capital spending in 2011 is budgeted at about $120 million, which reflects much higher spending on equipment replacement and mine development, plus substantial spending for improvements at the smelter in Columbus, development spending for the new Blitz and Graham Creek projects in the J-M reef, and continuing work at the Company’s Marathon PGM property in Canada. For a discussion of certain risks associated with the Company’s business, see “Business, Risk Factors and Properties — Introduction and Current Operations”, and “— Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

SAFETY

     Mining operations are conducted at the Stillwater Mine and at the East Boulder Mine and involve the use of heavy machinery and drilling and blasting in confined spaces. The pursuit of safety excellence at the Company continues with the utilization since 2001 of the Company’s “G.E.T. (Guide, Educate and Train) Safe” safety and health management systems. Efforts are focused on accident prevention, seeking safer methods of mining and increased employee awareness and training. Areas of specific focus include enhanced work place examinations, safety standards implementation and compliance, accident/incident investigations, near miss reporting and use of loss control representatives who are part of the mining workforce. Employee-led focus teams have been successful in proactively solving many safety related challenges. The Company continues to use focus teams to address specific safety and health related issues. One of these areas in particular has been in the area of compliance with the Mine Safety and Health Administration (MSHA) diesel particulate matter (DPM) standards. At year end, the Company believes all underground operations are in compliance with these stringent standards through the use of blended bio-diesel fuels, post exhaust treatments, power train advances and high secondary ventilation standards.

     During 2010, the overall Company reportable accident incidence rate improved to 3.65 versus 4.14 (measured as reportable incidents per 200,000 man-hours worked) at the end of 2009 while the severity rate remained essentially unchanged. The 2010 results equate to a 70% reduction in incidence rates for Company employees and contractors since the inception of the “G.E.T. Safe” safety management systems in 2001. The Stillwater Mine Concentrator was awarded the Large Metal/NonMetal Mill Group Sentinels of Safety Award for the State of Montana in 2010. This award was presented for completing all of 2009 (133,586 manhours) without a lost time accident. The Sentinels of Safety program is administered by MSHA and recognizes outstanding safety performance throughout the nation. The metallurgical complex in Columbus,

Montana, continued to maintain a low incidence rate while being recognized by the Montana Department of Labor and Occupational Safety and Health Administration (OSHA) as a leader in workplace safety.

     The smelter, base metal refinery and analytical laboratory continue to participate in and support the Montana Department of Labor’s Safety and Health Achievement Recognition Program (SHARP). They have all received SHARP recognition numerous times. The smelter received a three year SHARP recognition in June of 2010. The base metal refinery and laboratory received SHARP recognition in 2009 and have completed the application process for a 2010 award and are awaiting the results.

     The SHARP program recognizes employers who have demonstrated exemplary achievements in workplace safety and health. By meeting the SHARP inspection requirements, these facilities may be exempt from general OSHA inspections for one year. During 2010, employee participation and involvement was further enhanced through the continued implementation of internal safety auditing processes.

2011 — Looking Forward

     The gradual recovery from the economic recession of 2008 and 2009 has seen demand for the Company’s principal metals, palladium and platinum, increase steadily from their recent lows. The price of palladium, which traded as low as $164 per ounce in December 2008, was quoted in London on the last trading day of 2010 at $797 per ounce. Similarly, platinum has recovered from an October 2008 low of $763 per ounce to $1,755 per ounce at year end 2010. The Company’s combined sales realization on mined palladium and platinum increased from an average of $498 per ounce for the fourth quarter of 2008 to $844 per ounce in the fourth quarter of 2010, a 69% increase. Even more to the point, at the quoted yearend prices, and absent the ceiling prices of the then expiring automobile contract, the Company’s combined sales realization price was at $1,015 per ounce. The stronger PGM prices appear to be the result of recovery in automotive demand in the Western economies, coupled with continued strong growth in automotive production in China and certain other emerging economies. Broadened investor interest in these metals following the introduction of palladium and platinum exchange-traded funds (ETFs) to U.S. investors in January 2010 may have also benefited prices.

     From an operating perspective, the Company’s opportunity to increase production rapidly in response to higher prices is very limited as it is throughout the PGM industry. Production is constrained primarily by the developed state of the mines (i.e., the number and quality of working faces available for mining) and by limits on the availability of skilled manpower and equipment. The Company’s mine plans for 2011 contemplate production out of existing operations of about 500,000 ounces of palladium and platinum, slightly higher than actual production in 2010 but about in line with last year’s original mine plan. Total cash costs per ounce (a non-GAAP measure of mining efficiency) are projected to average about $430 per ounce in 2011, a little higher than the $397 experienced in 2010, reflecting anticipated cost inflation in materials and potential increases in labor costs. Prices for several key commodities (steel, fuel and explosives) used in mine production appear to be experiencing continued upward pressure. The Company’s labor agreement with the represented workforce at the Stillwater Mine and Columbus processing facilities will expire at the end of June 2011.

     Recognizing the robust outlook for PGM pricing and the constraints on increasing production from the existing mines, in the fourth quarter of 2010 the Company announced two new development and potential expansion projects along the J-M reef. The first of these, known as the Blitz project, will develop new underground drifts on two levels from the current Stillwater Mine toward the eastern extremity of the reef, ultimately involving about 20,000 feet of new development on each level. As now contemplated, this development project will take about five years to complete and will cost about $68 million. The other project, known as Graham Creek, will develop about 8,200 feet toward the west from the existing East Boulder Mine infrastructure, using a tunnel boring machine that is already in place underground. This also is about a five-year project but, in view of the single drift and shorter distance, is only expected to cost about $8 million. Definition drilling as these new drifts progress should provide valuable information about the J-M reef in these largely unexplored regions. However, future ore production from these new areas will be contingent on developing new ventilation raises to surface adequate to support mining activities there.

     During 2011, considerable effort also will be devoted to developing the recently acquired Marathon assets in Canada. Work on the principal Marathon resource will include putting a team in place to advance permitting and direct a detailed engineering study and ultimately to manage construction of the mine. A key focus during 2011 will be to advance the mine permitting process, working closely with Canadian federal and provincial agencies and the local communities to develop a plan that addresses environmental concerns and ensures that the development there will be of continuing benefit to the region over the long term.

     With the expiration of the Company’s supply agreement with Ford at the end of 2010, the Company is in discussions with various potential PGM customers for replacement supply agreements. As announced previously, a new three-year palladium sales agreement with GM was signed in December 2010, taking effect in January 2011. The new agreement does not include price floors or caps, but is based on fixed monthly delivery volumes and is priced based on the trailing month’s average market price less a small discount. Pending entering into other term agreements, the Company currently is selling its uncommitted mine production either on a spot basis or under month-to-month arrangements.

     During 2011, the Company plans to strengthen its palladium marketing program, more than doubling its annual marketing budget and seeking to coordinate with others in promoting palladium for jewelry applications. Spending in this area had been reduced during the economic downturn but will now be expanded both in scale and in scope. While palladium is already well established as a jewelry metal in many Asian markets, it is not as widely recognized among European and North American consumers. Marketing programs in 2011 will reach out to these markets to broaden familiarity and strengthen palladium’s image in the retail arena.

     Efforts at longer-term diversification will also continue during 2011. In addition to the acquisition of the Marathon PGM assets in 2010, on December 16, 2010, the Company announced that it had entered into a definitive agreement pursuant to which the Company will acquire some adjacent properties in the Coldwell Complex from Benton Resources Corp., another Canadian exploration company in 2011. During 2010, the Company also exercised an option to purchase a 15% interest in Marathon Gold Corporation, successor to the non-PGM assets that Marathon PGM held prior to the acquisition which includes a gold discovery in Newfoundland that they have announced. Exploration efforts on the Marathon PGM properties will continue in 2011 in order to determine if the extent of the currently defined ore body can be extended, either at depth or to the west, and to further evaluate other property interests as a result of the Marathon and Benton transactions. The Company is focused on PGM opportunities but given the rarity of PGMs has also considered gold, silver, copper and nickel projects, or projects with a combination thereof, in its quest for growth and diversification.

HISTORY OF THE COMPANY

     Mineral exploration in the Stillwater Complex dates from at least the late nineteenth century, with early mining activities — primarily for chromium — beginning in the 1920s. Palladium and platinum were discovered within the Stillwater Complex, by geologists from Johns Manville Corporation (Manville) in the early 1970s, in what then became known as the J-M Reef. In 1979, a Manville subsidiary entered into a partnership agreement with Chevron U.S.A. Inc. (Chevron) to develop PGMs discovered in the J-M Reef. Manville and Chevron explored and developed the Stillwater property and commenced commercial underground mining in 1986.

     Stillwater Mining Company was incorporated in 1992 and on October 1, 1993, Chevron and Manville transferred substantially all assets, liabilities and operations at the Stillwater property into the Company, with Chevron and Manville each receiving a 50% ownership interest in the Company’s stock. In September 1994, the Company redeemed Chevron’s entire 50% ownership. The Company subsequently completed an initial public offering in December 1994 and Manville sold a portion of its shares through the offering, reducing its ownership percentage to approximately 27%. In August 1995, Manville sold its remaining ownership interest in the Company to a group of institutional investors. The Company’s common stock is publicly traded on the New York Stock Exchange (NYSE) under the symbol “SWC”.

     On June 23, 2003, the Company completed a stock transaction with MMC Norilsk Nickel (Norilsk Nickel), whereby a subsidiary of Norilsk Nickel became a majority stockholder of the Company. On that date, the parties entered into a Stockholders Agreement governing the terms of Norilsk Nickel’s investment in the Company. As of December 31, 2009, Norilsk Nickel controlled approximately 51.5% of the Company’s outstanding common shares and held $80 million of the Company’s $166.5 million outstanding 1.875% convertible debentures maturing in 2028. As noted above, in December 2010, Norilsk Nickel announced that it had disposed of its entire equity interest in the Company through an underwritten offering to the public of the Stillwater shares.

     In November 2010, the Company announced that it had completed the acquisition of the PGM assets of Marathon PGM Corporation, a Canadian exploration company. The principal asset acquired in the transaction is a significant PGM-copper resource position in Ontario near the north shore of Lake Superior. In December 2010, the Company announced its intent to further consolidate its position in this district by signing a definitive agreement to purchase some adjacent mineral properties held by Benton Resources Corp., another Canadian exploration company.

STILLWATER AND EAST BOULDER MINES

Project Location

     The Stillwater Complex, which hosts the J-M Reef ore deposit, is located in the Beartooth Mountains in south central Montana. It is situated along the northern edge of the Beartooth Uplift and Plateau, which rise to elevations in excess of 10,000 feet above sea level. The plateau and Stillwater Complex have been deeply incised by the major drainages and tributaries of the Stillwater and Boulder Rivers down to elevations at the valley floor of approximately 5,000 feet.

Geology of the JM Reef

     Geologically, the Stillwater Layered Igneous Complex is composed of a succession of ultramafic to mafic rocks derived from a large complex magma body emplaced deep in the Earth’s crust an estimated 2.7 billion years ago. The molten mass was sufficiently large and fluid at the time of emplacement to allow its chemical constituents to crystallize slowly and sequentially, with the heavier mafic minerals settling more rapidly toward the base of the cooling complex. The lighter, more siliceous suites crystallized more slowly and also settled into layered successions of norite, gabbroic and anorthosite suites. This systematic process resulted in mineral segregations being deposited into extensive and relatively uniform layers of varied mineral concentrations.

     The uniquely PGM-enriched J-M Reef and its characteristic host rock package represent one such layered sequence. The geosciences community believes that the PGM-enriched suite and other minerals characterizing the J-M Reef accumulated at the same time and by the same mechanisms of formation as the rocks enclosing them. Over time, the orientation of a portion of the original horizontal reef and layered igneous complex was faulted an estimated 20,000 feet to the northeast and was tilted upward at angles of 50 to 90 degrees to the north by the Beartooth Uplift. Localized faulting and intrusive mafic dikes are also evident along the 28-mile strike length of exposed Stillwater Complex. The impact of these structural events is localized along the J-M Reef and affects the percent mineable tonnage in an area, create additional dilution, or result in below cut-off grade and barren zones within the reef. The impacts on ore reserves of these events are quantified in the percent mineable discussion under “Proven and Probable Ore Reserves.” The upper portion and exposed edge of the uplifted reef complex were eroded forming the lenticular-shaped surface exposure of the Stillwater Complex and J-M Reef package evident today.

     The J-M Reef package has been traced at its predictable geologic position and with unusual overall uniformity over considerable distances within the uplifted portion of the Stillwater Complex. The surface outcrops of the reef have been examined, mapped and sampled for approximately 28 miles along its east-southeasterly course and over a known expression of over 8,200 feet vertically. The predictability of the J-M Reef has been further confirmed in subsurface mine workings of the Stillwater and East Boulder Mines and by over 37,000 drill hole penetrations.

     The PGMs in the J-M Reef consist primarily of palladium, platinum and a minor amount of rhodium. The reef also contains significant amounts of nickel and copper and trace amounts of gold and silver. Five-year production figures from the Company’s mining operations on the J-M Reef are summarized in Part II, Item 6, “Selected Financial Data.”

Ore Reserve Determination

     As of December 31, 2010, the Company’s total proven palladium and platinum ore reserves were 4.6 million tons at an average grade of 0.54 ounces per ton, containing 2.5 million ounces of palladium and platinum. This represented a net decrease of 3.2% in proven contained ounces compared to the proven ore reserves reported as of December 31, 2009. The Company’s total probable palladium and platinum ore reserves at December 31, 2010, were 36.2 million tons at an average grade of 0.49 ounces per ton, containing 17.4 million ounces of palladium and platinum. Probable reserve contained ounces declined by 3.7% from those reported at December 31, 2009. Combined, the Company’s total proven and probable palladium and platinum ore reserves as of December 31, 2010, were 40.8 million tons at an average grade of 0.49 ounces per ton, containing 19.9 million ounces of palladium plus platinum — a net decrease of 3.6% in total proven and probable contained ounces from the 20.6 million ounces reported as of December 31, 2009.

Methodology

     The Company utilizes statistical methodologies to calculate ore reserves based on interpolation between and projection beyond sample points. Interpolation and projection are limited by certain modifying factors including geologic boundaries, economic considerations and constraints imposed by safe mining practices. Sample points consist of variably

spaced drill core intervals through the J-M Reef obtained from drill sites located on the surface and in underground development workings. Results from all sample points within the ore reserve area are evaluated and applied in determining the ore reserve.

     For proven ore reserves, distances between samples range from 25 to 100 feet but are typically spaced at 50-foot intervals both horizontally and vertically. The sample data for proven ore reserves consists of survey data, lithologic data and assay results. Quality Assurance/Quality Control (QA/QC) protocols are in place at both mine sites to test the sampling and analysis procedures. To test assay accuracy and reproducibility, pulps from core samples are resubmitted and compared. To test for sample label errors or cross-contamination, blank core (waste core) samples are submitted with the mineralized sample lots and compared. The QA/QC protocols are practiced on both resource development and production samples. The resulting data is entered into a 3-dimensional modeling software package and is analyzed to produce a 3-dimensional solid block model of the resource. The assay values are further analyzed by a geostatistical modeling technique (kriging) to establish a grade distribution within the 3-dimensional block model. Dilution is then applied to the model and a diluted tonnage and grade are calculated for each block. Ore and waste tons, contained ounces and grade are then calculated and summed for all blocks. A percent mineable factor based on historic geologic unit values is applied and the final proven reserve tons and grade are calculated.

     Two types of cut-off grades are recognized for the J-M Reef, a geologic cut-off boundary and an economic cut-off grade. The geologic cut-off boundary of 0.3 and 0.2 troy ounces of palladium plus platinum per ton at the Stillwater Mine and the East Boulder Mine, respectively, is an inherent characteristic of the formation of the J-M Reef and is used for calculation of the proven and probable reserves. The economic cut-off grade is lower than the geologic cut-off and can vary between the mines based on cost and efficiency factors. The determination of the economic cut-off grade is completed on a round by round basis and is driven primarily by excess mill capacity and geologic character encountered at the face. See “Proven and Probable Ore Reserves — Discussion” for reserve sensitivity to metal pricing.

     Probable ore reserves are based on longer projections, up to a maximum radius of 1,000 feet beyond the limit of existing drill hole sample intercepts of the J-M Reef obtained from surface and underground drilling. Statistical modeling and the established continuity of the J-M Reef as determined from results of 25 years of mining activity to date support the Company’s technical confidence in estimates of tonnage and grade over this projection distance. Where appropriate, projections for the probable ore reserve determination are constrained by any known or anticipated restrictive geologic features. The probable reserve estimate of tons and grade is based on the projection of factors calculated from adjacent proven reserve blocks or from diamond drilling data where available. The factors consist of a probable area, proven yield in tons per foot of footwall lateral, average grade and percent mineable. The area is calculated based on projections up to a maximum of 1,000-feet; the proven yield in tons per foot of footwall lateral and grade are calculated based on long-term proven ore reserve results in adjacent areas; and the percent mineable is calculated based on long-term experience from actual mining in adjacent areas. Contained ounces are calculated based on area divided by 300 (square feet) times proven yield in tons per foot of footwall lateral times grade (ounces per ton) times percent mineable (%).

     The Company reviews its methodology for calculating ore reserves on an annual basis. Conversion, an indicator of the success in upgrading probable ore reserves to proven ore reserves, is evaluated annually as part of the reserve process. The annual review examines the effect of new geologic information, changes implemented or planned in mining practices and mine economics on factors used for the estimation of probable ore reserves. The review includes an evaluation of the Company’s rate of conversion of probable reserves to proven reserves.

     The proven and probable ore reserves are then modeled as a long-term mine plan and additional factors including process recoveries, mining methods, metal prices, mine operating productivities and costs and capital estimates are applied to determine the overall economics of the ore reserves.

SEC Guidelines

     The United States Securities and Exchange Commission (SEC) have established guidelines contained in Industry Guide No. 7 to assist registered companies as they estimate ore reserves. These guidelines set forth technical, legal and economic criteria for determining whether the Company’s ore reserves can be classified as proven and probable.

     The SEC’s economic guidelines have not historically constrained the Company’s ore reserves, and did not constrain the ore reserves at December 31, 2010. Under these guidelines, ore may be classified as proven or probable if extraction and sale result in positive cumulative undiscounted cash flow. The Company utilizes both the historical trailing twelve-quarter average combined PGM market price and the current PGM market price in ascertaining these cumulative

undiscounted cash flows. In testing ore reserves at December 31, 2010, the Company applied the trailing twelve-quarter combined average PGM market price of about $624 per ounce, based upon the twelve-quarter average palladium price of about $381 per ounce and the twelve-quarter average platinum price of about $1,464 per ounce.

