10-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003.

OR

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)

Securities registered pursuant to Section 12(b) of the Act:

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

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

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 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 an accelerated filer (as defined in Exchange Act Rule 12b-2). þ YES  o NO

As of March 9, 2004, assuming a price of $12.92 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 $518,138,861.

As of March 9, 2004, the company had outstanding 89,916,849 shares of common stock, par value $0.01 per share.

TABLE OF CONTENTS

GLOSSARY
	PART I
ITEMS 1 AND 2	BUSINESS AND PROPERTIES	6
ITEM 3	LEGAL PROCEEDINGS	31
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	32
ITEM 4A	EXECUTIVE OFFICERS OF THE REGISTRANT	33
	PART II
ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	34
ITEM 6	SELECTED FINANCIAL AND OPERATING DATA	35
ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	53
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	54
ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	81
ITEM 9A	CONTROLS AND PROCEDURES	81
	PART III
ITEM 10	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	81
ITEM 11	EXECUTIVE COMPENSATION	82
ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	82
ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	82
ITEM 14	PRINCIPAL ACCOUNTING FEES AND SERVICES	82
	PART IV
ITEM 15	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K	83
	SIGNATURES	87
Consent of Independent Accountants
Rule 13a-14(a)/15d-14(a) Certification - CEO
Rule 13a-14(a)/15d-14(a) Certification - VP and CFO
Section 1350 Certification
Section 1350 Certification

GLOSSARY OF SELECTED MINING TERMS

     The following is a glossary of selected mining terms used 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.
Catalysts	The catalytic converter used in an automobile’s exhaust and pollution control system.
Close-spaced drilling	The drilling of holes designed to extract representative samples of rock in a target area.
Concentrate	A mineral processing product that generally describes the material that is produced after crushing and grinding ore and then effecting significant separation of gangue (waste) minerals from the metal and/or metal minerals, discarding the waste and minor amounts of metal and/or metal minerals leaving a “concentrate” of metal and/or metal minerals with a consequent 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, general and administrative costs, smelting and refining costs, royalty expenses, by-product credits, process and refining recovery rates and PGM prices.
Decline	A gently inclined 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 orebody.
Drift	A major horizontal access tunnel used for the transportation of ore or waste.
Ductility	Property of solid material that undergoes more or less plastic deformation before it ruptures. The ability of a material to deform plastically without fracturing.
Fault	A 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 refinery for the next step in the refining process.
Footwall	The underlying side of a fault, orebody, 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.
Grade	The average assay of a ton of ore, reflecting metal content. With precious metals, grade is expressed as troy ounces per ton of rock.
Lenticular-shaped	Resembling in shape the cross section of a double-convex lens.
Lode claims	Claiming the mineral rights along a lode (vein) structure of mineralized material on Federal land; typically lode claims are 1,500 feet in length along the trend of the mineralized material, the claim width typically being 600 feet wide.

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Mafic rocks	Igneous rocks composed chiefly of dark, ferromagnesian minerals in addition to lighter-colored feldspars.
Matrix	The finer-grained material between the larger particles of a rock or the material surrounding mineral particles.
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.
Millsite claims	Claiming of Federal land for millsite 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 sufficient 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.
Net smelter royalty	A share of revenue paid by the company to the owner of a royalty interest. At Stillwater, the royalty is calculated 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 by Stillwater 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 surfaces, often protruding above the surrounding ground.
PGM	The platinum group metals collectively and in any combination of platinum, palladium, rhodium, ruthenium, osmium, and iridium. Reference to PGM grades for the company’s operations mean measured quantities of palladium and platinum only.
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 measurements 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 extracted from ore in the course of processing such ore.

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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.
Secondary Materials	Spent PGM bearing materials collect for reprocessing from auto, petroleum, chemical and medicine, food and other catalysts. Additionally PGM’s are sourced from scrap electronic, old jewelry, old thermo couplers and materials used in glass manufacturing process.
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.
Silica oxide rich 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.
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.
Stope	An underground excavation from which ore is being extracted.
Strike	The course or bearing of a vein or a layer of rock.
Tailings	That portion of the ore that remains after the valuable minerals have been extracted.
Troy ounce	A unit measure used in the precious metals industry. A Troy ounce is equal to 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 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.

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EXPLANATORY NOTE

     This Amendment No. 1 to the “Form 10-K/A to our Annual Report on Form 10-K for the period ended December 31, 2003 amends and supplements the Annual Report on Form 10-K filed by the registrant with the Securities and Exchange Commission on March 15, 2004 (the “Original Form 10-K”). The filing of this Form 10-K/A shall not be deemed an admission that the Original Form 10-K, when filed, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.

