SALES

MINE PRODUCTION

The Company mines and processes ores containing palladium, platinum, rhodium, gold, silver, copper and nickel into intermediate and final products for sale to customers. Palladium, platinum, rhodium, gold and silver are sent to a third-party refiner for final processing from which they are sold to customers with whom the Company has established trading relationships. Refined platinum group metals (PGMs) in sponge form are transferred upon sale from the Company’s account at the third-party refiner to the account of the purchaser. By-product metals are normally sold at market price to customers, brokers or outside refiners. Copper and nickel by-products are typically sold at a discount to the quoted market prices. By-product sales (gold, nickel, mined rhodium, copper and silver) are included in revenues from Mine Production. During each of the three months ended June 30, 2016 and 2015, total by-product sales totaled $6.1 million and $6.9 million, respectively. For the six months ended June 30, 2016 and 2015, by-product sales totaled $11.3 million and $13.7 million, respectively.

In July 2014, the Company executed five-year supply and refining agreements with Johnson Matthey (JM). Under the terms of these agreements, JM has an exclusive five-year right to refine all of the PGM filter cake the Company produces at its Columbus, Montana facilities. JM also has the right to purchase all of the Company's mine production of palladium and platinum at competitive market prices (except for platinum sales under the Company's sales agreement with Tiffany & Co., which are specifically excluded from the JM agreements) and has the right to bid for any recycling volumes the Company has available. Other provisions of the agreements include a good-faith effort by JM to assist in growing the Company's recycling volumes and the sharing of market intelligence to the extent permitted by law. The Company has the right to exit the JM PGM supply arrangement in return for the payment of a nominal fee. In addition, the Company, in its sole discretion, may elect to terminate the refining arrangement after July 2018.

In accordance with the terms of the JM PGM supply agreement, all Company sales of mined PGMs, other than the platinum sales under the Company's sales agreement with Tiffany & Co., were to JM for the six months ended June 30, 2016 and 2015.

PGM RECYCLING

The Company purchases spent catalyst materials from third-parties for recycling and processes these materials within its facilities in Columbus, Montana to recover palladium, platinum and rhodium for sale. The Company has entered into sourcing arrangements for catalyst materials with various suppliers. Under these sourcing arrangements the Company may advance cash as general working capital or against a shipment of material shortly before actually receiving the physical shipment at the Company's processing facilities. These advances are included in Other current assets on the Company’s Consolidated Balance Sheets until such time as the materials have been physically received and title has transferred to the Company, at which time the advance is reclassified into Inventories. Finance charges collected on advances and inventories prior to being earned are included in Other current liabilities on the Company’s Consolidated Balance Sheets. Finance charges are reclassified from Other current liabilities to Interest income ratably from the time the cash advance was made until the out-turn date of the inventory from the final refiner.

The Company also accepts material supplied from third-parties on a tolling basis, processing it for a fee and returning the recovered metals to the supplier.

TOTAL SALES

Total sales to significant customers as a percentage of total revenues for the three and six months ended June 30, 2016 and 2015 were as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015 ⁽¹⁾		2016 ⁽¹⁾		2015 ⁽¹⁾
Customer A	72	%	80	%	76	%	77	%
Customer B	10	%	—		—		—

(1) The “—” symbol represents less than 10% of total revenues.