     The Company believes that it is appropriate to use a long-term average price for measuring ore reserves, as such a price better matches the period over which the reserves will ultimately be mined. However, should metal prices decline substantially from their present level for an extended period, the twelve-quarter trailing average price might also decline and could result in a reduction of the Company’s reported ore reserves.

     The Company’s board of directors has established an Ore Reserve Committee, which met three times during 2010 with management who also met with outside experts to review ore reserve methodology, to identify best practices in the industry and to receive reports on the progress and results of the Company’s mine development efforts. The Committee has reviewed the Company’s ore reserves as reported at December 31, 2010, having met with management and with the Company’s independent consultant on ore reserves.

Results

     The December 31, 2010, ore reserves were reviewed by Behre Dolbear & Company, Inc. (Behre Dolbear), third party independent consultants, who are experts in mining, geology and ore reserve determination. The Company has utilized Behre Dolbear to carry out independent reviews and inventories of the Company’s ore reserves since 1990. Behre Dolbear has consented to be a named expert herein. See “Business, Risk Factors and Properties — Risk Factors — Ore Reserves Are Very Difficult to Estimate and Ore Reserve Estimates May Require Adjustment in the Future; Changes in Ore Grades, Mining Practices and Economic Factors Could Materially Affect the Company’s Production and Reported Results.”

     The Stillwater Mine proven and probable ore reserves at year-end 2010 decreased by 4.1% in terms of ore tons from those reported at year-end 2009. The East Boulder Mine proven and probable ore reserves at year-end 2010 decreased by 1.9% in ore tons from those reported at year-end 2009. Overall, the Company’s estimated proven and probable ore reserves based on ore tons decreased by 0.5% in 2010. The Company’s ore reserve determination for 2010, calculated at December 31, 2010, was limited by geologic certainty and not by economic constraints.

PROVEN AND PROBABLE ORE RESERVES

     The Company’s proven ore reserves are generally expected to be extracted utilizing existing mine infrastructure. However, additional infrastructure development will be required to extract the Company’s probable ore reserves. Based on the 2011 mining plans at each mine, the year-end 2010 proven ore reserves of 2.6 million tons at the Stillwater Mine and 2.1 million tons at the East Boulder Mine represent an adequate level of proven ore reserves to support planned mining activities.

     The grade of the Company’s ore reserves, measured in combined platinum and palladium ounces per ton, is a composite average of samples in all reserve areas. As is common in underground mines, the grade mined and the recovery rate achieved varies depending on the area being mined. In particular, mill head grade varies significantly between the Stillwater and East Boulder mines, as well as within different areas of each mine. During 2010, 2009 and 2008, the average mill head grade for all tons processed from the Stillwater Mine was 0.50, 0.56 and 0.51 PGM ounces per ton of ore, respectively. During 2010, the average mill head grade for all tons processed from the East Boulder Mine was about 0.39 PGM ounces per ton of ore compared to an average mill head grade of 0.38 PGM ounces per ton of ore in 2009 and 2008. Concentrator feeds at both mines typically include, along with the ore, some PGM-bearing material that is below the cut-off grade for reserves (reef waste) but that is economic to process so long as there is capacity available in the concentrator.

     As of December 31, 2010, 2009 and 2008 the Company’s proven and probable ore reserves were as follows:

		2010												2009												2008
						AVERAGE				CONTAINED								AVERAGE				CONTAINED								AVERAGE				CONTAINED
		TONS				GRADE				OUNCES				TONS				GRADE				OUNCES				TONS				GRADE				OUNCES
		(000’s)				(OUNCE/TON)				(000’S)				(000’s)				(OUNCE/TON)				(000’S)				(000’s)				(OUNCE/TON)				(000’S)
Stillwater Mine(2)
Proven Reserves			2,559				0.64				1,648				2,606				0.66				1,712				2,911				0.65				1,898
Probable Reserves			13,116				0.62				8,176				13,748				0.63				8,688				14,030				0.64				8,911
Total Proven and Probable Reserves(1)			15,675				0.63				9,824				16,354				0.64				10,400				16,941				0.64				10,809
East Boulder Mine(2)
Proven Reserves			2,059				0.41				848				2,036				0.43				867				2,066				0.45				935
Probable Reserves			23,064				0.40				9,199				22,607				0.41				9,347				19,202				0.45				8,717
Total Proven and Probable Reserves(1)			25,123				0.40				10,047				24,643				0.41				10,214				21,268				0.45				9,652
Total Company Reserves(2)
Proven Reserves			4,618				0.54				2,496				4,642				0.56				2,579				4,977				0.57				2,833
Probable Reserves			36,180				0.49				17,375				36,355				0.50				18,035				33,232				0.53				17,628
Total Proven and Probable Reserves(1)			40,798				0.49				19,871	(3)			40,997				0.50				20,614				38,209				0.54				20,461

Discussion

     The Company’s total proven and probable ore reserve tonnage at December 31, 2010, increased by about 6.8% or 2.6 million tons over the past two years. However, total contained ounces in proven reserves decreased by about 11.9% from those reported December 31, 2008. In 2010, proven and probable tons decreased 0.5% and contained ounces decreased by 3.6% from those reported December 31, 2009. In 2009, proven and probable tons increased 7.3% while contained ounces slightly increased by 0.7% from those reported December 31, 2008. The Company’s mine development efforts over the past several years have focused on converting probable reserves to proven reserves, rather than on adding new probable reserves.

     Changes in proven and probable ore reserves are due to the net effect of:

	•		Additions to proven ore reserves from new definition drilling,
	•		Deletions as proven reserves are mined,
	•		Deletions from probable ore reserves as areas are converted by new drilling from probable to proven ore reserves,
	•		Additions from development activity to convert mineralized inventory to probable ore reserves,
	•		Additions and deletions from adjustments to ore reserve estimation factors and mine planning criteria. The cut-off grade used in mine planning is 0.3 ounces of platinum and palladium per ton for the Stillwater Mine and is 0.2 ounces of platinum and palladium per ton for the East Boulder Mine. The economic value of this cut-off grade varies with platinum and palladium prices and with the different mining methods employed, their costs and their efficiency.

     The Company’s production levels for palladium and platinum are driven by the number of ore tons mined, the mill head grade of the ore and the metallurgical recovery percentages. The Company measures its net mine production in terms of the number of ounces contained in the mill concentrate, adjusted for subsequent processing losses expected to be incurred in smelting and refining. The Company defines an ounce of metal as “produced” at the time it is transferred from the mine and received at the concentrator. Depletion, depreciation and amortization costs are inventoried at each stage of production.

     The graph above provides a general indication of the sensitivity of the Company’s ore reserves to the long-term weighted average price of platinum and palladium, assuming the relative proportions of the two metals realized at the Company’s mines. It is based on the mine plan and model the Company uses to measure reserve economics, and reflects some reductions in capital spending at lower price levels where reserves are economically constrained. It does not provide for any adjustments to the planned mining sequence or to the mix of mining methods at lower prices, but instead is derived from a single planning scenario. As such, it should be regarded as indicative rather than definitive.

     The economic analysis of proven and probable reserves at the end of 2010 identified that at a palladium and platinum combined price of about $530 per ounce the stated level of reserves would begin to be reduced by economic constraints. This combined price at which ore reserves become constrained by economics has increased from $400 per ounce in the analysis performed in 2009 and $517 per ounce shown in 2008. The variation in these threshold prices reflects year-on-year changes in mining costs, current development and production method assumptions, adjustments to ore grade and mine plans, and economic performance due to changing market prices during those periods. The Company has not tested the ore reserves beyond the level shown above because of the expense of accessing and drilling to establish ore reserves and because of the extensive life of a 19.9 million ounce reserve.

MARATHON DEVELOPMENT PROJECT

Location

     The Marathon PGM-Cu project (the “project”) is located 10 kilometers (km) north of the town of Marathon, Ontario. The project site is in an area characterized by typical boreal vegetation, moderate to steep hilly terrain and numerous streams, ponds and shallow lakes. The project area is bounded to the east by the Pic River and Lake Superior to the south-west. The climate of this area is typical of northern areas within the Canadian Shield, with long winters and short, warm summers.

     The project area is conveniently situated in close proximity to population centers, the Trans-Canada Highway, electrical transmission corridor, rail lines, Great Lake port facilities and a regional airport.

Project Description

     The Marathon PGM-Cu project is an advanced stage development project undergoing preparations for the construction and commercial commissioning of a conventional open pit mining and processing operation. The planned operations will be owner-operated employing its own equipment and workforce.

     Near term project activities include detailed engineering, design and construction of the mine, processing facilities and support infrastructure. The present mine plan includes development of a substantial main pit and the sequential mining of several smaller satellite pits. Mineral resources and ore reserves were determined in an independent study performed by a third party and documented in a January 8, 2010 report: “Technical Report on the Updated Feasibility Study for the Marathon PGM-Cu Project, Marathon, Ontario, Canada”. Proven and probable reserves total 91 million tonnes grading 0.246% copper and 1.07 g/t Pd+Pt. Planned operations include mining and processing at a nominal rate of 22,000 tonnes per day for a mining life of approximately 11.5 years.

     The project will require an estimated 300 workers during the construction phase and 130 to 250 permanent full time positions during the life of mine operations. Approximately three spin-off jobs (suppliers, contractors) will result in the region for each full time position.

     The PGM-copper ores will be processed (crushed, ground and concentrated) at on-site processing facilities to produce a marketable concentrate product containing copper, palladium, platinum, rhodium, silver and gold. The concentrate will be transported off-site via road and rail to a commercial smelter and refinery for subsequent metal extraction and separation. The residual material or “process solids” resulting from the milling process will be deposited in the Process Solids Management Facility (PSMF). Multiple sites within the project area have been evaluated as potential locations for the PSMF of which two preferred sites are undergoing final consideration and environmental assessment. The non-ore bearing mine rock produced, will be permanently stored in purposefully built Mine Rock Storage Areas (MRSAs) located west and east of the main pit.

     Incremental reclamation activities are planned throughout the operation’s life. At final closure, and upon the completion of an end of life closure plan, the Company will have secured and remediated the project site to a condition facilitating sustainable future or traditional use by the local and First Nations communities.

     Stillwater Canada Inc. is continuing with baseline environmental and socio-economic studies and is engaged with federal, provincial regulatory ministries and First Nation communities to secure the required permits and approvals for mine construction and operation. In December 2008, the project was accepted under the Major Projects Management Office (MPMO) initiative. A formal project description was submitted to the Canadian Environmental Assessment Agency (CEAA) in March 2010, which triggered the Federal Environmental Assessment (FEA) process. On October 7, 2010, the project was referred to an independent review panel. All federal and provincial approvals are anticipated in 2013 allowing commencement of commercial production in 2014.

Geology of the Marathon Deposit

     The Marathon PGM-Cu deposit is hosted by the Eastern Gabbro Series of the Proterozoic Coldwell Complex, a large intrusive body that intrudes and bisects the Archean aged Schreiber-Hemlo Greenstone Belt. The Coldwell is a composite magmatic intrusion and the largest alkaline intrusive complex in North America. It is approximately 25 km in diameter with a surface area of 580 square kilometers. The Coldwell Complex was emplaced in three nested intrusive cycles introduced sequentially during cauldron subsidence near where the northern end of a regional-scale fault system intersected Archean rocks, near the north shore of Lake Superior.

     Mineralization at the Marathon PGM-Cu deposit is related to a large magmatic system consisting of three or more cross-cutting intrusive olivine gabbro units that comprise the Eastern Gabbro Series of the Coldwell Complex. In order of intrusion, the three gabbroic units consist of Layered Gabbro Series, Layered Magnetite Olivine Cumulate (LMOC) and Two Duck Gabbro (TD Gabbro). Late quartz syenite and augite syenite dikes cut all of the gabbros but form a minor component of the intrusive assemblage. The TD Gabbro is the dominant host rock for copper-PGM mineralization and is a principal focus of exploration in the district. The mineralized zones occur as shallow dipping sub parallel lenses that follow the basal gabbro contact and form distinct mineral horizons designated as Footwall, Main, Hanging Wall and W-Horizon. The Main Zone is the thickest and most continuous zone. Additional accumulations of copper-PGM mineralization are associated with LMOC and occur in the hanging wall of the deposit.

Mineral Resource & Reserve Estimate

     Resource and reserve estimates were determined by an independent study performed by a third party effective November 2009. The mineral resource model used to estimate the mineral resources applied the same pit optimization, pit design, production scheduling and diluted block model used for the January 2010 updated technical report and feasibility studies. Only material in the block model with the resource classification of ‘measured’ or ‘indicated’ were considered as potential mill feed. In addition to the estimated grade values for Cu, Pd, Pt, Au, Ag, and Rh contained within the diluted block model, other variables were calculated or input into the diluted block model. These included the net smelter return, geotechnical parameters, block economic net value, haulage simulation results, block material type, and whittle rock types. In order to complete an open pit design on the Marathon PGM-Cu deposit, the following data, criteria and procedures were used:

	•		The available geotechnical data describing the inter ramp slope angle, slope sectors, and berm widths that are required to develop a geotechnically stable pit design;
	•		Economic and metallurgical criteria such as estimated metal pricing, metal recoveries, downstream operating costs (smelting, refining, and shipping), currency conversion rates, and projected annual mill feed requirements; and
	•		Pit optimization based on the economic, metallurgical, geotechnical and production requirements for the project. Pit optimization was completed using a Lerchs-Grossmann algorithm (LG) on the block model. GEMCOM’s LG software, the Whittle optimizer was selected. Once a pit optimization was completed, the selected pit shell was used as a design basis for the open pit.

Proven & Probable Reserve Estimate

     For the Marathon PGM-Cu deposit, three major mining areas are present; the North pit, the South pit and the Malachite pit. Once the three pit areas were designed, a production schedule was then prepared, followed by equipment selection and estimation of operating costs, capital costs and personnel requirements. Mineral reserves have been estimated for the North, South and Malachite pits from the diluted block model, pit optimization and pit design. The mineral reserves are summarized in the table below:

						Pd				Pt				Au				Cu				Ag				Cu				Pd				Pt				Au				Ag
Classification		Tonnes				(g/t)				(g/t)				(g/t)				(%)				(g/t)				(Mlb)				(oz 000)				(oz 000)				(oz 000)				(oz 000)
Proven			76,461,000				0.910				0.254				0.090				0.268				1.464				452				2,237				625				222				3,600
Probable			14,986,000				0.435				0.147				0.060				0.138				1.318				46				209				71				29				635
Total			91,447,000				0.832				0.237				0.085				0.247				1.440				497				2,447				696				251				4,235

The mineral reserve estimate presented in the table above is effective as of November 24, 2009. The estimated ounces of proven and probable reserves include mining losses but do not include processing losses. Table tonnages are reported in metric tonnes.

IMPAIRMENT OF LONG-LIVED ASSETS

     The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. The estimation of future cash flows takes into account estimates of recoverable ounces, PGM prices (long-term sales contract prices and historical pricing trends or third party projections of future prices rather than prices at a point in time as an indicator of longer-term future prices), production levels, and capital and reclamation expenditures, all based on life-of-mine plans and projections. If the assets are impaired, a calculation of fair market value is performed, and if fair market value is lower than the carrying value of the assets, the assets are reduced to their fair market value.

     The Company determined that there was no material event or change in circumstances requiring the Company to test its long-lived assets for impairment at December 31, 2010, or December 31, 2009. However, during the latter part of 2008, in view of a steep decline in metals prices during that year, the Company concluded that the economic circumstances in which the Company operates had changed significantly. Therefore, at the end of 2008, the Company assessed whether total estimated undiscounted future cash flows at the Stillwater and the East Boulder Mines would be sufficient to recoup the carrying amount of each asset. Based on the mine plans as of December 31, 2008, and an

assessment of long-term pricing, the Company determined that undiscounted future cash flows at the Stillwater Mine were sufficient to return the carrying value, but the undiscounted future cash flows projected at the East Boulder Mine were not sufficient to cover the carrying value there. Consequently, with the assistance of Behre Dolbear, the Company assessed the fair value of the East Boulder Mine assets at December 31, 2008, and concluded that a valuation adjustment was needed at East Boulder. Accordingly, the Company recorded a $67.3 million charge against earnings at December 31, 2008, reducing the carrying value of the East Boulder Mine assets to $161.4 million at that date.

     Assumptions underlying future cash flows are subject to certain risks and uncertainties. Any differences between projections and actual outcomes for key factors such as PGM prices, recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s ability to recover the carrying amounts of its long-lived assets and so could potentially lead to impairment charges in the future.

CURRENT OPERATIONS

     The Company’s operations are located in south central Montana. The Company conducts mining and milling operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine south of Big Timber, Montana. Both mines are located on mine claims that follow the apex of the J-M Reef. The Company operates a smelter and base metal refinery, and recycling facilities at Columbus, Montana.

Montana Properties and Facilities — February 2011

     The Company’s original long-term development strategy and certain elements of its current planning and mining practices on the J-M Reef ore deposit were founded upon initial feasibility and engineering studies conducted in the 1980’s. Initial mine designs and practices were established in response to available technologies and the particular characteristics and challenges of the J-M Reef ore deposit. The Company’s current development plans, mining methods and ore extraction schedules are designed to provide systematic access to, and development of, the ore deposit within the framework of current and forecast economic, regulatory and technological considerations as well as the specific characteristics of the J-M Reef ore deposit. Some of the challenges inherent in the development of the J-M Reef include:

•		Surface access limitations (property ownership and environmental sensitivity);
•		Topographic and climatic extremes involving rugged mountainous terrain and substantial elevation differences;
•		Specific configuration of the mineralized zone (narrow — average width 5 feet, depth — up to 1.5 miles of vertical extent, and long — approximately 28 miles in length), dipping downward at an angle varying from near vertical to 38 degrees;
•		A deposit which extends both laterally and to depth from available mine openings, with travel distances underground from portal to working face of up to six miles; and
•		Proven and probable ore reserves extending for a lateral distance of approximately 32,000 feet at the Stillwater Mine and approximately 12,500 feet at the East Boulder Mine — a combined extent underground of approximately 8.4 miles, with active underground travelways and ramps on multiple levels totaling more than 85 miles in extent that must be maintained and supported logistically.

2010 Safety Performance

     Safety performance at the Company’s mining operations falls under the regulatory jurisdiction of the U.S. Mine Safety and Health Administration (MSHA). MSHA performs detailed quarterly inspections at each of the Company’s mine sites and separately investigates any occurrences deemed to pose a significant hazard to employee health and safety. The Company cooperates fully with MSHA in its compliance responsibilities and maintains its own safety management system to ensure that no employee is put at risk in carrying out his or her job responsibilities and unsafe conditions are identified and remediated immediately.