PART I

ITEMS 1 AND 2
BUSINESS AND PROPERTIES

INTRODUCTION AND 2003 HIGHLIGHTS

     Stillwater Mining Company is engaged in the development, extraction, processing and refining of palladium, platinum and associated metals (platinum group metals or PGMs) from a geological formation in southern Montana known as the J-M Reef. The J-M Reef is the only known significant source of platinum group metals inside the United States and one of the significant resources outside South Africa and Russia. Associated by-product metals of PGMs include minor amounts of rhodium, gold, silver, nickel and copper. 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 its current mining operations at the Stillwater Mine near Nye, Montana and at the East Boulder Mine near Big Timber, Montana. Both mines are located on the J-M Reef. In addition, the company operates a smelter and refinery at Columbus, Montana.

     PGMs are rare precious metals with unique physical properties that are used in diverse industrial applications and in the jewelry industry. The largest use for PGMs is in the automotive industry for the production of catalysts that reduce harmful automobile emissions. Palladium is also used in the production of electronic components for personal computers, cellular telephones, facsimile machines and other devices, as well as for dental applications. Platinum’s largest use is for jewelry. Industrial uses for platinum, in addition to automobile and industrial catalysts, include the manufacturing of data storage disks, glass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline and fuel cells.

     At December 31, 2003, the company had proven and probable ore reserves of approximately 40.4 million tons with an average grade of 0.58 ounce of PGMs per ton containing approximately 23.6 million ounces of palladium and platinum at a ratio of approximately 3.6 parts palladium to one part platinum. See “Business and Properties — Ore Reserves”.

2003 Highlights:

•   In 2003, the company’s total revenues consisted of $161.6 million from sales of palladium and $78.6 million from sales of platinum or 67.3% and 32.7% of total revenues, respectively compared to $202.9 million from sales of palladium and $72.7 million from sales of platinum, or 73.6% and 26.4% of total revenues respectively, for 2002 and $220.4 million from sales of palladium and $57.0 million of from sales platinum or 79.5% and 20.5% of total revenues, respectively for 2001. The company reported a net loss of $323.3 million, or $4.77 per share in 2003 compared to net income of $31.7 million, or $0.74 per share in 2002. The 2003 net loss includes a $390.3 million asset impairment charge and a charge of $70.3 million to record a valuation allowance for the amount of the net deferred tax assets the company believes will not be utilized. The charges are non-cash and not expected to impact operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Year Ended December 31, 2003 Compared to Year Ended December 31, 2002.”

•   In 2003, the company produced a total of 584,000 ounces of palladium and platinum compared to 617,000 ounces in 2002. Total consolidated cash costs per ounce were $283 in 2003, compared with $287 in 2002. The lower consolidated cash costs per ounce were due to a decrease in operating costs primarily related to lower mining costs at the East Boulder Mine.

•   On June 23, 2003, the company and MMC Norilsk Nickel (Norilsk Nickel), a Russian mining company, completed a stock purchase transaction whereby the company issued 45,463,222 shares of its common stock to Norimet Limited (Norimet), a wholly-owned subsidiary of Norilsk Nickel, representing 50.8% of the company’s then outstanding shares. The company received consideration from Norimet consisting of $100.0 million in cash and 877,169 ounces of palladium valued at $148.2 million as of June 23, 2003 (see Note 12). The aggregate value of the consideration was $248.2 million as of June 23, 2003. The company was required to use 50% of the cash consideration received from Norilsk Nickel to pay down its bank loans. As

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contemplated by the stock purchase transaction on September 3, 2003, Norimet completed a cash tender offer at $7.50 per share to acquire 4,350,000 shares of the company’s outstanding common stock. Following completion of the tender offer, Norimet owned 49,813,222 shares or 55.5% of the then outstanding common stock. As of March 9, 2004 Norimet owned 49,813,222 shares or 55.4% of the company’s outstanding common stock.

     For a discussion of certain risks associated with the company’s business, please read “Business and Properties—Current Operations”, and “—Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

HISTORY OF THE COMPANY

     Palladium and platinum were discovered in the J-M Reef by Johns Manville Corporation (“Manville”) geologists in the early 1970s. 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 underground mining in 1986.

     The company was incorporated in 1992 and on October 1, 1993, Chevron and Manville transferred substantially all assets, liabilities and operations at the Stillwater property to 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 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 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 purchase transaction with Norilsk Nickel, whereby Norilsk Nickel became a majority stockholder of the company. On such date, the parties entered into a Stockholders Agreement. Under the Stockholders Agreement, among other things:

•   The company’s board of directors will be composed of a majority of directors who meet certain independent requirements, including the requirements of the NYSE.

