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Value

Looking for a mining company that isn't just producing gold and silver? Stillwater Mining Company (SWC - Snapshot Report) could be your bet. Earnings are expected to jump 2525% in 2010.

Stillwater Mining sets itself apart from some of the seemingly fly-by-night mining companies because of the metals it specializes in. It mines palladium and platinum from two underground mines in south-central Montana.

The company is the only producer of these metals in the United States and one of the largest outside of the Russian Federation and South Africa.

The Stillwater area has been mined since the 1890s but it wasn't mined for palladium and platinum until the early 1970s. Stillwater was incorporated in 1992 so it's been in the game awhile.

Stillwater Surprised for the Second Time in 3 Quarters

On May 3, Stillwater Mining reported first quarter results that beat the Zacks Consensus by 27.3%. It was the second beat in the last 3 quarters.

Earnings per share were 14 cents compared to the consensus of 11 cents. The company lost 12 cents in the same quarter a year ago.

Revenue rose 56% to $133.5 million from $85.8 million in the first quarter of 2009. Higher platinum group metal (PGM) prices, higher volumes sold and lower production costs all boosted the quarter.

Total cash production costs averaged $364 an ounce, 10% under the $405 an ounce average in the year ago period. The decreases were primarily due to continued good mine production and restructuring measures taken several years earlier. The company also saw a stronger recycling and by-product credits.

PGM prices have also rebounded from the worst of it in 2009. The average sales realization in the first quarter was $644 an ounce. Comparatively, it averaged $579 per ounce in the fourth quarter of 2009 and was just $498 per ounce in the fourth quarter of 2008.

Outlook for 2010

The company is encouraged by the rise in PGM prices but given the events of the past two years is still playing it cautiously. It is not convinced these higher prices are here to stay.

Despite its better than expected first quarter, Stillwater has decided to leave its 2010 guidance unchanged at 515,000 ounces of mined palladium and platinum at an average combined total cash cost of $360 per ounce. Capital expenditures are expected to be $50 million.

Zacks Consensus Estimates Rise Anyway

Even though the company kept its production guidance in place, the estimates have jumped in the past 2 months.

There is one estimate for 2010. It is up 14 cents to 97 cents per share in the last 2 months. This is quite an improvement from 2009, where the company ended up losing 4 cents per share.

Similarly, the good times are expected to continue into 2011 with the one full year estimate jumping 19 cents in the past 60 days to $1.67 from $1.48 per share. This is earnings growth of 72.12% over projected 2010 results.

Is Stillwater a Value Stock?

Stillwater is trading with a forward P/E of 12.4 which is in the value parameters in and of itself. It also is trading well below its industry peers, which average a P/E of 21.4.

The company also has a price-to-book ratio of 2.5 which isn't the cheapest P/B ratio I've ever seen, and is slightly above the industry average of 2.3, but, again, it's within the value parameters.

Stillwater is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

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