     MSHA enforcement powers include a broad range of alternatives, including issuing citations for violations of mandatory health or safety standards under the Federal Mine Safety and Health Act of 1977 (the Mine Act), elevated citations for violations that could significantly and substantially contribute to a safety or health hazard, 104(b) withdrawal orders for failure to abate a violation, 104(d) orders for unwarrantable failure of a mine operator to comply with mandatory health or safety standards, 110(b)(2) citations for flagrant violations of the Mine Act, and 107(a) imminent danger withdrawal orders. In addition, MSHA has authority to put on notice or close mining operations that demonstrate a continuing pattern of violations of the Mine Act and to impose criminal penalties on mine operators who fail to address violations of mine health and safety standards.

     In legislation signed into law on July 21, 2010, publicly traded mining companies are required to disclose certain statistics pertaining to their compliance with the Mine Act. The table below includes these statistics for the full year 2010. For each mine site, the numbers listed below are numbers of actual issuances of citations/orders except for proposed assessment dollar values.

		Section				Section				Section				Section				Assessment				Legal
		104 (S&S)				104 (b)				104 (d)				107 (a)				(in 000’s)				Actions
Stillwater Mine			58				—				1				2	(1)		$	187				10
East Boulder Mine			26				—				—				—			$	34				2

     For the year ended December 31, 2010, none of the Company’s mines received written notice from MSHA of (i) a flagrant violation under section 110(b)(2) of the Mine Act; (ii) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of other mine health or safety hazards under section 104(e) of the Mine Act; or (iii) the potential to have such a pattern. During the year ended December 31, 2010, the Company experienced no fatalities at any of its mines.

     As of December 31, 2010, the Company had a total of 12 matters pending before the Federal Mine Safety and Health Review Commission. This includes legal actions that were initiated prior to the three months ended December 31, 2010, and which do not necessarily relate to the citations, orders or proposed assessments issued by MSHA during such twelve-month period.

     The Company believes that the ultimate disposition of these alleged Mine Act violations and the pending legal dockets before the Commission will not have a material adverse effect on the Company’s business, financial condition, results of operations or liquidity.

EMPLOYEES

     The following table indicates the number of Company employees (excluding contractors) in the respective areas:

		Number of Employees
SITE		at December 31,
		2010				2009				2008
Stillwater Mine			850				797				869
East Boulder Mine			280				265				261
Smelter and Refinery Complex			169				158				169
Administrative Support			55				53				65
Total			1,354				1,273				1,364

     All of the Company’s hourly employees at the Stillwater Mine, the East Boulder Mine, the smelter and the base metal refinery are represented by the United Steelworkers of America (USW). The Company is party to a four-year labor agreement expiring on July 1, 2011, that covers substantially all hourly workers at the Stillwater Mine, the smelter and the base metal refinery and provides for annual wage increases of approximately 3.5% per annum. Separately, the labor contract covering all hourly workers at the East Boulder Mine is due to expire on July 1, 2012. See “Business, Risk Factors and Properties — Risk Factors — Limited Availability of Additional Mining Personnel and Uncertainty of Labor Relations May Affect the Company’s Ability to Achieve Its Production Targets.”

STILLWATER MINE

     The Company conducts underground mining operations at its wholly-owned Stillwater Mine, near Nye, Montana. The Stillwater Mine facility accesses, extracts and processes PGM ores from the eastern portion of the J-M Reef using mine openings located in the Stillwater Valley. In addition, the Company owns and maintains ancillary buildings that contain the concentrator, shop and warehouse, changing facilities, headframe, hoist house, paste plant, water treatment, storage facilities and office. All surface structures and tailings management facilities are located within the 2,475 acre Stillwater Mine Operating Permit area. Ore reserves developed at the Stillwater Mine are controlled by patented mining claims either leased or owned outright by the Company. The mine is located approximately 85 miles southwest of Billings, Montana, and is accessed by a paved road. The mine has adequate water and power from established sources. See “Business, Risk Factors and Properties — Risk Factors — Uncertainty of Title to Properties — The Validity of Unpatented Mining Claims is Subject to Title Risk.”

     The Stillwater Mine accesses and has developed a 5.9-mile-long underground segment of the J-M Reef, between the elevations of 2,000 and 7,300 feet above sea level. Access to the ore at the Stillwater Mine is accomplished by means of a 1,950-foot vertical shaft and by a system of horizontal adits and drifts driven parallel to the strike of the J-M Reef at vertical intervals of between 150 feet and 300 feet. Seven main adits have been driven from surface portals on the west and east slopes of the Stillwater Valley at various elevations between 5,000 and 5,900 feet above sea level. Several additional principal levels have been developed below the 5,000-foot level down to the 3,200-foot elevation, accessed from the vertical shaft and the associated shaft ramp system. Ore from this region of the mine is hauled by truck and/or rail to the shaft, where it is crushed and hoisted out of the mine. The Company is continuing to develop a decline system below the 3,200-foot elevation to access and develop deeper areas in the central part of the mine below those currently serviced by the existing shaft. At the end of 2010, this decline system extended down to the 2,000 foot level.

     The 1,950-foot vertical shaft was constructed between 1994 and 1997 as part of the Company’s plan to increase output from 1,000 to 2,000 tons of ore per day and was sunk adjacent to the concentrator (starting at the 5,000-foot elevation) to increase efficiency of the operation. Ore and any waste rock to be transported to the surface from the off-shaft and deeper areas of the mine are crushed prior to being hoisted up the shaft. The production shaft and underground crushing station reduce haulage times and costs, facilitate the handling of ore and waste and improve the grinding capabilities of the concentrator. Ore from above the 5,000-foot west elevation is hauled to the surface by rail. Waste material not used for backfilling in underground excavations is transported to the surface and placed in permitted waste rock disposal sites.

     The Stillwater Mine currently uses its 30 footwall lateral drifts and 6 primary ramps and vertical excavations to provide personnel and equipment access, supply haulage and drainage, intake and exhaust ventilation systems, muck haulage, backfill plant access, powder storage and/or emergency egress. The footwall lateral and primary ramp systems

will continue to provide support for production and ongoing development activities. In addition, certain mine levels are required as an integral component of the ventilation system and serve as required intake and/or exhaust levels, or as parallel splits to maintain electrical ventilation horsepower balance and to meet MSHA requirements. MSHA regulations require the Company to designate alternate (secondary) escapeways from mine workings. These levels, in addition to comprising critical functional components of the ventilation and escapeway system, serve as permanent mine service and utility infrastructure for road and rail transportation, dewatering and backfill pumping facilities. They have been designed and are intended to be used for the life of the mine.

     During 2007, the Company began construction of a second major decline ramp from the 3,500 level of the existing shaft with eventual development down to about the 1,900-foot elevation. The first-phase installation of the Kiruna electric trucks at Stillwater Mine that will provide more efficient ramp haulage from the deeper portions of the off shaft area — a long-term project — is now nearly complete and should open up more mining alternatives in that part of the mine. In the future, the Company expects to install a horizontal rail haulage system on the 2,000 foot level to transport ore and waste material from the deeper mining faces to the electric truck ramps.

     Prior to 1994, almost all of the Company’s mining activities utilized captive cut-and-fill stoping methods. This is a manpower-intensive mining method that extracts the ore body in eight to ten foot high horizontal cuts within the reef, accessed from vertical raises and mined with conventional jackleg drills and slushers. The open space created by the extraction of each cut is backfilled with waste rock and coarse concentrator tailings and becomes the floor for the next level of mining as the process moves upward. Commencing in 1994, the Company introduced two mechanized mining methods: ramp-and-fill and sub-level stoping. Ramp-and-fill is a mining method in which a series of horizontal cuts are extracted from the ore body using mobile equipment. Access to the ore body is from ramps driven within or adjacent to the ore body allowing the use of hydraulic drills and load-haul-dump equipment. Sub-level stoping is a mining method in which blocks of the reef approximately 50 feet high and up to 75 feet in length are extracted in 30-foot intervals utilizing mobile long-hole drills and remote control rubber tired load-haul-dump equipment. The reef is mined in a retreat sequence and mined out areas are filled with development waste or sand backfill as appropriate. Traditionally, captive cut-and-fill has been viewed as being more selective in nature than either ramp-and-fill or sub-level stoping, but it also requires miners with special skills and is generally less productive. Other factors considered in determining the most appropriate mining method for each area include the amount of ancillary development required as well as the ore grade and ground conditions expected. The Company determines the appropriate mining method to be used on a stope-by-stope basis utilizing an engineering and economic analysis.

     The Company processes ore from the Stillwater Mine through a surface concentrator facility (mill) adjacent to the Stillwater Mine shaft. The mill has a permitted design capacity of 3,000 tons per day. During 2010, an average of 1,951 tons of ore and 187 tons of sub-grade material were processed through the mill per calendar day. In addition, on average the mill processed 108 tons per calendar day of smelter slag. Crushed ore is fed into the concentrator, mixed with water and ground to slurry in the concentrator’s mill circuits to liberate the PGM-bearing sulfide minerals from the rock matrix. Various reagents are added to the slurry, which then is agitated in a froth flotation circuit to separate the valuable sulfides from the waste rock. In this circuit, the sulfide minerals are successively floated, recycled, reground and refloated to produce a concentrate suitable for further processing. The flotation concentrate, which represents approximately 1.5% of the original ore weight, is filtered, placed in large bins and then transported by truck 46 miles to the Company’s metallurgical complex in Columbus, Montana. In 2010, 51% of the tailings material from the mill was returned to the mine and used as fill material to provide support for additional mining activities. The balance was placed in tailings containment areas on the surface. No additional steps are necessary to treat any tailings placed back into the mine or into the impoundments, as they are environmentally inert. Tailings are disposed of into the impoundment areas pursuant to the Company’s operating permits. Mill recovery of PGMs is historically about 92%. During 2008, failure of a critical drive gear on part of the fine grinding circuit caused recoveries to temporarily drop down to the 91% range.

     In 1998, the Company received an amendment to its existing operating permit providing for the construction of a lined surface tailings impoundment that would serve the Stillwater Mine for approximately the next 30 years. This facility, located about eight miles from the mine and generally referred to as the Hertzler impoundment, was placed into operation in late 2000. See “Business, Risk Factors and Properties — Current Operations — Regulatory and Environmental Matters — Permitting and Reclamation”.

     During 2010, the Stillwater Mine produced 351,700 ounces of palladium and platinum, 10.7% below the 393,800 ounces produced in 2009. This lower 2010 production was attributable to several factors, including a safety initiative that diverted miners for a time into remedial ground control efforts, an unplanned loss of a power center that took several key stopes off line for about a month, and generally lower than anticipated realized ore grades in the off-shaft portion of the

mine. The Stillwater Mine’s total cash costs (a non-GAAP measure) averaged $380 per ounce in 2010 compared to $344 per ounce in 2009. These total cash costs are net of recycling and by-product sales credits — without the benefit of these credits, Stillwater Mine’s total cash costs would have averaged $458 per ounce in 2010 and $397 per ounce in 2009. Analysis of this 10.4% increase in average costs (net of credits) indicates the higher 2010 cost per ounce was almost entirely attributable to the lower ounces produced in 2010 at the Stillwater Mine. See Part II, Item 6, “Selected Financial Data” for further discussion of non-GAAP measures.

EAST BOULDER MINE

     The East Boulder Mine is located in Sweet Grass County, Montana, approximately 32 miles southeast of the town of Big Timber and is accessed by a public road. The East Boulder Mine is fully permitted independently of the Stillwater Mine and comprises a second distinct mining operation accessing the western portion of the J-M Reef. The mine consists of underground mine development and surface support facilities, including a concentrator, shop and warehouse, changing facilities, storage facilities, office and tailings management facility. All mine facilities are wholly owned and operated by the Company. Surface facilities for the East Boulder Mine are situated on unpatented mill site claims maintained on federal lands located within the Gallatin National Forest and administered by the U.S. Forest Service. All surface facilities, including the tailings management complex, are located within a 980 acre operating permit area. Proven and probable ore reserves for the mine are controlled by patented mining claims owned by the Company. Development of the East Boulder Mine began in 1998, and it commenced commercial production effective January 1, 2002.

     From the surface facilities at East Boulder, the J-M reef is accessed by two 18,500-foot long, 15-foot diameter horizontal adits driven into the mountain. These adits are equipped with rail haulage and intersect the ore body at an elevation 6,450 feet above sea level. Within the mine, the ore body currently is developed from seven levels of horizontal footwall lateral drifts driven parallel to the J-M Reef totaling approximately 37,500 feet in length, and from four primary ramps totaling approximately 16,815 feet of development. The ore body is accessed vertically by ramp systems tying together the footwall laterals and driven approximately every 2,500 feet along the length of the deposit. During 2010, active mining areas were consolidated into seven production zones including two areas below the primary 6,450 haulage level.

     The mined ore is transported horizontally out of the East Boulder Mine by rail haulage to the mine portal, where it is processed through the East Boulder concentrator facility, which has a permitted mill capacity of 2,000 tons per day. Concentrates produced in the mill are transported approximately 75 miles to the Company’s metallurgical complex in Columbus, Montana.

     In 2010, approximately 50% of the East Boulder mine tailings material was returned to the mine and used for backfill in mined out voids to provide a foundation upon which additional mining activities can occur. The balance was placed in surface tailings containment areas. In 2009, approximately 44% of the mine tailings were returned to the mine; sandfill activity was reduced significantly in the 2009 mine plan. No additional steps are necessary to treat any tailings placed back into the mine or into the impoundments, as they are environmentally inert, and tailings placed into the impoundment areas are disposed of pursuant to the Company’s operating permits. The current impoundment area has an estimated staged life of approximately 20 years at the original planned production and processing rate of 2,000 tons per day. Mill recovery of the PGMs contained in the ore was about 89% in 2010 and 2009 and 90% in 2008.

     The East Boulder Mine’s total cash costs (a non-GAAP measure) were $442 per ounce in 2010 compared to $407 per ounce in 2009. These total cash costs include the benefit in each period of recycling and by-product credits — if these credits are excluded, the resulting cash costs would have been $539 per ounce in 2010 and $471 per ounce in 2009. The higher average cash costs per ounce in 2010 were driven mostly by higher labor and materials costs, coupled with the effect of lower ounces produced at the mine. See Part II, Item 6 “Selected Financial Data” for further discussion of non-GAAP measures.

EXPLORATION AND DEVELOPMENT

     The J-M Reef has been explored from the surface along its entire 28-mile strike length by surface sampling and drilling which consists of an array of over 900 drill holes. Exploration activities historically also included driving and then drilling from two exploratory underground adits not currently in active use, the West Fork Adit and the Frog Pond Adit. Comprehensive evaluation of PGM mineralization encountered in the J-M Reef has allowed delineation of indicated ore reserves adjacent to the Stillwater and East Boulder Mines and confirmation of the existence of mineralized material over much of the remaining strike length. Exploration to date has defined sufficient probable ore reserves to

sustain mining for a number of years in the future. It is the Company’s practice to systematically convert its established probable ore reserves to the proven ore category as mine development progresses by performing definition drilling and evaluation coincident with planned advances of underground development.

     A key element of the Company’s development activities in the Stillwater Complex consists of ongoing efforts to convert its established probable ore reserves into proven ore reserves by extending the lateral and vertical development of the Stillwater and East Boulder Mines. These ongoing activities involve constructing and extending mine development workings to access established ore reserves and continuously advancing definition drilling, engineering and mine plans to replace depleted ore reserves. During 2010, 2009 and 2008, $32.2 million, $25.9 million and $55.9 million, respectively, were incurred in connection with capitalized mine development and are included in total capital expenditures. Development spending in 2011 is planned to be about $60.3 million, which should offset the effect of reduced development spending in 2009 and 2010 as well as providing for reserve replacement.

The following table outlines measures that are used by the Company to gauge progress on resource development activities:

Location and Development Activity		2010				2009				2008
Stillwater Mine
New Primary Development (equivalent feet)(1)			19,666				12,323				25,047
New Footwall Lateral (equivalent feet)(1)			9,983				8,430				10,836
New Definition drilling (feet)			291,173				292,701				358,761
East Boulder Mine
New Primary Development (equivalent feet)(1)			3,539				3,602				9,963
New Footwall Lateral (equivalent feet)(1)			2,362				1,522				4,254
New Definition drilling (feet)			81,474				64,448				140,944

     In addition to the development spending planned at the existing mines, about $10 million of spending is planned in 2011 for the two separate development projects along the J-M reef — the Blitz project adjacent to the Stillwater Mine and the Graham Creek project to the west of the East Boulder Mine. These projects are intended to provide access to two promising but largely unexplored segments of the reef and may ultimately allow the Company to expand or extend its mine production. The Company has also planned about $10 million of capital spending in 2011 for detailed engineering and other projects on the recently acquired Marathon PGM properties in Canada (see the COLDWELL COMPLEX below).

     The Company has established an exploration team that will coordinate drilling and evaluation efforts on the Marathon properties. This team of experienced geologists may also pursue other exploration opportunities in the future, with particular emphasis on Canada.

COLDWELL COMPLEX

     In November 2010, the Company announced that it had completed the acquisition of the PGM assets of Marathon PGM Corporation, a Canadian exploration company. The principal asset acquired in the transaction is a significant PGM-copper resource position in Ontario near the north shore of Lake Superior. In December 2010, the Company announced its intent to further consolidate its position in this district by signing a definitive agreement to purchase some adjacent mineral properties held by Benton Resources Corp., another Canadian exploration company.

     The Marathon PGM-copper project is located 10 km north of the town of Marathon, Ontario located on the eastern margin of the Coldwell Complex, a Proterozoic layered intrusion. The palladium, platinum and copper mineralization occurs in the Two Duck Lake gabbro. The known zones of significant mineralization have a total north-south strike length of about 3 km and dip 30° to 40° toward the west. The mineralization has a true thickness ranging from 4 meters (m) to 100m.

     The town of Marathon is situated adjacent to the Trans-Canada Highway on the northeast shore of Lake Superior, approximately 300 km east of the city of Thunder Bay. The Marathon project benefits from excellent location and access to well-developed transportation infrastructure. The project site is in an area characterized by dense vegetation, moderate to steep hilly terrain with a series of streams, ponds and small lakes. The project area is bounded to the east by the Pic River and Lake Superior to the southwest. The climate of this area is typical of northern areas within the Canadian Shield, with long winters and short, warm summers.

     Anaconda Canada originally explored in the project area for copper during the 1960’s and drilled over 36,000 meters in exploring and defining the copper mineralization. In 1985, Fleck Resources acquired the property and focused on re-assaying Anaconda’s drill core for PGMs and completed another 3,615 meters of drilling. Geomaque Exploration (now Rio Narcea Gold Mines, Ltd.) held an option to purchase this project in 2001. Geomaque spent over $1 million on the project and completed a preliminary assessment of the project in April 2001.

