TORONTO (miningweekly.com) – US platinum-group metals-miner Stillwater Mining increased its profit in the third quarter to $4,4-million, compared with $0,1-million a year earlier, in large part thanks to improvements in operating costs at the company's two Montana mines, CEO Francis McAllister said on Friday.

Excluding by-products and recycling credits, costs at the firm's Stillwater mine declined to $407/oz  of platinum-group metals, compared with $531/oz in the third quarter of last year.

At the East Boulder operation, cash costs before credits decreased to $467/oz, from $619 a year earlier.

In November last year, the firm announced that it would scale down operations at its East Boulder mine, reduce capital expenditure and cut jobs across the group, in an attempt to stay profitable amid falling PGM prices.

As a result, production at the Stillwater Mine rose to 95 100 oz in the third quarter, compared with 93 800 oz in the same period of last year, while output declined 6% at East Boulder, to 34 000 oz.

The company also announced that it has increased its production guidance and lowered cost estimated for the full year.

Better-than-anticipated productivity levels mean that the firm is well ahead of its output targets for the year, and so it has revised its guidance for 2009 to 515 000 PGM ounces, compared with an earlier forecast of 495 000 oz.

Total cash costs will also be better than estimated and are now expected to come in at $375/oz for the full year (including by-product and recycling credits), from previous guidance of $399/oz.

Although the company has benefited from a recovery in palladium and platinum prices during this year, it continues to focus on improving productivity and putting the squeeze on production costs, McAllister said on a conference call.

“While the company's financial performance certainly has been aided by the recovery in prices for palladium and platinum during 2009, we also have seen the benefit of improving productivity and declining production costs.

“This restructuring of the way we operate is an urgent priority, particularly in view of the expiration of our supply agreement with Ford at the end of next year," he said.

“In the past, the floor prices in the automotive contracts have protected us during periods of low PGM prices. The expiration of the floor prices will require us to be more resilient in responding to any downward pricing cycles.”

McAllister said that the cancellation earlier this year of a contract by General Motors had actually had a minimal effect on the company's third-quarter numbers, as stronger PGM prices offset the financial impact of losing the favourable floor prices in the GM agreement

GM broke off its supply contract with Stillwater in July, as part of its government-backed bankruptcy restructuring.