     Successive drilling campaigns have progressively added to the Marathon resource on a year over year basis, continually expanding the resource in a systematic approach to exploration. In January 2010, an optimized in-pit resource estimate was released, which is part of the optimized definitive feasibility study for the project. The project consists of the development of an open pit mining and milling operation. The study anticipates that one primary pit and several smaller satellite pits will be mined. During the operating phase of the project, production is expected to be approximately 22,000 tonnes per day. Based upon current reserve estimates and available information the operating life of the mine will be approximately 11.5 years.

     Once development proceeds, the project is expected to create an estimated 300 construction jobs, approximately 130 to 250 permanent full-time life of mine positions and roughly three spin-off jobs (suppliers, contractors) in the region for each full-time position.

     The ore will be processed (crushed, ground, concentrated) at on-site processing facilities. The final products from the mill will be a concentrate product containing copper, palladium, platinum and gold and a by-product of non-mineralized rock called “process solids”. The concentrate will be transported off-site via road and rail to a smelter and refinery for subsequent metal extraction and separation. The process solids resulting from the milling process will be disposed of in a permitted PSMF. Multiple options for process solids disposal have been assessed, which has resulted in two options for final consideration and environmental assessment. The non-ore bearing mine rock produced will be permanently stored in purposefully built MRSAs located west and east of the main pit.

     At closure, or the end of the operational phase of the mine, the project footprint will be reclaimed to permit future use as desired by the local communities and for traditional use by First Nations communities.

     The Company has started the federal and provincial environmental permitting and approvals process for the project. In December 2008, the project was accepted into the MPMO initiative. A project description was submitted to the CEAA in March 2010, which triggered the FEA process. On October 7, 2010 the project was referred to an independent review panel. While there can be no certainty as to the project timeline at this point, the Company’s current planning estimates that all federal and provincial approvals would be received in 2013, which based upon approximately a one-year construction schedule would result in an estimated start of commercial production in 2014 or 2015.

     Stillwater Mining Company has a history of outstanding environmental performance and is committed to construct and operate the Marathon facilities in a safe and environmentally sound manner, in full compliance with relevant federal

and provincial laws and with best environmental practices. The Company prides itself on its ability to work with communities and regulatory agencies, focusing on the design, construction and operation of facilities in a manner that ensures they are managed proactively to protect the environment. The Company strives to be respectful of nature and considerate of all local stakeholders and affected First Nations. The project will bring value to the Company’s shareholders and will improve the social and economic well-being of the nearby communities.

METALLURGICAL COMPLEX

Smelter

     The Company owns a smelter facility and associated real estate located in Columbus, Montana. The smelter facility consists of two electric furnaces, two top blown rotary converters (TBRC’s), a matte granulator and gas handling and solution regeneration systems.

     During 2009, the Company completed construction of the second smelter furnace at the Columbus facility. The new furnace is intended to accommodate forecasted levels of future processing, mitigate any potential operational risk (virtually all of the Company’s metal production is dependent on the availability of the smelter facility), and allow the Company to continue processing during periodic scheduled maintenance shutdowns. After stripping out the old refractory material from the original furnace during 2010, the furnace will be rebricked during 2011 and reconfigured as a “slag cleaning” furnace. In this configuration, slag tapped from the second furnace would be laundered into the original furnace, providing additional residence time for the matte to separate from the slag material with the intent of increasing metal recoveries. Reconfigured as such, the slag cleaning furnace also serves as a backup production furnace if needed.

     Concentrates from the mine sites are transported to the smelter, dried, and fed into the electric furnace. In the furnace, the concentrates are commingled with spent catalyst materials collected by the Company’s recycling business segment. The combined feed is melted in the furnace, where the lighter silica-rich slag separates out into a distinct layer that floats on the heavier nickel-copper PGM-rich matte. The matte is tapped from the furnace periodically and granulated. This granulated furnace matte is then re-melted and processed in a TBRC, which extracts iron from the converter matte. The converter matte is poured from the TBRC, granulated and transferred to the base metals refinery for further processing. The granulated converter matte, approximately 6% of the original smelter feed by weight, consists principally of copper and nickel sulfides containing about 1.5% to 2.0% PGMs. The slag is separately tapped from the furnace, cooled and returned to the mine for reprocessing.

     The gases released from the smelting operations are routed through a gas/liquid scrubbing system, which removes approximately 99.8% of the contained sulfur dioxide. Spent scrubbing solution is treated in a process that converts the sulfur dioxide into gypsum, or calcium sulfate, and regenerates clean scrubbing solution. The gypsum is sold for use as a soil amendment by farmers and as a water treatment additive in the coal bed methane industry.

Base Metal Refinery

     The Company’s base metal refinery is located on property the Company owns adjacent to the smelter in Columbus, Montana.

     The base metal refinery utilizes the patented Sherritt Process, whereby a sulfuric acid solution dissolves the nickel, copper, cobalt and residual iron in the converter matte. These metals are separated chemically from the PGM-bearing converter matte and the copper and nickel ultimately are marketed as by-products. Iron is precipitated from an iron-copper-nickel-cobalt solution and is returned to the smelter to be processed and removed in the slag. A nickel crystallizer circuit produces a crystalline nickel sulfate by-product containing minor amounts of cobalt, which is marketed under sales contracts with various companies. A copper electrowinning circuit removes copper from solution as cathode copper that is marketed to copper refiners for upgrading to commercial grade material. The removal of these metals upgrades the PGM fraction of the converter matte product substantially from about 1.5% PGMs to approximately 37% PGMs.

     The base metal refinery produces a palladium, platinum and rhodium-rich filter cake, which also contains minor amounts of gold and silver. This filter cake is shipped to third-party precious metal refineries in New Jersey and California under tolling agreements that provide the Company with returns of finished metal. The palladium and platinum metals are returned to the Company’s account as 99.95% purity sponge; rhodium, gold and silver are also returned to the Company’s account. The refined metal is then available for delivery to the Company’s customers. The Company pays its refiners a per-ounce refining charge for the toll processing of the refined filter cake, and they also retain a small percentage of the contained metals.

PGM RECYCLING

     The Company regularly sources spent catalytic converter materials containing PGM metals from third-party suppliers and processes them through its metallurgical complex. Such materials may either be purchased outright or may be processed and returned to the supplier for a tolling fee. The spent catalytic material is collected by the third party suppliers, primarily from automobile repair shops and automobile yards that disassemble old cars for the recycling of their parts. The Company also processes spent PGM catalysts from petroleum refineries and other sources, normally on a tolling basis.

     Upon receipt of the PGM materials for recycling, they are weighed, crushed and sampled prior to being commingled with mine concentrates for smelting in the electric furnace. Nickel and copper sulfides which occur naturally in the mine concentrates act as a metallurgical collector to facilitate the chemical extraction of the PGMs from the recycled material.

     In acquiring recycled automotive catalysts, the Company sometimes advances funds to its suppliers in order to facilitate procurement efforts. During 2009, the Company modified its recycling business model to narrow the amount of advances outstanding to such suppliers while at the same time continuing to support and grow the recycling segment. Total outstanding procurement advances to recycling suppliers totaled $6.1 million and $3.6 million at December 31, 2010 and 2009, respectively. In the current business environment, the Company has generally limited working capital advances to new suppliers for material that has been procured and awaiting transit or physically in transit to the Company’s processing facilities.

     Recycled ounces sold in 2010 increased to 156,100 ounces compared to 102,000 ounces in 2009. In addition to purchased material, the Company processed 235,900 ounces of PGMs on a tolling basis in 2010, up from 128,000 tolled ounces in 2009. In total, recycled volumes fed to the smelter increased to 399,400 ounces of PGMs in 2010, up 59.1% from 251,000 ounces in 2009. The stronger volumes in 2010 were mostly the result of more material available in the market in response to higher PGM market prices.

     The Company records revenue and costs of metals sold for the processing of these recycled materials. Revenues from recycling increased substantially to $168.6 million in 2010, from $81.8 million in 2009, but were $475.4 million in 2008. Costs of metals sold were $157.3 million, $75.9 million and $448.4 million for 2010, 2009 and 2008, respectively — most of these costs are associated with purchasing the recycled material for processing. Earnings from the processing of recycled catalysts in 2010, 2009 and 2008, including financing charges to customers, were $11.5 million, $6.5 million and $7.8 million, respectively. Following the steep drop in PGM prices and doubts as to collectability under various commitments with suppliers, the 2010, 2009 and 2008 recycling results included write-downs of $0.6 million, $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business.

     Because of the significant quantities of recycling material typically processed through its smelter and base metal refinery and the substantial time required for processing, the Company usually carries large inventories of recycling material in process. Working capital associated with these recycling activities as inventories and advances was $41.5 million and $29.0 million at December 31, 2010 and 2009, respectively.

OTHER PROPERTIES

     The Company owns a warehouse facility in Columbus, Montana and leases office space in Columbus and Billings, Montana. The Company’s corporate office is located in the office space leased in Billings, Montana. The annual expense for office leases totals $0.3 million per year. The Company also owns parcels of rural land in Stillwater and Sweet Grass Counties, Montana, near its mine and metallurgical complex sites totaling approximately 4,549 acres and additional properties in the communities of Columbus and Big Timber, Montana, Marathon, Ontario and Lac du Bonnet, Manitoba which are used as support facilities.

LONG-TERM FINANCING

Convertible Debentures

     On March 12, 2008, the Company issued and sold $181.5 million aggregate principal amount of senior convertible debentures due in 2028 (debentures). The debentures pay interest at 1.875% per annum, payable semi-annually on March

15 and September 15 of each year. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. Holders of the debentures may require the Company to repurchase all or a portion of their debentures on March 15, 2013, March 15, 2018 and March 15, 2023, or upon the occurrence of certain events including a change in control. The Company may redeem the debentures for cash beginning on or after March 22, 2013.

     The debentures were sold to an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the private placement exemption afforded by Section 4(2) of the Securities Act. The initial investor offered and resold the debentures to “qualified institutional buyers” under Rule 144A of the Securities Act. An affiliate of MMC Norilsk Nickel, with the approval of the Company’s public directors, purchased and as of December 31, 2010, currently holds $80 million of the debentures.

     In connection with the issuance of the debentures, the Company incurred $5.1 million of issuance costs, which primarily consisted of investment banking fees, legal and other professional fees. These costs are classified within other noncurrent assets and are being amortized as interest expense over the term from issuance through the first date that the holders can require repurchase of the debentures, which is March 15, 2013. Amortization expense related to the issuance costs of the debentures was $0.9 million, $1.0 million and $0.8 million in 2010, 2009 and 2008, respectively, and the interest expense on the debentures was $3.1 million, $3.3 million and $2.7 million in 2010, 2009 and 2008, respectively. The Company made cash payments of $3.1 million, $3.4 million and $1.7 million for interest on the debentures during 2010, 2009 and 2008, respectively.

     In October 2009, the Company undertook the exchange of $15 million face amount of the convertible debentures for 1.84 million shares of the Company’s common stock. The debentures so acquired have been retired, leaving $166.5 million face value of the debentures outstanding at December 31, 2009. Because the number of shares issued in this transaction exceeded the 42.5351 shares per $1,000 of face value specified in the bond indenture, accounting principles required that the Company expense the value of the excess shares as an “inducement loss.” Consequently, the Company recorded a loss on the exchange transaction of $8.1 million during the fourth quarter of 2009.

     During the fourth quarter of 2009, the Company filed a $450 million shelf registration statement. The registration statement became effective on December 8, 2009, and permits the Company to issue any of various public debt or equity instruments for financing purposes so long as the registration statement remains effective. The Company is generating significant cash flow at the current time and will also consider its financing needs as its plans develop and opportunities warrant. In this connection, the development of the Marathon property will require significant capital and the debentures may require cash payments, whether upon maturity or earlier redemption. Management believes that the shelf may facilitate access to additional liquidity in the future. However, there is no assurance that debt or equity capital would be available to the Company in the public markets should the Company determine to issue securities under the shelf registration.

PGM SALES AND HEDGING

Mine Production

     Palladium, platinum, rhodium, gold and silver are sold to a number of consumers and dealers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) of 99.95% purity (rhodium of 99.9%) in sponge-form are transferred upon sale from the Company’s account at third-party refineries to the account of the purchaser. After final refining, by-product gold, silver and rhodium are normally sold at market prices to customers, brokers or outside refiners. Copper and nickel by-products from the Company’s base metal refinery, however, are produced at less than commercial grade, so prices for these metals typically reflect a quality discount. By-product sales are included in revenues from mine production. During 2010, 2009 and 2008, total by-product (copper, nickel, gold, silver and mined rhodium) sales were $28.0 million, $23.6 million and $36.8 million, respectively.

     The Company’s ten-year sales agreement with Ford Motor Company expired at the end of 2010. Under this sales agreement, Ford purchased 80% of the Company’s mined palladium production and 70% of its mined platinum production each month. The Ford contract included certain guaranteed pricing floors and caps for metal delivered, partly protecting the parties from extreme fluctuations in PGM prices. Metal sales under the agreement, when not affected by

the guaranteed floor or ceiling prices, were priced at a slight discount to market. Going forward, the absence of the price protection in the Ford agreement will increase the Company’s financial exposure to low PGM prices. Nevertheless, the Company has recently signed a new three-year palladium supply agreement with General Motors Corporation, a one-year palladium agreement with BASF Corporation (BASF), and is engaged in discussions with other potential customers for the remainder of its mined palladium and platinum.

     The Company has historically entered into derivative contracts and hedging arrangements from time to time to manage the effect on the Company’s cash flow of fluctuation in the price of palladium and platinum from mine production. Hedging activities consist of fixed forwards for future delivery of specific quantities of PGMs at specific prices, and financially settled forwards that provide for net cash settlement of forward sales. Gains or losses can occur as a result of hedging strategies if the derivative contracts ultimately settle at prices above or below market. See Note 6 “Derivative Instruments” to the Company’s 2010 audited consolidated financial statements for further information.

PGM Recycling

     The Company has capacity available in its smelter and base metal refinery and purchases catalyst materials from third parties for recycling in those facilities to recover PGMs. The Company has entered into sourcing arrangements for catalyst material with several suppliers. Under these sourcing arrangements, the Company advances cash to suppliers for purchase and collection of these spent catalyst materials. These advances are reflected as advances on inventory purchases and included in Other current assets on the Company’s consolidated balance sheet until such time as the material has been physically received and title has transferred to the Company. Following the steep drop in PGM prices and doubts as to collectability under various commitments with suppliers, the 2010, 2009 and 2008 recycling results included write-downs of $0.6 million, $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business. Since 2008, the Company has restructured its recycling business model somewhat to further restrict the conditions under which funds are advanced and thereby limit its financial exposure to its suppliers. See “Business, Risk Factors and Properties — Risk Factors — Reliance on a Few Third Parties for Sourcing of Recycling Materials and Advances for Recycling Materials Creates the Potential for Losses.” The Company regularly enters into fixed forward sales related to recycling of catalysts. These fixed forward sales transactions in the recycling business have not been accounted for as derivatives because they qualify as “normal purchases/normal sales” under generally accepted accounting principles. Metals from processing recycled materials are generally sold forward at the time the material is purchased and then are delivered against the forward sales contracts when the ounces are recovered.

     At various times during the latter period of the agreement with General Motors, the Company elected to fulfill a portion of its palladium delivery commitments utilizing recycled metal. Consequently, a portion of the Company’s palladium from recycling from time to time was priced using financially settled forward sales, which allowed the Company to price the metal forward. Because these financially settled forward sales inherently settled net, they were not eligible for the normal sales exemption. The Company elected not to designate these financially settled forward sales as hedges. Changes in fair value of these financially settled forwards at the end of each accounting period were reflected in recycling revenue. The corresponding net realized loss on these derivatives in 2009 and 2008 was $0.2 million in each year. There were no financially settled forward contracts outstanding at December 31, 2010.

     All of the Company’s recycling forward sales transactions open at December 31, 2010, will settle at various periods through June 2011. See Note 6 “Derivative Instruments” to the Company’s 2010 audited consolidated financial statements for more information. The Company has credit agreements with its major trading partners that provide for it to make margin deposits in the event that forward prices for metals exceed the Company’s hedged prices by a predetermined margin limit. No margin deposits were required or outstanding as of December 31, 2010 or 2009.

Other

     The Company makes other open market purchases of PGMs from time to time for resale to third parties. The Company recognized revenue of $6.2 million, $5.8 million and $20.0 million on ounces purchased in the open market and re-sold for the years ended December 31, 2010, 2009 and 2008, respectively. These purchases for resale were essentially breakeven transactions undertaken for the convenience of certain customers.

TITLE AND ROYALTIES

Montana, USA

     The Company holds 1,006 patented and unpatented lode or mill site claims in Montana covering approximately 16,200 acres along the apex of the J-M Reef mineral zone and on adjacent federal lands utilized for the Company’s operations facilities. The Company believes that approximately 130 of these claims cover 100% of the known apex of the J-M Reef. The Company’s remaining unpatented claims either adjoin the apex of the J-M Reef or secure sites for surface operations. Prior to the federal moratorium on processing new applications for mining claim patents, the Company had leasehold control on one patented claim under the Mouat Agreement, had been granted patents on 34 of its own claims (a combined total of 735 acres), and had 33 patent applications pending on 135 additional mining claims covering an area of 2,249 acres. The applications included claims owned directly by the Company or held by the Company in leasehold. During the fourth quarter of 2001, 31 new patents were issued to the Company for 126 mining claims covering 2,126 acres. At year-end 2001, patents had been issued for all submitted applications involving the claims owned directly by the Company. In a decision dated April 30, 2002, the Montana State Office of the Bureau of Land Management (BLM) rejected two mineral patent applications submitted prior to July 13, 1993 covering 123 acres in nine mining claims held by the Company in leasehold under the Mouat Agreement. The Company joined with the Mouat interests in appealing the BLM decision to the U.S. Department of the Interior Board of Land Appeals (IBLA). On April 25, 2005, Administrative Judges for the IBLA ruled in favor of the Mouat Interests’ and Company’s appeal and remanded the cases to the BLM with instruction to issue the pending patents. As of the date of this filing, the Certificates of Patent had not yet been issued; however, the Company considers the matter resolved and expects the patents to be granted in due course. The Company presently maintains 836 active unpatented mining and mill site claims. Unpatented mining claims may be located on lands open to mineral appropriation and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining claims is often uncertain and such claims are more commonly subject to challenges of third parties, regulatory or statutory changes, or contests by the federal government. The validity of an unpatented mining claim or mill site claim, in terms of establishing and maintaining possessory rights, depends on strict compliance with a complex body of federal and state statutory and decision law regarding the location, qualifying discovery of valuable minerals, occupancy and beneficial use by the claimant.

     Of the Company’s 1,006 controlled claims, 868 are subject to royalties, including 840 subject to a 5% net smelter royalty payable to Franco Nevada U.S. Corporation (formerly Newmont Capital Limited), 143 subject to a 0.35% net smelter royalty payable to the Mouat family, and 115 subject to both royalties. During 2010, 2009 and 2008, the Company incurred royalty expenses of $13.7 million, $10.6 million and $14.6 million, respectively. At December 31, 2010, 100% of the Company’s proven and probable ore reserves were secured by either its control of 161 patented mining claims or the nine current first-half certified claims pending final action under the April 2005 appeal ruling by the IBLA. Processing facilities at the East Boulder Mine are situated on 127 validated unpatented mill site claims.

Ontario, Canada

      In the fourth quarter of 2010, the Company acquired Marathon PGM Corporation and its PGM-copper assets and, pursuant to a definitive agreement in December 2010, announced its intent to acquire certain exploration properties and royalty interests of Benton Resources Corp. situated in northwest Ontario, Canada, in 2011. Upon completion of the transaction with Benton Resources Corp., the Company will own mining claims and crown leases totaling approximately 15,239 hectares (37,878 acres) covering the more prospective portions of the Port Coldwell Intrusive Complex. The Coldwell Complex hosts the Marathon PGM-Copper deposit and is located near the northern shore of Lake Superior adjacent to the town of Marathon, Ontario.

     After completion of the Benton Resources Corp. transaction in 2011, the Company’s aggregate property holdings in the Coldwell Complex will include 42 crown leases on 2,849 hectares (7,040 acres) and 77 mining claims comprised of 780 claim units totaling 12,480 hectares (30,838 acres). Thirty-seven of the leases (1,365 hectares) grant both surface and mineral rights while five of the leases (1,484 hectares) presently grant mineral rights only. Applications have been submitted for surface leases on the 5 mineral leases as well as for both mineral and surface crown leases on certain additional property currently held by the Company under valid mining claims. In Canada, paramount title to minerals typically vests in the Crown subject only to the burden of aboriginal title, while the various Ministries of the Provinces enjoy legislative powers to administer the disposition of minerals within their jurisdiction. In Ontario, mining claims grant the claimant conditional rights of access for exploration of hard rock minerals conducted in compliance with regulations regarding surface disturbance, environmental stewardship and annual expenditures to maintain the validity of the claims. Mining claims in Ontario do not authorize removal of minerals for other than test work and analyses. To commercially extract minerals, a mining lease is necessary. Crown mining leases provide the claimant with a preference right to develop and extract minerals for a (renewable) 21-

year term, under more specific conditions of aboriginal consultation, environmental protection, approved closure/reclamation plans and financial assurances provided to the Crown over the life of the project. The Company believes that its mining claims and crown leases provide adequate security of mineral and surface tenure to advance its planned mine development and mineral exploration activities in the Marathon-Coldwell region of Ontario.

     The Company’s Ontario properties in the Coldwell Complex remain subject to certain underlying provisions and production royalty interests. Production royalty interests include: a 2% NSR royalty payable to Teck Cominco Ltd. in respect to the ‘Bamoos leases’ (217 hectares), a 1% NSR royalty payable to Stephen Stares in respect to the ‘Bermuda claim’ (94 hectares); a 2% NSR royalty payable to Franco Nevada (as successors in interest to Newmont and Redstone Resources) in respect to the Par Lake, et.al. leases (1,315 hectares); a conditional 2% NSR royalty payable to Benton Resources Corp. in respect to the ‘Bermuda Properties’ (7,317 hectares); a 1% NSR royalty payable to Stephen Stares in respect to certain of the ‘Bermuda Properties (approximately 7,300 hectares); a conditional 2% NSR royalty payable to Rudy Wahl in respect to the ‘Coubran Lake’ claims (752 hectares); and a conditional 2.5% NSR royalty payable to Superior Prospects Inc. in respect to the ‘Geordie Lake claims’ (1,520 hectares). At the date of filing, approximately 4% of the Company’s stated proven and probable ore reserves at the Marathon PGM-copper deposit are subject to the 2% NSR royalty payable to Teck Cominco Ltd. The Company’s other royalty obligations affect only exploration-stage properties in the Marathon/Coldwell region.

     At the Company’s Geordie Lake exploration property located approximately 8 km west of the Marathon PGM-Copper deposit, Gryphon Metals, Inc. retains a back-in option to a 12.5% working interest on the ‘Geordie Lake claims’ (1,520 hectares). The option can be exercised upon completion and delivery of a feasibility study by the Company and Gryphon making a cash payment to the Company equal to 31.25% of all costs incurred on the property through completion of the feasibility study.

REGULATORY AND ENVIRONMENTAL MATTERS

Montana, USA

General

     The Company’s business is subject to extensive federal, state and local government controls and regulations, including regulation of mining and exploration which could involve the discharge of materials and contaminants into the environment, disturbance of land, reclamation of disturbed lands, associated potential impacts to threatened or endangered species and other environmental concerns. In particular, statutes including, but not limited to, the Clean Air Act, the Clean Water Act, the Solid Waste Disposal Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act and the National Environmental Policy Act, impose permit requirements, effluent standards, air emission standards, waste handling and disposal restrictions and other design and operational requirements, as well as record keeping and reporting requirements, upon various aspects of mineral exploration, extraction and processing. In addition, the Company’s existing mining operations may become subject to additional environmental control and mitigation requirements if applicable federal, state and local laws and regulations governing environmental protection, land use and species protection are amended or become more stringent in the future. The Company is aware that federal regulation under the Solid Waste Disposal Act governing the manner in which secondary materials and by-products of mineral extraction and beneficiation are handled, stored and reclaimed or reused are subject to frequency review by the agencies which could affect the Company’s facility design, operations, and permitting requirements. See “Business, Risk Factors and Properties — Risk Factors — Changes to Regulations and Compliance with Regulations Could Affect Production, Increase Costs and Cause Delays.”

     The Stillwater Mine and the East Boulder Mine are located on the northern edge of the Absaroka-Beartooth Wilderness Area, about 30 miles north of Yellowstone National Park. Due to the proximity of the Company’s operations to Yellowstone National Park and a wilderness area, the Company’s operations are subject to stringent environmental controls that may adversely impact the Company’s operations. For example, increasingly stringent requirements may be adopted under the Clean Water Act, Clean Air Act or Endangered Species Act which could require installation of environmental controls not required of competitors located overseas. See “Business, Risk Factors and Properties — Risk Factors — Changes to Regulations and Compliance with Regulations Could Affect Production, Increase Costs and Cause Delays.”

     The Company’s past and future activities may also cause it to be subject to liabilities under provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), and

analogous state law. Such laws impose strict liability on certain categories of potentially responsible parties including current property owners for releases or threatened releases of hazardous or deleterious substances into the environment that result in cleanup and other remediation costs.

     Generally compliance with the above statutes requires the Company to obtain permits issued by federal, state and local regulatory agencies and to file various and numerous reports that track operational monitoring, compliance, performance and records keeping activities of its operational effect on the environment. Certain permits require periodic renewal or review of their conditions. The Company cannot predict whether it will be able to renew such permits or whether material changes in permit conditions will be imposed. Non-renewal of permits or the imposition of additional conditions could have a material adverse effect on the Company’s financial condition and results of operations. See “Business, Risk Factors and Properties — Risk Factors — If the Company is Unable to Obtain Surety Coverage to Collateralize Its Reclamation Liabilities, Operating Permits May Be Affected.”

     For the past several years, the Company has employed various measures in an effort to protect the health of the Company’s workforce and to comply with much stricter MSHA limits on DPM exposure for the underground miners. These measures have included using catalytic converters, filters, enhanced ventilation regimens, modifying certain mining practices underground, and the utilization of various bio-diesel blends. The new DPM limits were delayed for a time, but ultimately went into effect on May 20, 2008. Compliance with the revised MSHA DPM standards continues to be a challenge within the mining industry. However, as a result of its internal efforts to reduce DPM exposure, recent sampling indicates that the Company has achieved compliance with the new standards at both the Stillwater Mine and the East Boulder Mine. No assurance can be given that any lack of compliance in the future will not impact the Company.

     Nitrogen concentrates in groundwater have been elevated above background levels at both the Stillwater Mine and the East Boulder Mine as a result of operational activities and discharges currently authorized under permit. Noncompliance with standards have occurred in some instances and are being addressed by the Company through action plans approved by the appropriate federal and state regulatory agencies. In view of its good-faith efforts to comply and progress to date in implementing remedial and advanced treatment technologies, the Company does not believe that failure to be in strict compliance will have a material adverse effect on the Company. The Company further anticipates that the implementation of remedial measures will be effective in mitigating impacts to a level that meets permit and statutory water quality standards.

     The Company believes that its operations and facilities comply in all material respects with current federal, state and local permits and regulations, and that it holds all necessary permits for its operations at the Stillwater and East Boulder Mines and to complete all of its planned expansion projects. However, compliance with existing and future laws and regulations may require additional control measures and expenditures, which cannot be estimated at this time. Compliance requirements for new mines and mills may require substantial additional control measures that could materially affect permitting and proposed construction schedules for such facilities. Under certain circumstances, facility construction may be delayed pending regulatory approval. The cost of complying with future laws and regulations may render currently operating or future properties less profitable and could adversely affect the level of the Company’s ore reserves and, in the worst case, render its mining operations uneconomic.

Permitting and Reclamation

     Operating Permits 00118 and 00149 issued by the Montana Department of State Lands encompass approximately 2,475 acres at the Stillwater Mine located in Stillwater County, Montana and 980 acres at the East Boulder Mine located in Sweet Grass County, Montana. The permits delineate lands that may be subject to surface disturbance. At present, approximately 453 acres have been disturbed at the Stillwater Mine, and 200 acres have been disturbed at the East Boulder Mine. The Company employs concurrent reclamation wherever feasible.

     Reclamation regulations affecting the Company’s operations are promulgated and enforced by the Hard Rock Bureau of the Montana Department of Environmental Quality (DEQ). The United States Forest Service (USFS) may impose additional reclamation requirements during the permitting process. For regulatory purposes, reclamation does not mean restoring the land to its pre-mining state. Rather, it means returning the post-mining land to a state which has stability and utility comparable to pre-mining conditions. Major reclamation requirements include stabilization and re-vegetation of disturbed lands, controlling storm water and drainage from portals and waste rock dumps, removal of roads and structures, treating and the elimination of process solutions, treatment and the elimination of mine water prior to discharge in compliance with standards and visual mitigation.

     Permits governing air and water quality are issued to the Company by the Montana DEQ, which has been delegated such authority by the federal government. Operating permits issued to the Company by the Montana DEQ and the USFS do not have an expiration date but are subject to periodic reviews. The reviews evaluate bonding levels, monitor reclamation progress, and assess compliance with all applicable permit requirements and mitigation measures. Closure and reclamation obligations are reviewed and reassessed by the agencies and the Company on a five year rotating schedule. Bonding and financial guarantees are posted with the agencies to cover final reclamation costs at the end of the reconciliation and reassessment process. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

     In mid-2000, the Company signed an agreement with local environmental groups known as the “Good Neighbor Agreement” (GNA). By way of the agreement, the group and its affiliates the “Councils” agreed not to challenge permit renewals or submittals in exchange for the Company participation in programs that reduce traffic flows to both the Stillwater Mine and the East Boulder Mine. Additionally, the Company is funding expanded monitoring programs and has funded the development of a watershed partnership for the Boulder River basin to assist residents in improving the quality of surface and ground water. In August of 2005, this agreement was mutually amended to acknowledge the progress made in implementing the agreement and completing and finalizing many of the agreement requirements. Additionally, future commitments were reviewed and amended as appropriate in an effort to bring the agreement current with existing environmental conditions, updated technical data and changes to schedules and monitoring plans resulting from information gathered during the previous 5-year period. In 2010, the Agreement celebrated ten years of successful implementation which has made it the recognized model within the natural resources industry for successful collaboration and dispute resolution. The Company estimates the total cost of all the environmental programs associated with the implementation of the agreement to be between $0.2 million and $0.3 million annually.

     The Company’s environmental expenses for Montana operations were $3.3 million, $2.7 million, and $3.6 million in 2010, 2009 and 2008, respectively. The Company had capital expenditures for environmental facilities during 2010, 2009 and 2008 of $0.2 million, $1.2 million and $1.0 million, respectively. The Company’s ongoing operating expenditures for environmental compliance are expected to total at least $4.1 million per year and will be expensed as incurred.

Ontario, Canada

     On November 30, 2010 Stillwater Mining Company completed the acquisition of the Canadian company Marathon PGM Corporation. The acquisition consisted of the PGM assets of Marathon PGM Corporation, including the Marathon PGM-Copper project. The transaction was valued at US$173.4 million (including $36.0 million of deferred income tax liability assumed).

     The project is the most advanced property in the acquisition. The total mineral reserve is estimated to be about 91 million tonnes with 0.247% copper and 1.07 g/t Pd+Pt and an estimated mine life of 11.5 years. The Company is continuing with baseline environmental and socio-economic studies and is engaged with federal, provincial regulatory ministries and First Nation communities to secure the required permits and approvals for mine construction and operation. In December 2008, the project was accepted under the Major Projects Management Office (MPMO) initiative. A formal project description was submitted to the Canadian Environmental Assessment Agency (CEAA) in March 2010, which triggered the Federal Environmental Assessment (FEA) process. Authorizations are required for the project from the following federal agencies; the Department of Fisheries and Oceans, Transport Canada and Natural Resources Canada. These federal agencies sent letters of recommendation to the Minister of Environment and subsequently on October 7, 2010, the project was referred to an independent review panel. The Company cannot predict when or whether operating permits will be obtained or whether material changes in permit requirements, conditions or the regulatory process will be imposed. Any delay in the permit approval process could have a material adverse effect on the Company’s financial condition and results of operations. See “Business, Risk Factors and Properties — Risk Factors — If the Company is Unable to Obtain Surety Coverage to Collateralize Its Reclamation Liabilities, Operating Permits May Be Affected.”

COMPETITION: PALLADIUM AND PLATINUM MARKET

General

     Palladium and platinum are rare precious metals with unique physical qualities that are used in diverse industrial applications and in the jewelry industry. The development of a less expensive alternative alloy or synthetic material with the same characteristics as PGMs for industrial purposes could reduce demand for the Company’s products and drive down PGM prices. Although the Company is unaware of any such alloy or material, there can be no assurance that none

will be developed. Jewelry demand is influenced by a variety of external factors, including fashion trends, metal prices and the general state of the economy. Adverse changes in any of these factors could negatively affect the Company’s financial performance.

     Significant quantities of platinum and palladium are held in inventory by investors, trading houses and government entities. The number of ounces in each of these inventories is not always disclosed publicly, nor is it clear under what circumstances these holdings might be brought to market. For example, in the past, the Russian Federation has held large inventories of palladium as strategic inventory, selling substantial volumes from time to time without warning into the market. There is no official disclosure of the size of the Russian inventories or clarity as to plans for future sales and some have suggested that the Russian government inventories now are nearly depleted. Also, new exchange-traded funds, or ETFs, have been introduced recently that may enable more investors to participate in the PGM markets, potentially resulting in more metal being held in inventory. The overhang from these significant investment holdings of platinum and palladium makes it more difficult to predict accurately future supply and demand for these metals and may contribute to added PGM price volatility.

     The Company competes with other suppliers of PGMs, some of which are significantly larger than the Company and have access to greater mineral reserves and financial and commercial resources. Some significant suppliers produce platinum in greater quantities than palladium and thus currently enjoy average per ounce revenue greater than the Company. Some significant suppliers of PGMs produce palladium and platinum as by-products of other production and consequently, on a relative basis, are not as directly impacted by changes in the price of palladium as the Company is. See “Global Supply” below. New mines may be developed over the next several years, potentially increasing supply. Furthermore, the volume of PGMs recovered through recycling scrap sources, mostly spent automotive and industrial catalysts, is increasing. There can be no assurance that the Company will be successful in competing with these existing and emerging PGM producers. See “Business, Risk Factors and Properties — Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Global Demand

     The unique physical qualities of PGMs include: (1) a high melting point; (2) excellent conductivity and ductility; (3) a high level of resistance to corrosion; (4) strength and durability; and (5) strong catalytic properties.

     Johnson Matthey estimates that demand for palladium (net of recycling volumes) likely increased by approximately 12% to 7.1 million ounces during 2010. Their Platinum 2010 Interim Review Report published in November 2010 (Johnson Matthey or the Johnson Matthey report), projected that 2010 palladium demand increased from 2009 primarily as a result of recovering demand in the automotive catalyst and electronics markets. They also estimate that palladium recycling volumes increased in 2010 by 29% over 2009.

     The largest application for palladium is in automotive catalytic converters. In 2010, this industry consumed approximately 3.8 million ounces (net of recycling), or about 54% of net worldwide palladium demand. (Johnson Matthey estimates that an additional 1.3 million palladium ounces generated from recycling also were consumed in catalytic converters during 2010, up from about 965,000 ounces in 2009.) Overall, net consumption of palladium in catalytic converters has increased by about 24% from 2009. Industrial demand for palladium includes applications in electronics and the chemical industry; Johnson Matthey indicates net year-on-year demand for industrial palladium increased by 12.5% to about 1.35 million ounces. Johnson Matthey estimates that approximately 1.0 million ounces (net of recycling), or about 13.6% of 2010 palladium demand, was consumed in the production of electronic components for personal computers, cellular telephones, facsimile machines and other devices. Net palladium jewelry demand worldwide for 2010 is estimated by Johnson Matthey to have decreased by about 22.7% from the previous year to about 545,000 ounces, mostly in response to sharply rising palladium prices. Johnson Matthey also reported that dentistry continues to be a major user of palladium for gold-based dental alloys, and that dental demand remained about flat at approximately 620,000 ounces, or 8.7% of total palladium demand for 2010. According to Johnson Matthey, investment demand probably grew modestly in 2010 to an estimated 670,000 ounces, about 9.4% of total 2010 palladium demand; that compares to investment demand of about 625,000 ounces in 2009, representing about 9.9% of total 2009 palladium demand. Investment demand was stimulated in part by the January 2010 introduction of palladium and platinum ETFs as retail investment vehicles in the U.S.

     According to Johnson Matthey, the outlook for palladium over the next year is largely positive, driven primarily by recovery in the automotive sector, growth in Chinese industrial demand for the metal and increasing use of palladium in the aftertreatment systems of diesel catalytic converters. Over the past several years, the pricing disparity between

platinum and palladium has driven research into substituting palladium for platinum in diesel catalytic converters, whereby the technical limit on palladium content reportedly has now risen to as much as 50% of the total PGMs in diesel catalytic converters. Jewelry consumption of palladium reportedly has been declining in China, partially due to higher prices, but interest in palladium continues to grow in other markets, particularly with the introduction of a compulsory palladium hallmark January 1, 2010 in the United Kingdom. The effect of the introduction in early 2010 of new exchange-traded funds in New York for platinum and palladium drew strong investor interest early on but has slowed since then. Johnson Matthey comments that, in their view, the two critical factors in the palladium market for 2011 are the availability of export sales from the Russian government stockpiles and the relative strength of Chinese industrial and economic growth.

     Johnson Matthey estimates that for 2010 palladium was in surplus by about 45,000 ounces — essentially in balance. Prices for palladium in 2010, based on London Bullion Market Association afternoon postings, ranged from a low of $395 per ounce on February 5, 2010 to end 2010 at a high of $797 per ounce.

     Charts reproduced from the Johnson Matthey Platinum 2010 Interim Review. Permission to reproduce was neither sought nor obtained.

     Johnson Matthey reports that 2010 demand for platinum (net of recycling volumes) probably increased by 6.1% to about 5.7 million ounces in 2010 from 5.4 million ounces in 2009. (Johnson Matthey estimates that platinum supplied from recycling totaled 1.84 million ounces in 2010, up from about 1.4 million ounces in 2009.) Platinum purchases by the auto catalyst sector (net of recycling volumes) grew during 2010 by 39.5% to 1.9 million ounces, driven principally by recovery during 2010 in the market for diesel-powered automobiles in Europe. Johnson Matthey anticipates that diesel demand will strengthen further in the future as the European economy improves.

     Jewelry demand for platinum (net of recycling) declined in 2010 by 24.9% to about 1.7 million ounces. This decline reflects the effect of higher metal prices in 2010.

     Industrial uses of platinum include the production of data storage disks, fiberglass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells. Johnson Matthey projects that gross industrial consumption of platinum during 2010 increased by about 51%, reflecting the impact of the economic recovery on industrial activity in 2010.

     In Johnson Matthey’s view, the outlook for platinum demand for the next year or so is dependent on the strength of the economic recovery, which as it progresses should gradually restore diesel demand in Europe and continue to support industrial demand for the metal. Jewelry demand is sensitive to metal prices and will be slow to recover while prices remain strong and consumer demand is lukewarm. Overall, they conclude, platinum is likely to remain in modest surplus over the next year.

     Johnson Matthey estimates that platinum supplied to the market in 2010 exceeded demand by about 290,000 ounces. The price of platinum during 2010, based on London Bullion Market Association afternoon postings, ranged from a high of $1,786 per ounce, reached on November 9, 2010, compared to a low of $1,475 per ounce on February 5, 2010, and closed the year trading at $1,755 per ounce. See “Business, Risk Factors and Properties — Risk Factors — Users of PGMs May Reduce Their Consumption and Substitute Other Materials for Palladium and Platinum.”

Global Supply

     On the supply side, Johnson Matthey noted that their tally of 2010 PGM supply includes about one million ounces of palladium transferred out of Russian state inventories during the year and then subsequently sold. Johnson Matthey acknowledges that, going forward, these Russian inventory sales constitute a significant uncertainty in projecting annual palladium supply. Including these state transfers, Johnson Matthey reports that palladium supplied to market in 2010 of 7.14 million ounces was just 0.6% higher than 2009 levels.

     The leading global sources of palladium and platinum production are mines located in the Republic of South Africa and the Russian Federation. The Johnson Matthey report estimates that South Africa provided approximately 34.8% of the palladium and 76.3% of the platinum sold worldwide during 2010. The same report also estimates that the Russian Federation, both as a by-product of nickel production from Norilsk Nickel and from transfers out of government inventories, provided approximately 52.0% of the palladium and approximately 13.5% of the platinum sold worldwide in 2010 (see charts below). (In preparing these estimates, Johnson Matthey treats PGM recycling volumes as a net offset against demand, rather than as new supply.)

     Charts reproduced from the Johnson Matthey Platinum 2010 Interim Review. Permission to reproduce was neither sought nor obtained.

     Supply numbers provided by Johnson Matthey are for metals entering the market and do not necessarily represent metals produced during the years shown. For palladium this may constitute a significant year-to-year difference because of unpredictable releases out of the strategic inventories held by the Russian Federation, as well as those held by the auto companies and investors. For platinum this inventory effect is less significant, as inventories held by governments or private institutions have not been as material recently. According to Johnson Matthey, annual worldwide mine production of palladium for 2010 is estimated at 6.13 million ounces, essentially even with the 6.14 million ounces produced in 2009. Annual worldwide production of platinum for 2010 is estimated at 6.01 million ounces, down very slightly from about 6.025 million ounces in 2009.

     Johnson Matthey comments that the outlook for palladium in the future is sensitive to activity from the Russian state inventories. Their outlook assumes that there were additional Russian inventory sales during 2010, although they did not result in any significant market surplus for palladium. However, they also note that investors seem to be aware of the imbalance between palladium mine production and demand, and some appear to anticipate supply imbalances over the longer term if the Russian inventory sales end.

     In addition to mine sources, PGMs are recovered from automotive catalytic converters acquired from scrap dealers. A growing industry has developed in the collection and recovery of PGMs from scrap sources, including automotive catalytic converters, electronic and communications equipment and petroleum catalysts. Volumes were affected by the lower PGM prices during the first half of 2010 but strengthened fairly steadily throughout the year as prices improved. Johnson Matthey estimates 2010 worldwide recoveries from recycling provided 1.85 million ounces of palladium and 1.84 million ounces of platinum, up from 1.43 million ounces of palladium and 1.405 million ounces of platinum in 2009, driven in 2010 by the economic incentive to recycle when metal prices are high.

Prices

     Stillwater Mining Company’s revenue and earnings depend significantly on world palladium and platinum market prices. The Company has no direct control over these prices, but is working to foster PGM demand growth by encouraging new uses for these metals. PGM prices can fluctuate widely. The Company does have the ability to hedge prices and until the Ford sales agreement expired on December 31, 2010, benefited from contractual floor prices that tended to mitigate some of the Company’s price exposure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Revenue” and “Factors That May Affect Future Results and Financial Condition.” The volatility of palladium and platinum prices is illustrated in the following table of the London Bullion Market Association afternoon postings of annual high, low and average prices per ounce since 2001. The accompanying charts also demonstrate this volatility. See “Business, Risk Factors and Properties — Risk Factors — Vulnerability to Metals Price Volatility — Changes in Supply and Demand Could Reduce Market Prices. ”

		PALLADIUM												PLATINUM
YEAR		HIGH				LOW				AVERAGE				HIGH				LOW				AVERAGE
2001		$	1,090			$	315			$	604			$	640			$	415			$	529
2002		$	435			$	222			$	338			$	607			$	453			$	539
2003		$	269			$	148			$	201			$	840			$	603			$	691
2004		$	333			$	178			$	230			$	936			$	767			$	846
2005		$	295			$	172			$	201			$	1,012			$	844			$	897
2006		$	404			$	261			$	320			$	1,355			$	982			$	1,143
2007		$	382			$	320			$	355			$	1,544			$	1,118			$	1,303
2008		$	582			$	164			$	352			$	2,273			$	763			$	1,576
2009		$	393			$	179			$	264			$	1,494			$	918			$	1,204
2010		$	797			$	395			$	526			$	1,786			$	1,475			$	1,610
2011		$	824			$	753			$	793			$	1,845			$	1,722			$	1,787

AVAILABLE INFORMATION

     The Company’s Internet Website is http://www.stillwatermining.com. The Company makes available, free of charge, through its Internet Website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, corporate proxy statements, and any amendments to those reports, as soon as reasonably practicable after the Company electronically files such materials with, or furnishes them to, the Securities & Exchange Commission. These documents will also be provided free of charge in print, upon request.

RISK FACTORS

     Set forth below are certain risks faced by the Company.

VULNERABILITY TO METALS PRICE VOLATILITY-CHANGES IN SUPPLY AND DEMAND COULD REDUCE MARKET PRICES

     Because essentially the Company’s primary source of revenue is the sale of platinum group metals, changes in the market price of platinum group metals may significantly affect profitability. Many factors beyond the Company’s control influence the market prices of these metals. These factors include global supply and demand, speculative activities, international political and economic conditions, currency exchange rates, and production levels and costs in other PGM-producing countries, principally Russia and South Africa.

     Over the past several years, the market price of palladium has been extremely volatile. After reaching a record high price level of $1,090 per ounce in January 2001, the price of palladium declined over a 27-month period until hitting a

low of $148 per ounce in April 2003. Thereafter, the price gradually recovered, posting a high of $582 per ounce in April 2008 and then declining sharply to a low of $164 per ounce in December 2008. Palladium prices recovered significantly during 2009 and 2010, ending the year 2010 at $797 per ounce. As of February 9, 2011, the market price of palladium (based on the London Bullion Market Association afternoon fixing) was $835 per ounce.

     The market price of platinum trended generally upward from $440 per ounce at the end of 2001 to $1,530 at the end of 2007. In late January 2008, following the announcement of electrical power shortages in South Africa, the price rose sharply, peaking in March 2008 at $2,273 per ounce in London. Beginning in June 2008, however, the price declined steeply as the economy deteriorated in the second half of 2008, hitting a low of $756 per ounce before ending 2008 at $898 per ounce. During 2009 and 2010, prices generally recovered, and platinum ended 2010 quoted in London at $1,755 per ounce. On February 9, 2011, the London Bullion Market Association afternoon fixing for platinum was $1,858 per ounce.

     A prolonged or significant economic contraction in the United States or worldwide could put further downward pressure on market prices of PGMs, particularly if demand for PGMs declines in connection with reduced automobile demand and more restricted availability of investment credit. If other producers or investors release substantial volumes of platinum group metals from stockpiles or otherwise, the increased supply could reduce the prices of palladium and platinum. Changes in currency exchange rates, and particularly a significant weakening of the South African rand, could

reduce relative costs of production and improve the competitive cost position of South African PGM producers. This in turn could make additional PGM investment attractive in South Africa and reduce the worldwide competitiveness of the Company’s North American operations.

     Reductions in PGM prices would adversely affect the Company’s revenues, profits and cash flows. Protracted periods of low metal prices could significantly reduce revenues and the availability of required development funds to levels that could cause portions of the Company’s ore reserves and production plan to become uneconomic. This could cause substantial reductions to PGM production or suspension of mining operations, impair asset values, and reduce the Company’s proven and probable ore reserves. See “Business, Risk Factors and Properties — Competition: Palladium and Platinum Market” for further explanation of these factors.

     Extended periods of high commodity prices may create economic dislocations that may be destabilizing to PGM supply and demand and ultimately to the broader markets. Periods of high PGM market prices generally are beneficial to the Company’s current financial performance. However, strong PGM prices also create economic pressure to identify or create alternate technologies that ultimately could depress future long-term demand for PGMs, and at the same time may incentivize development of otherwise marginal mining properties. Similarly, markets for PGM jewelry are primarily driven by discretionary spending that tends to decline during periods of high prices and may drive the industry toward developing new, more affordable jewelry materials. See “Risk Factors — Users of PGMs May Reduce Their Consumption and Substitute Other Materials for Palladium and Platinum” for additional discussion of these risks.

THE COMPANY NO LONGER HAS CONTRACTUAL FLOOR PRICES AND NOW HAS FIXED DELIVERY COMMITMENTS IN ITS SUPPLY AGREEMENTS

     The Company’s revenues for the year ended December 31, 2010, included 68.5% from mine production. The Company no longer is party to sales agreements that contain pricing floors which in the past provided financial protection against significant declines in the price of palladium. As a result, the Company is now fully exposed to any extended downturn in PGM prices. While the Company has sought to mitigate this exposure by improving its relative cost profile and by maintaining substantial balance sheet liquidity, there can be no assurance that these measures would be sufficient in the event of an extended period of low PGM prices.

     The Company’s prior major sales agreements largely were based on delivery commitments tied to percentages of mine production volumes in each month. As a result, the Company had only limited exposure to shortfalls in mine production. The Company now is entering into agreements with fixed delivery commitments each month, and should there be an operating shortfall in any month that leaves the Company short of its delivery commitments, the Company could be required to purchase metal in the open market to make up the delivery shortfall. Such purchases could entail substantial losses if the market price moved adversely during the shortfall month.

     Effective January 1, 2011, the Company has entered into a new three-year supply agreement with GM that provides for fixed quantities of palladium to be delivered to GM each month. The new agreement does not include price floors or caps, but provides for pricing at a small discount to a trailing market price. (The specific commercial provisions of the agreement are contractually confidential.) The Company has also entered into an agreement with BASF Corporation under similar terms. The Company is attempting to negotiate potential supply arrangements with other large PGM consumers but does not believe these agreements are likely to include pricing floors. Such agreements are likely to require delivery of specified quantities of PGMs in each delivery period. Pending execution of any further sales agreements, the Company is selling most of its remaining mine production under month-to-month and spot sales arrangements.

     For more information about the Company’s sales agreements, see “Business, Risk Factors and Properties — Current Operations — PGM Sales and Hedging.” For additional discussion of hedging risks, see “Risk Factors — Hedging and Sales Agreements Could Limit the Realization of Higher Metal Prices.”

     In its recycling business, the Company regularly enters into fixed forward sales and from time to time into financially settled forward contracts for metal produced from catalyst recycling, normally at the time the catalyst material is purchased. For the Company’s fixed forward sales related to recycling of catalysts, the Company is subject to the customers’ compliance with the terms of the agreements, their ability to terminate or suspend the agreements and their willingness and ability to pay. The loss of any of these agreements or failure of a counterparty to perform could require the Company to sell or purchase the contracted metal in the open market, potentially at a significant loss. The Company’s revenues for the year ended December 31, 2010, included 30.3% from recycling sales and 1.1% from other sales.

FAILURE TO SECURE SALES AGREEMENTS FOR OUNCES PRODUCED FROM MINE PRODUCTION LEAVES THE COMPANY EXPOSED TO SPOT MARKET TRADING

     Based on its trading experience, the Company believes it could readily sell all of its current mine production on a spot basis into terminal markets with virtually no detrimental effect on market prices. Nevertheless, such markets are not entirely predictable, and the absence of firm sales commitments leaves the Company exposed to the vagaries of market demand. If demand for PGMs were to fall sufficiently, the Company could be compelled to sell its uncommitted production at a loss, perhaps putting further downward pressure on prices at the same time. The Company intends to enter into additional supply agreements to cover a substantial portion of its mined PGM production, but there can be no assurance at this time that the Company will be able to do so. If the selling price of PGMs proves insufficient over an extended period to cover the Company’s operating and capital costs of production, the Company’s operations might have to be curtailed, suspended or closed.

RELIANCE ON A FEW THIRD PARTIES FOR SOURCING OF RECYCLING MATERIALS AND ADVANCES FOR RECYCLING MATERIALS CREATES THE POTENTIAL FOR LOSSES

     The Company has available smelter and base metal refinery capacity and purchases catalyst materials from third parties for recycling activities to recover PGMs. The Company has entered into sourcing arrangements for catalyst material with several suppliers, one of which both brokers and supplies directly a large share of the Company’s catalyst for recycling. The Company is subject to the suppliers’ compliance with the terms of these arrangements and their ability to terminate or suspend the agreement. Should one of these sourcing arrangements be terminated, the Company could suffer a loss of profitability as a result of the termination. This loss could negatively affect the Company’s business and results of operations. Similarly, these suppliers source material from various third parties in a competitive market, and there can be no assurance of the suppliers’ continuing ability to source material on behalf of the Company at current volumes and prices. Any continuing issue associated with the suppliers’ ability to source material could reduce the Company’s profitability.

     Under these sourcing arrangements, the Company advances cash to support the purchase and collection of these spent catalyst materials. These advances are reflected as advances on inventory purchases and included in Other current assets on the Company’s balance sheet until such time as the material has been received and title has transferred to the Company. In some cases, the Company has a security interest in the materials that the suppliers have procured but the Company has not yet received. However, a portion of the advances are unsecured and the unsecured portion of these advances is fully at risk.

     The Company regularly advances money to its established recycling suppliers for catalyst material that the Company has received and carries in its processing inventories. These advances typically represent some portion of the estimated total value of each shipment until assays are completed determining the actual PGM content of the shipment. Upon completion of the shipment assays, a final settlement takes place based on the actual value of the shipment. However, pending completion of the assays the payments are based on the estimated PGM content of each shipment, which may vary significantly from the actual PGM content upon assay. Should the estimated PGM content upon assay significantly exceed the actual PGM content, the Company may be at risk for a portion of the amount advanced. This risk normally is mitigated by the established nature of the business relationship with the supplier, but should the supplier be unable to settle such an overpayment, the Company could incur a loss to the extent of any overpayment.

     Following the sharp decline in PGM prices during the second half of 2008, the volume of spent catalyst material received from the Company’s recycling suppliers diminished significantly. This was an industry-wide trend in which some of the suppliers incurred significant inventory losses, and a few even exited the business. Following the decline in PGM prices and doubts as to collectability under various commitments with suppliers, the 2010, 2009 and 2008 recycling results included write-downs of $0.6 million, $0.5 million and $26.0 million, respectively, of advances to suppliers in its recycling business. Subsequently, the Company has restructured its recycling business model in an effort to reduce the need for unsecured advances. However, there can be no assurance that the Company will not incur additional recycling losses in the future.

     Over the past two or three years, the Company has installed new recycling facilities that are intended to facilitate growing the volumes of recycled material that the Company can effectively sample, assay and process. The Company believes that a business model that allows much faster turnaround of assay results than is typical in the industry now will provide some competitive advantage in growing the volumes of recycling material coming to the Company. However, there is no assurance that this assumption is correct or that the Company’s revised business model will be widely accepted

within the industry, particularly in view of the practice of some of the Company’s competitors of offering significant cash working capital advances to their suppliers well ahead of receiving material from those suppliers.

AN EXTENDED PERIOD OF LOW RECYCLING VOLUMES AND WEAK PGM PRICES COULD PUT THE COMPANY’S OPERATIONS AT ADDITIONAL RISK

     The Company’s recycling segment generates supplemental earnings and cash flow to help support the economics of the mining business when PGM prices are low. The recycling segment in turn depends upon the copper and nickel produced in mine concentrates to extract the PGMs in recycled material within the Company’s processing facilities. The economics of the recycling segment to a large extent have been regarded as incremental within the processing operations, with the result that the recycling business is allocated only an incremental share of the total cost of the processing facilities.

     Volumes of recycling materials available in the marketplace diminished substantially in response to the drop in PGM prices in late 2008 and early 2009. These lower recycling volumes resulted in less earnings and cash flow from the recycling segment, and therefore less economic support for the mining operations. Should it become necessary at any point to reduce or suspend operations at the mines, the proportion of processing costs allocated to the recycling segment would increase substantially, making the recycling segment less profitable. Further, the ability to operate the smelter and refinery without significant volumes of mine concentrates has never been demonstrated and would likely require modification to the processing facilities. There is no assurance that the recycling facilities can operate profitably in the absence of significant mine concentrates, or that capital would be available to complete necessary modifications to the processing facilities.

THE COMPANY MAY BE COMPETITIVELY DISADVANTAGED AS A PRIMARY PGM PRODUCER WITH A PREPONDERANCE OF PALLADIUM

     The Company’s products compete in a global market place with the products of other primary producers of PGMs and with companies that produce PGMs as a by-product. In many cases, the other primary producers mine ore reserves with a higher ratio of platinum to palladium than the Company and as a result enjoy higher average realizations per ounce than Stillwater Mining Company. The Company also competes with mining companies that produce PGMs as a by-product of their primary commodity, principally nickel.

     Because the Company’s U.S. based cost structure is denominated in dollars, in periods when the U.S. dollar is relatively strong, the Company’s competitors may still operate profitably, while the Company may not. Furthermore, non-primary producers of PGMs who regard PGMs as a by-product will generally continue to produce and sell PGMs when prices are low, as PGMs are not their principal commodity.

     The high correlation between the Company’s share price and the market price of palladium suggests that the Company is widely viewed by investors as a surrogate for investing directly in palladium. The Company has focused considerable attention on identifying attractive opportunities to acquire additional PGM assets, with the intent hopefully of providing shareholders with accretive growth and so increasing shareholder value. However, the availability of attractive acquisition opportunities in PGMs is quite limited, particularly on a scale that the Company can reasonably manage. Consequently, the opportunity for growth may be limited without stepping outside PGMs. The Company has advised its shareholders on various occasions that it may need to pursue investments in non-PGM assets, such as gold, silver, copper and nickel or combinations thereof, where in management’s view they may make strategic sense and not materially detract from the Company’s basic PGM profile. Of course, there is no assurance that the Company will succeed in acquiring additional attractive properties, whether or not PGM based, or that it will necessarily have the resources in the future to do so.

ACHIEVEMENT OF THE COMPANY’S PRODUCTION GOALS IS SUBJECT TO UNCERTAINTIES

     Based on the complexity and uncertainty involved in operating underground mines, it is challenging to provide accurate production and cost forecasts. The Company cannot be certain that either the Stillwater Mine or the East Boulder Mine will achieve the production levels forecasted or that the expected operating cost levels will be achieved or that funding will be available from internal and external sources in requisite amounts or on acceptable terms to sustain the necessary ongoing development work. Failure to achieve the Company’s production forecast negatively affects the Company’s revenues, profits and cash flows. As the extent of underground operations continues to expand at depth and horizontally, it is likely that operating costs will increase unless productivity is increased commensurately. Also, as

additional underground infrastructure is constructed, amortization expense may increase unless additional ore reserves are identified. Such increased costs could adversely affect the Company’s profitability.

     The East Boulder Mine commenced commercial operations in 2002 and has never reached its original planned 2,000 ton-per-day operating rate on a sustained basis. Ore grades at the East Boulder Mine also are typically lower than comparable grades at the Stillwater Mine. Partially as a result, production costs per ounce at the East Boulder Mine have generally been significantly higher than at the Stillwater Mine. The Company has put in place various operating plans and programs that are intended to reduce production costs at both the East Boulder Mine and the Stillwater Mine; however, there can be no assurance that these plans and programs will be implemented effectively. Actual production, cash operating costs and economic returns achieved in the future may differ significantly from those currently estimated or those established in future studies and estimates.

     During 2007 and 2008, attrition rates at the Stillwater and East Boulder Mines exceeded already high historical experience, resulting in shortages of skilled miners and disruptions to mining efficiency. With the more difficult economic conditions during 2009, the Company saw these attrition rates decline to levels well below the historical trend, with accompanying improvements in productivity. Employee attrition rates during 2010 were essentially comparable to those in 2009. While the Company believes that the improvements in productivity realized during 2009 were attributable to more than just a more stable workforce, if the economy recovers significantly in the future, the competition for skilled miners may resume and the Company may see its employee attrition rates climb. This in turn could prove disruptive to the Company’s workforce and result in lower productivity. See “Risk Factors — Limited Availability of Additional Mining Personnel and Uncertainty of Labor Relations May Affect the Company’s Ability to Achieve Its Production Targets” below for further discussion of this and related issues.

ORE RESERVES ARE VERY DIFFICULT TO ESTIMATE AND ORE RESERVE ESTIMATES MAY REQUIRE ADJUSTMENT IN THE FUTURE; CHANGES IN ORE GRADES, MINING PRACTICES AND ECONOMIC FACTORS COULD MATERIALLY AFFECT THE COMPANY’S PRODUCTION AND REPORTED RESULTS

     Ore reserve estimates are necessarily imprecise and depend to some extent on statistical inferences drawn from limited drilling, which may prove unreliable. Reported ore reserves are comprised of a proven component and a probable component. (See Glossary for definitions.) For proven ore reserves, distances between samples can range from 25 to 100 feet, but are typically spaced at 50-foot intervals both horizontally and vertically. The sample data for proven ore reserves consists of survey data, lithologic data and assay results. The Company enters this data into a 3-dimensional modeling software package, where it is analyzed to produce a 3-dimensional solid block model of the resource. The assay values are further analyzed by a geostatistical modeling technique (kriging) to establish a grade distribution within the 3-dimensional block model. Dilution is then applied to the model and a diluted tonnage and grade is calculated for each block.

     Probable ore reserves are based on longer projections, up to a maximum radius of 1,000 feet beyond the limit of existing drill-hole sample intercepts of the J-M Reef obtained from surface and underground drilling. Statistical modeling and established continuity of the J-M Reef as determined from results of mining activity to date support the Company’s technical confidence in estimates of tonnage and grade over this projection distance. Where appropriate, projections for the probable ore reserve determination are constrained by any known or anticipated restrictive geologic features. The probable ore reserve estimate of tons and grade is based on the projection of factors calculated from adjacent proven ore reserve blocks or from diamond drilling data where available. The factors consist of a probable area, proven yield in tons per foot of footwall lateral, average grade and percent mineable. The area is calculated based on projections up to a maximum of 1,000-feet from known drill contacts; the proven yield (in tons per foot of footwall lateral) and grade are calculated based on long-term proven ore reserve results in adjacent areas; and the percent mineable is calculated based on long-term experience from actual mining in adjacent areas. Contained ounces are calculated based on area divided by 300 (square feet) times proven yield in tons per foot of footwall lateral times grade (ounces per ton) times percent mineable (%). As a result, probable ore reserve estimates are less reliable than estimates of proven ore reserves. Both proven and probable ore reserve projections are also limited where appropriate by certain modifying factors, including geologic evidence, economic criteria and mining constraints.

     Conversion of probable ore reserves to proven ore reserves is calculated by dividing the actual proven tons converted for a given area by the expected tonnage based on a probable yield expectation for that given area. Actual period-to-period conversion of probable ore reserves to proven ore reserves may result in increases or decreases to the total reported amount of ore reserves. Conversion, an indicator of the success in upgrading probable ore reserves to proven ore

reserves, is evaluated annually as described under “Business, Risk Factors, and Properties - Proven and Probable Ore Reserves”. Conversion rates are affected by a number of factors, including geological variability, quantity of tonnage represented by the period drilling, applicable mining methods and changes in safe mining practices, economic considerations and new regulatory requirements.

     The following table illustrates, for each year’s development program, the actual percent conversion rates of probable ore reserve into tons experienced by year from 2001 through 2010:

		Historic
Year ended		Weighted
December 31,		Average (2)				2010				2009				2008				2007				2006				2005				2004				2003				2002				2001
(in percent)
Stillwater Mine			88				70				83				74				68				94				101				62				52				71				104
East Boulder Mine (1)			95				97				24				71				107				91				110				125				86				91				88

     Ore reserve estimates are expressions of professional judgment based on knowledge, experience and industry practice. The Company cannot be certain that its estimated ore reserves are accurate, and future conversion and production experience could differ materially from such estimates. Should the Company encounter mineralization or formations at any of its mines or projects different from those predicted by drilling, sampling and similar examinations, reserve estimates may have to be adjusted and mining plans may have to be altered in a way that might adversely affect the Company’s operations. Declines in the market prices of platinum group metals may render the mining of some or all of the Company’s ore reserves uneconomic. The grade of ore may vary significantly from time to time and between the Stillwater Mine and the East Boulder Mine, as with any mining operation. The Company cannot provide assurance that any particular quantity of metal may be recovered from the ore reserves. Moreover, short-term factors relating to the ore reserves, such as the availability of production workplaces, the need for additional development of the ore body or the processing of new or different ore types or grades, may impair the Company’s profitability in any particular accounting period.

AN EXTENDED PERIOD OF LOW PGM PRICES COULD RESULT IN A REDUCTION OF ORE RESERVES AND POTENTIAL FURTHER ASSET IMPAIRMENT CHARGE

     The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts of its assets may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. Estimations of future cash flows take into account estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contracts prices, price trends and related factors), production levels and capital and reclamation expenditures, all based on life-of-mine plans and projections.

     If the Company determines that the carrying value of a long-lived asset is not recoverable and the asset is impaired, then the Company must determine the fair value of the impaired asset. If fair value is lower than the carrying value of the assets, then the carrying value must be adjusted down to the fair value. If the fair value of the impaired asset is not readily determinable through equivalent or comparable market price information, the Company normally engages the services of third-party valuation experts to develop or corroborate fair value assessments.

     Were the Company to experience a prolonged period of low PGM prices adversely affecting the determination of ore reserves, the Company could face one or more impairment adjustments. Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between projections and actual outcomes for key factors such as PGM prices, recoverable ounces, and/or the Company’s operating performance could have a material effect on the Company’s ability to recover the carrying amounts of its long-lived assets, potentially resulting in impairment charges in the future. The Company has estimated that as of December 31, 2010, the combined long-term PGM market price level below which ore reserves start to be constrained economically is about $530 per ounce. See “Business, Risk Factors and Properties — Proven and Probable Ore Reserves” for a chart illustration.

     Lower prices also can affect the economic justification of ore reserves. The Company reviews its ore reserves annually and has reviewed them as of December 31, 2010. As in past years, the Company also engaged Behre Dolbear as

third-party independent geological experts to review and express their opinion on the Company’s reserve calculations. The Company performs its ore reserve economic assessment using a twelve-quarter trailing price in order to level out short-term volatility in metals prices, viewing the twelve-quarter trailing average as a reasonable surrogate for long-term future PGM prices over the period when the reserves will be mined. The Company’s combined twelve-quarter trailing weighted average price for platinum and palladium at December 31, 2010, was about $624 per ounce. At this price, the Company’s geologic ore reserves at each mine can be shown to generate (undiscounted) positive cash flow over the life of the reserve. Consequently, the Company’s ore reserves were not constrained economically at December 31, 2010.

     It is important to note that if PGM prices were to fall for an extended period, the trailing twelve-quarter price will gradually decline. Following the Company’s methodology, there can be no assurance that the Company’s reported proven and probable ore reserves will not be constrained economically in the future.

USERS OF PGMS MAY REDUCE THEIR CONSUMPTION AND SUBSTITUTE OTHER MATERIALS FOR PALLADIUM AND PLATINUM

     High PGM prices may lead users of PGMs to substitute other materials for palladium and platinum or to reduce the amounts they consume. The automobile, jewelry, electronics and dental industries are the largest consumers of palladium. All of these applications are sensitive to prices. In response to supply concerns and high market prices for palladium, some automobile manufacturers in the past have sought alternatives to palladium, although no practical alternatives to palladium, platinum and rhodium in automotive catalytic converters have been identified to date. There has been some substitution in the past of other metals for palladium in electronics and dental applications. High platinum prices likewise tend to reduce demand by driving users toward alternative metals. The principal demand for platinum is in the automobile and chemical industries and for jewelry. Substitution in these industries may increase significantly if PGM market prices rise or if supply becomes unreliable. Significant substitution for any reason, in the absence of alternative uses for PGMs being identified, could result in a material and sustained PGM price decrease, which would negatively affect the Company’s revenues and profitability.

     High PGM prices also drive users toward ever more efficient utilization of PGMs. In the past, the development of new flow geometries and substrate configurations have resulted in “thrifting down” the amount of PGMs in catalytic converters required to meet emission standards. Recently, apparently in response to high PGM prices, certain PGM consumers have announced new nanotechnology applications that may allow further significant reductions in the volume of PGMs required in each catalytic converter. These emerging applications could tend to drive down PGM demand in the future and result in lower PGM prices.

     To the extent existing and future environmental regulations tend to create disincentives for the use of internal combustion engines, demand for platinum and palladium in automotive catalytic converters could be reduced. This in turn could drive down PGM prices and could impair the Company’s financial performance.

IF THE COMPANY IS UNABLE TO OBTAIN SURETY COVERAGE TO COLLATERALIZE ITS RECLAMATION LIABILITIES, OPERATING PERMITS MAY BE AFFECTED

     The Company is required to post surety bonds, letters of credit, cash or other acceptable financial instruments to guarantee the future performance of reclamation activities at its operating mines. The total availability of bonding capacity from the U.S. insurance industry is limited. During 2008, the State of Montana increased the required bonding levels at the Company’s mining operations and is expected to require an additional increase in the future. The aggregate surety amount in place at the East Boulder Mine was $13.7 million at the end of 2010, comprised of $6.2 million of surety bonds and a $7.5 million letter of credit. At December 31, 2010, the Stillwater Mine carried reclamation bonds totaling $19.6 million, including an increase of $10.0 million voluntarily put in place during the fourth quarter of 2008, pending the outcome of the current EIS being completed by the State of Montana. Should increased bonding requirements be imposed in the future and the Company find itself unable to obtain the required bonds or otherwise provide acceptable surety, the ability to operate under existing operating permits would likely be curtailed, which could have a significant adverse affect on the Company’s operations.

MINING RISKS AND POTENTIAL INADEQUACY OF INSURANCE COVERAGE — THE COMPANY’S BUSINESS IS SUBJECT TO SIGNIFICANT RISKS THAT MAY NOT BE COVERED BY INSURANCE

Underground mining and milling, smelting and refining operations involve a number of risks and hazards, including:

•		unusual and unexpected rock formations affecting ore or wall rock characteristics;
•		ground or slope failures;
•		cave-ins, ground water influx, rock bursts and other mining or ground-related problems;
•		environmental hazards;
•		industrial accidents;
•		organized labor disputes or work slow-downs;
•		metallurgical and other processing, smelting or refining problems;
•		wild fires, flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of God;
•		mechanical equipment failure and facility performance problems, and
•		availability and cost of critical materials, equipment and skilled manpower.

     Such risks could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining or processing, monetary losses and possible legal liability. Some fatal accidents and other non-fatal serious injuries have occurred at the Company’s mines since operations began in 1986. Future industrial accidents or occupational disease occurrences could have a material adverse effect on the Company’s business and operations. The Company cannot be certain that its insurance will cover certain risks associated with mining or that it will be able to maintain insurance to cover these risks at economically feasible premiums. The Company might also become subject to liability for environmental damage or other hazards which may be uninsurable or for which it may elect not to insure because of premium costs or commercial impracticality. Such events could result in a prolonged interruption in operations that would have a negative effect on the Company’s ability to generate revenues, profits, and cash flow.

HEDGING AND SALES AGREEMENTS COULD LIMIT THE REALIZATION OF HIGHER METAL PRICES

     The Company enters into derivative contracts and other hedging arrangements from time to time in an effort to reduce the negative effect of price changes on its cash flow. These arrangements typically consist of contracts that require the Company to deliver specific quantities of metal, or to financially settle the obligation in the future, at specific prices. The Company may also hedge pricing through the sale of call options and the purchase of put options. See “Business, Risk Factors and Properties — Current Operations — PGM Sales and Hedging” for a discussion of the Company’s hedge positions. While hedging transactions are intended to reduce the negative effects of price decreases, they have also prevented the Company at times from benefiting fully from price increases. If PGM prices are above the price at which future production has been hedged, the Company will experience an opportunity loss upon settlement.

CHANGES TO REGULATIONS AND COMPLIANCE WITH REGULATIONS COULD AFFECT PRODUCTION, INCREASE COSTS AND CAUSE DELAYS

     The Company’s business is subject to extensive federal, state and local environmental controls and regulations, including regulations associated with the implementation of the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Metals Mines Reclamation Act and numerous permit stipulations as documented in the Record of Decision for each operating entity. Properties controlled by the Company in Canada are subject to analogous Canadian federal and provincial controls and regulations. The body of environmental laws is continually changing and, as a general matter, is becoming more restrictive. Compliance with these regulations requires the Company to obtain permits issued by federal, state, provincial and local regulatory agencies. Certain permits require periodic renewal and/or review of the Company’s performance. The Company cannot predict whether it will be able to secure or renew such permits or whether material changes in permit conditions will be imposed. Nonrenewal of permits, the inability to secure new permits, or the imposition of additional conditions could eliminate or severely restrict the Company’s ability to conduct its operations. See “Business, Risk Factors and Properties — Current Operations — Regulatory and Environmental Matters.”

     Compliance with existing and future environmental laws and regulations may require additional control measures and expenditures, which the Company cannot reasonably predict. Environmental compliance requirements for new or expanded mining operations may require substantial additional control measures that could materially affect permitting and proposed construction schedules for such facilities. Under certain circumstances, facility construction may be

delayed pending regulatory approval. Expansion plans or new mining and processing facilities may require new environmental permitting. Private parties may pursue successive legal challenges to the Company’s existing or proposed permits. See “Business, Risk Factors and Properties — Current Operations — Regulatory and Environmental Matters.”

     The Company’s activities are also subject to extensive federal, state, provincial and local laws and regulations governing matters relating to mine safety, occupational health, labor standards, prospecting, exploration, production, exports, smelting and refining operations and taxes. Compliance with these and other laws and regulations, including requirements implemented under guidance from of the U.S. Department of Homeland Security, could require additional capital outlays, which could negatively affect the Company’s cash flow.

     The Company’s mining operations are located adjacent to the Absaroka-Beartooth Wilderness Area and are situated approximately 30 miles from the northern boundary of Yellowstone National Park. While the Company works closely and cooperatively with local environmental organizations, the Montana Department of Environmental Quality and the United States Forest Service, there can be no assurance that future political or regulatory efforts will not further restrict or seek to terminate the Company’s operations in this sensitive area.

     For the past several years, the Company has employed various measures in an effort to protect the health of the Company’s workforce and to comply with much stricter MSHA limits on DPM exposure for the underground miners. These measures have included using catalytic converters, filters, enhanced ventilation regimens, modifying certain mining practices underground, and the utilization of various bio-diesel blends. The new DPM limits were delayed for a time, but ultimately went into effect on May 20, 2008. Compliance with the revised MSHA DPM standards continues to be a challenge within the mining industry. However, as a result of its internal efforts to reduce DPM exposure, recent sampling indicates that the Company has achieved compliance with the new standards at both the Stillwater Mine and the East Boulder Mine. No assurance can be given that any lack of compliance in the future will not impact the Company.

     Various legislative initiatives have been introduced and, in some cases, enacted mandating additional safety and health measures for mining employees and providing stronger penalties for failure to comply. The Company believes it has a highly effective safety program in place for its employees, but there can be no assurance that the Company will be in compliance with future legislated initiatives or that the Company will not incur significant penalties under these initiatives.

THE COMPANY’S CREDIT RATING IS BELOW INVESTMENT GRADE AND FUTURE INTEREST RATES ARE UNCERTAIN, POTENTIALLY LIMITING FUTURE CREDIT AVAILABILITY AND/OR INCREASING POTENTIAL BORROWING COSTS; AND OTHER FACTORS THAT MAY AFFECT THE COMPANY

     Stillwater Mining Company’s credit rating currently is below investment grade and is not expected to achieve investment grade in the immediate future. The rating agencies at various times have expressed concern regarding the Company’s lack of operating diversity, the recent termination of its sales agreements, its relatively narrow cash operating margins and volatile pricing environment. The Company’s low credit rating will likely make it difficult and more costly to obtain some forms of third-party financing in the future. Although the Company believes it has adequate liquidity available at the current time, should the Company need to access the credit markets in the future, the Company’s lower credit rating would likely be an impediment to obtaining additional debt or lines of credit at reasonable rates. The Company does not have a revolving credit facility in place at this time. Should the Company require additional credit capacity in the future and be unable to obtain it, the Company might not be able to meet its obligations as they come due and so could be compelled to restructure or seek protection from creditors.

     Interest rates at present are near historic lows, and borrowing costs appear likely to rise in the future in step with any improvement in economic conditions. While there appears to be ample liquidity available at this time, as the economy strengthens and the government takes steps in the future to rein in liquidity, the availability of credit may tighten and the Company may experience limits on its ability to secure external financing. This in turn could constrain the Company’s ability financially to develop new operations or, in the extreme, to maintain its existing operations.

     A related risk is that the underlying rate of general inflation, or the specific cost of certain materials necessary for the Company’s operations, may increase in the future. This in turn could squeeze the Company’s operating margins and sharply increase the cost of developing new operations. While the commodity nature of the Company’s products may serve as a partial hedge against underlying inflation, there can be no assurance that the Company’s costs would not rise faster than the value of its products in such an environment.

     On December 13, 2010, Norimet Ltd., a wholly-owned subsidiary of MMC Norilsk Nickel (Norilsk) and the Company’s majority shareholder, completed a $971 million secondary offering of Stillwater shares in the public market and so disposed of its entire equity interest in the Company. Prior to completion of the offering it was determined that Norimet was unable to locate its original share certificates and the Company, the Company’s transfer agent and affiliates of Norilsk, entered into certain indemnification and ancillary arrangements to protect the Company and its transfer agent from possible claims relating to the issuance of replacement certificates. For additional information about these arrangements, see Note 19 to the Company’s consolidated financial statements for a discussion of potential exposure to losses that the Company could suffer.

LIMITED AVAILABILITY OF ADDITIONAL MINING PERSONNEL AND UNCERTAINTY OF LABOR RELATIONS MAY AFFECT THE COMPANY’S ABILITY TO ACHIEVE ITS PRODUCTION TARGETS

     The Company’s operations depend significantly on the availability of qualified miners. Historically, the Company has experienced periods of high turnover with respect to its miners, particularly during the strong metal markets of 2007 and early 2008. In addition, the Company must compete for individuals skilled in the operation and development of underground mining properties. The number of such persons is limited, and significant competition exists to obtain their skills. The Company cannot be certain that it will be able to maintain an adequate supply of miners and other personnel or that its labor expenses will not increase as a result of a shortage in supply of such workers. Failure to maintain an adequate supply of miners could result in lower mine production and impair the Company’s financial performance.

     The Company had 1,354 employees at December 31, 2010. About 834 employees located at the Stillwater Mine and the Columbus processing facilities are covered by a collective bargaining agreement with USW Local 11-0001, expiring July 1, 2011. As of December 31, 2010, about 225 employees at the East Boulder Mine were covered by a separate collective bargaining agreement with USW Local 11-0001, which will expire on July 1, 2012. There is no assurance that the Company can achieve a timely or satisfactory renewal of either of these agreements as they expire. A strike or other work stoppage by the Company’s represented employees could result in a significant disruption of the Company’s operations and higher ongoing labor costs.

     In response to the limited availability of skilled underground miners, beginning in 2005 the Company initiated a new miner training program whereby it has from time to time hired individuals largely inexperienced in mining and provided intensive, supervised training in skills critical to underground mining in the Company’s operations. This training program requires dedicating significant time and personnel to the training effort, and consequently was scaled back significantly during 2009. These new and less experienced miners, even after training, generally will require several years of experience to achieve the productivity level of the Company’s regular mining workforce. There is no assurance that these new miners will achieve the assumed level of productivity as they gain experience, nor that the Company will be able to retain these new workers in the face of other employment opportunities. Because the Company has now cut back on these training programs, the Company is unable to utilize this training pool as a significant source of replacement mining skills.

UNCERTAINTY OF TITLE TO PROPERTIES — THE VALIDITY OF UNPATENTED MINING CLAIMS IS SUBJECT TO TITLE RISK

     The Company has a number of unpatented mining and mill site claims. See “Business, Risk Factors and Properties — Current Operations —Title and Royalties.” The validity of unpatented mining claims on public lands is often uncertain and possessory rights of claimants may be subject to challenge. Unpatented mining claims may be located on lands open to appropriation of mineral rights and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining claims is often uncertain and vulnerable to challenges by third parties or the federal government. The validity of an unpatented mining claim or mill site, in terms of its location and its maintenance, depends on strict compliance with a complex body of federal and state statutory and decisional law and, for unpatented mining claims, the existence of a discovery of valuable minerals. In addition, few public records exist to definitively control the issues of validity and ownership of unpatented mining claims or mill sites. While the Company pays annual maintenance fees and has obtained mineral title reports and legal opinions for some of the unpatented mining claims or mill sites in accordance with the mining laws and what the Company believes is standard industry practice, the Company cannot be certain that the mining laws will not be changed nor that the Company’s possessory rights to any of its unpatented claims may not be deemed defective and challenged. Any change in the mining law could include the imposition of a federal royalty provision on unpatented claims, which could have an adverse effect on the Company’s economic performance.

THE COMPLEXITY OF PROCESSING PLATINUM GROUP METALS POSES OPERATIONAL AND ENVIRONMENTAL RISKS IN ADDITION TO TYPICAL MINING RISKS

     The Company’s processing facilities include concentrators at each mine site that grind the ore and extract the contained metal sulfides, and a smelter and base metal refinery located in Columbus, Montana. These processes ultimately produce a PGM filter cake that is shipped for final refining to third party refiners. The Columbus operations involve pyrometallurgical and hydrometallurgical processes that utilize high temperatures, pressures, caustic chemicals and acids to extract PGMs and other metals from the concentrates. These processes also generate waste gases that are scrubbed to eliminate sulfur dioxide emissions. While the environmental and safety performance of these facilities to date has been outstanding, there can be no assurance that incidents such as solution spills, sulfur dioxide discharges, explosions or accidents involving hot metals and product spills in transportation will not occur in the future. Such incidents potentially could result in more stringent environmental or operating restrictions on these facilities and additional expenses to the Company, which could have a negative impact on its results of operations and cash flows. Further, the Company processes virtually all of its metals through these processing facilities, and any incident interrupting processing operations for an extended period would have a material adverse effect on the Company’s performance.

THE ACQUISITION OF THE MARATHON PROPERTIES IN CANADA INTRODUCES SIGNIFICANT NEW UNCERTAINTIES AS TO THE COMPANY’S FUTURE PERFORMANCE AND COMMITMENTS

     The Company’s recent acquisition of the PGM assets of Marathon PGM Corporation, although perceived by the Company as an attractive opportunity, also introduces a number of significant risks, all of which must be managed and all or any combination of which could create difficulties for the Company in the future. Among these risks, many of which are not yet fully defined, are the following:

	•		Some remaining uncertainty as to the ultimate extent, quality, final grade and mineability of the Marathon resource;
	•		Lack of a final engineering study to lock down the capital cost of installing the mine, the equipment required and its availability, the timing of the construction, and access to local infrastructure in support of a future operation;
	•		Uncertainty as to future PGM and copper prices, which could significantly affect the financial viability of the proposed Marathon development;
	•		Need for employees to manage the project and to staff the mining operations, their numbers, required skill sets and availability;
	•		Negotiation of terms for a processing agreement with a third-party copper smelter to take the concentrates produced by the Marathon operations;
	•		Ability to complete project permitting in coordination with the various responsible agencies and affected groups within an acceptable time frame;
	•		Ability to source or acquire the required mine and mill equipment on a timely basis due to long lead times resulting from widespread worldwide mine development;
	•		Availability of required financing for the Marathon project, internally and/or externally, potentially during a period when the Company’s outstanding convertible debentures may need to be refinanced or repaid;
	•		Future significant exposure to exchange rate risk between the Canadian dollar and the U.S. dollar; and
	•		Other factors involving the integration of Marathon into the Company, including various legal, accounting, tax and human resource matters.

     While the Company believes to the extent possible it is addressing each of these areas of risk, there can be no assurance that unforeseen matters may not arise that would adversely affect the Company’s ability to effectively manage and develop its Canadian prospects.

ITEM 3

LEGAL PROCEEDINGS

     The Company is involved in various claims and legal actions arising in the ordinary course of business, primarily employee lawsuits and employee injury claims. In the opinion of management, the ultimate disposition of these types of matters is not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

PART II

ITEM 5

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PERFORMANCE GRAPH

     The following chart compares the yearly percentage change in the Company’s cumulative total stockholder return on Common Stock, with the cumulative total return on the following indices, assuming an initial investment of $100 on December 31, 2005 and the reinvestment of all dividends: (i) the Russell 2000 and (ii) the Peer Group. The performance shown is not necessarily indicative of future performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Stillwater Mining Company, the Russell 2000
Index and a Peer Group

Cumulative Total Return

		12/31/06				12/31/07				12/31/08				12/31/09				12/31/10
Stillwater Mining Company		$	107.95			$	83.49			$	42.70			$	81.94			$	184.53
Russell 2000			118.37				116.51				77.15				98.11				124.46
Peer Group			169.07				217.23				86.47				165.26				189.12

     Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings made under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this report or future filings made by the Company under those statutes, the preceding stock performance graph is not to be incorporated by reference into any such prior filings, nor shall such graph or report be incorporated by reference into any future filings made by the Company under those statutes. The Peer Group referenced above includes Stillwater Mining Company, Anglo Platinum Limited, Impala Platinum Holdings Limited, Lonmin PLC, and North American Palladium Limited.

ITEM 6

SELECTED FINANCIAL DATA

(in thousands, except per share and current ratio data)		2010				2009				2008				2007				2006
INCOME STATEMENT DATA
Revenues
Mine production		$	381,044			$	306,892			$	360,364			$	331,277			$	334,834
PGM recycling			168,612				81,788				475,388				326,394				269,941
Sales of palladium received in Norilsk Nickel transaction			—				—				—				—				17,637
Other			6,222				5,752				19,980				15,365				33,366
Total revenues		$	555,878			$	394,432			$	855,732			$	673,036			$	655,778
Costs and Expenses
Costs of metals sold:
Mine production			229,986				209,140				283,793				256,942				242,612
PGM recycling (1)			157,310				75,920				448,351				308,567				249,689
Costs of palladium received in Norilsk Nickel transaction			—				—				—				—				10,785
Other			6,379				5,741				19,892				14,289				32,300
Total costs of metals sold			393,675				290,801				752,036				579,798				535,386
Depreciation and amortization
Mine production			71,121				70,239				82,792				82,396				83,583
PGM recycling			472				178				192				142				100
Total depreciation and amortization			71,593				70,417				82,984				82,538				83,683
General and administrative			35,898				28,926				70,816				28,285				28,018
Impairment of property, plant and equipment			—				—				67,254				—				—
Operating income (loss)		$	54,712			$	4,288			$	(117,358	)		$	(17,585	)		$	8,691
Induced conversion loss		$	—			$	(8,097	)		$	—			$	—			$	—
Total income tax benefit (provision)		$	—			$	30			$	32			$	—			$	(10	)
Net income (loss)		$	50,365			$	(8,655	)		$	(115,797	)		$	(16,913	)		$	8,684
Other comprehensive income (loss), net of tax		$	(762	)		$	70			$	5,865			$	9,578			$	1,799
Comprehensive income (loss)		$	49,603			$	(8,585	)		$	(109,932	)		$	(7,335	)		$	10,483
Weighted average common shares outstanding
Basic			97,967				94,852				93,025				92,016				91,260
Diluted			99,209				94,852				93,025				92,016				91,580
Basic earnings (loss) per share		$	0.51			$	(0.09	)		$	(1.24	)		$	(0.18	)		$	0.10
Diluted earnings (loss) per share		$	0.51			$	(0.09	)		$	(1.24	)		$	(0.18	)		$	0.09
CASH FLOW DATA
Net cash provided by operating activities		$	123,897			$	59,672			$	114,243			$	56,422			$	96,963
Net cash used in investing activities		$	(272,034	)		$	(54,723	)		$	(74,567	)		$	(80,967	)		$	(78,909	)
Net cash provided by (used in) financing activities		$	844			$	(88	)		$	60,683			$	(2,379	)		$	(9,954	)

ITEM 6

SELECTED FINANCIAL DATA

(Continued)
(in thousands, except per share and current ratio data)		2010				2009				2008				2007				2006
BALANCE SHEET DATA
Cash and cash equivalents		$	19,363			$	166,656			$	161,795			$	61,436			$	88,360
Investments		$	188,988			$	34,515			$	18,994			$	27,603			$	35,497
Inventories		$	101,806			$	88,967			$	72,038			$	118,300			$	109,188
Total current assets		$	349,367			$	319,021			$	282,395			$	258,568			$	286,632
Property, plant and equipment, net		$	509,787			$	358,866			$	393,412			$	465,054			$	460,328
Total assets		$	909,470			$	725,195			$	722,889			$	742,044			$	758,316
Current portion of long-term debt and capital lease obligations		$	—			$	—			$	97			$	1,209			$	1,674
Total current liabilities		$	58,202			$	49,476			$	55,108			$	68,974			$	85,590
Long-term debt and capital lease obligations		$	196,010			$	195,977			$	210,947			$	126,841			$	129,007
Total liabilities		$	326,398			$	278,384			$	301,735			$	225,003			$	243,467
Stockholders’ equity		$	583,072			$	446,811			$	421,154			$	517,041			$	514,849
Working capital		$	291,165			$	269,545			$	227,287			$	189,594			$	201,042
Current ratio			6.0				6.4				5.1				3.7				3.3

OPERATING AND COST DATA
(in thousands, except per ounce and per ton costs)		2010				2009				2008				2007				2006
Consolidated:
Ounces produced:
Palladium			374				407				384				413				463
Platinum			111				123				115				124				138
Total			485				530				499				537				601
Tons milled			1,095				1,086				1,060				1,169				1,289
Mill head grade (ounce per ton)			0.48				0.52				0.50				0.50				0.51
Sub-grade tons milled (1)			86				98				146				75				62
Sub-grade mill head grade (ounce per ton)			0.17				0.20				0.17				0.12				0.13
Total tons milled (1)			1,181				1,184				1,206				1,244				1,351
Combined mill head grade (ounce per ton)			0.46				0.50				0.46				0.48				0.49
Total mill recovery (%)			91				91				91				91				91
Total operating costs per ounce (Non-GAAP) (2)		$	331			$	310			$	336			$	268			$	239
Total cash costs per ounce (Non-GAAP) (2)		$	397			$	360			$	405			$	330			$	294
Total production costs per ounce (Non-GAAP) (2)		$	546			$	495			$	569			$	487			$	431
Total operating costs per ton milled (Non-GAAP) (2)		$	136			$	139			$	139			$	116			$	106
Total cash costs per ton milled (Non-GAAP) (2)		$	163			$	161			$	167			$	143			$	131
Total production costs per ton milled (Non-GAAP) (2)		$	224			$	222			$	236			$	210			$	192
Stillwater Mine:
Ounces produced:
Palladium			271				302				268				274				314
Platinum			81				92				81				85				95
Total			352				394				349				359				409
Tons milled			713				727				690				640				739
Mill head grade (ounce per ton)			0.53				0.58				0.54				0.60				0.60
Sub-grade tons milled(1)			68				50				78				75				62
Sub-grade mill head grade (ounce per ton)			0.18				0.20				0.16				0.12				0.13
Total tons milled(1)			781				777				768				715				801
Combined mill head grade (ounce per ton)			0.50				0.56				0.51				0.55				0.56
Total mill recovery (%)			92				92				91				92				92
Total operating costs per ounce (Non-GAAP) (2)		$	317			$	297			$	318			$	233			$	227
Total cash costs per ounce (Non-GAAP) (2)		$	380			$	344			$	383			$	294			$	280
Total production costs per ounce (Non-GAAP) (2)		$	524			$	469			$	521			$	425			$	400
Total operating costs per ton milled (Non-GAAP) (2)		$	143			$	150			$	144			$	117			$	116
Total cash costs per ton milled (Non-GAAP) (2)		$	171			$	174			$	174			$	147			$	143
Total production costs per ton milled (Non-GAAP) (2)		$	236			$	238			$	237			$	214			$	204
East Boulder Mine:
Ounces produced:
Palladium			103				105				116				139				149
Platinum			30				31				34				39				43
Total			133				136				150				178				192
Tons milled			382				359				370				529				550
Mill head grade (ounce per ton)			0.39				0.40				0.42				0.38				0.39
Sub-grade tons milled (1)			18				48				68				—				—
Sub-grade mill head grade (ounce per ton)			0.15				0.20				0.19				—				—
Total tons milled (1)			400				407				438				529				550
Combined mill head grade (ounce per ton)			0.37				0.38				0.38				0.38				0.39
Total mill recovery (%)			89				89				90				90				89
Total operating costs per ounce (Non-GAAP) (2)		$	368			$	347			$	378			$	338			$	264
Total cash costs per ounce (Non-GAAP) (2)		$	442			$	407			$	456			$	404			$	324
Total production costs per ounce (Non-GAAP) (2)		$	604			$	572			$	682			$	613			$	498
Total operating costs per ton milled (Non-GAAP) (2)		$	123			$	116			$	130			$	114			$	92
Total cash costs per ton milled (Non-GAAP) (2)		$	147			$	136			$	156			$	136			$	113
Total production costs per ton milled (Non-GAAP) (2)		$	201			$	191			$	234			$	206			$	174