•   Norilsk Nickel will be able to elect a number of directors based on its proportionate ownership of the company’s voting shares. No director designated by Norilsk Nickel may be an officer, employee or director of Norilsk Nickel or any of its affiliates and some of these directors must meet certain independence requirements.

•   At all times there will be a number of directors on the board who are elected and replaced in a manner designed to protect their independence from Norilsk Nickel (the “Public Directors”).

•   Without the prior approval of a majority of the Public Directors, the company may not enter into any agreement or transaction with Norilsk Nickel or any of its affiliates or which otherwise benefits Norilsk Nickel or its affiliates in an advantageous manner over the interests of other stockholders.

•   Norilsk Nickel and its affiliates may not acquire additional shares of the company, subject to certain exceptions. Norilsk Nickel and its affiliates may make an offer to acquire all or part of the company’s shares with the prior written consent of a majority of the Public Directors after the Public Directors have received an opinion from an independent financial advisor regarding the fairness of the purchase to the company’s other stockholders.

•   Other than transfers to an affiliate under certain conditions, Norilsk Nickel is restricted from transferring its shares without the prior written consent of a majority of the Public Directors if the transfer will result in any person beneficially owning 5% or more of the company’s voting shares. After the third anniversary of the Stockholders Agreement, these transfers will be permitted if certain conditions are met.

GEOLOGY OF THE J-M REEF

     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.

     Geologically, the Stillwater Layered Complex is composed of a succession of ultramafic to mafic rocks derived from a large

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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 relatively slower and also settled into layered successions of norite, gabbroic and anorthosite suites. This systematic process resulted in mineral segregations being deposited into extensive and 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 may affect the percent mineable tonnage in an area, create additional dilution, or result in below cut-off grade and barren zones. The impacts on ore reserves of these events are quantified under the percent mineable discussion under “Ore Reserves.” The upper portion and exposed edge of the 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 gross uniformity over considerable distances within 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. That predictability of the J-M Reef has been further confirmed in subsurface mine workings of the Stillwater and East Boulder Mines and by over 21,000 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 iron, copper and nickel, 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 and Operating Data”.

ORE RESERVES

     As of December 31, 2003, the company’s total proven and probable palladium and platinum ore reserves are 40.4 million tons at an average grade of 0.58 ounce per ton, containing 23.6 million ounces of palladium and platinum, a decrease of 7% in contained ounces from December 31, 2002.

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 to 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 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 reserves consists of survey data, lithological data and assay results. This data is entered into a 3-dimensional modeling software package. The data 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 thickness and grade is 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.

     Probable 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 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, average thickness, average grade and percent mineable. The area is calculated based on the 1,000-foot projections, the thickness and grade is calculated based on long-term proven reserve results in adjacent areas and the percent mineable is calculated based on long-term mine production results from proven areas. Contained ounces are calculated based on area (square feet) times thickness (feet) times grade (ounces per ton) times percent mineable (%) divided by density (expressed as cubic feet per ton).

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     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 reserves are then modeled as a long-term mine plan and additional factors including recoveries, metal prices, mine operating costs and capital estimates are applied to determine the overall economics of the reserves.

SEC Guidelines

     The United States Securities and Exchange Commission (SEC) has 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 2003. Under these guidelines, ore may be classified as proven or probable if extraction and sale result in positive cumulative undiscounted cash flow. Pursuant to Industry Guide No. 7, industry practice and guidance provided by the SEC on the selling price for purposes of this analysis is based on either the historical trailing 12-quarter average combined PGM market price or the current PGM market price. In testing ore reserves at December 31, 2003, the company applied the trailing 12-quarter combined average PGM market price of $428 per ounce, based upon a palladium price of $379 per ounce and platinum price of $586 per ounce.

Results

     The December 31, 2003, ore reserves were reviewed by Behre Dolbear & Company, Inc. (“Behre Dolbear”), 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 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 could materially impact the company’s production and reported results.”

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Proven and Probable Ore Reserves

	DECEMBER 31, 2003						DECEMBER 31, 2002
			AVERAGE		CONTAINED				AVERAGE		CONTAINED
	TONS		GRADE		OUNCES		TONS		GRADE		OUNCES
	(000’s)		(OUNCE/TON)		(000’s)		(000’s)		(OUNCE/TON)		(000’s)
Stillwater Mine (2), (3)
Proven Reserves		2,052		0.68		1,387		2,490		0.71		1,777
Probable Reserves		15,428		0.65		10,073		17,443		0.68		11,803
Total Proven and Probable Reserves (1)		17,480		0.66		11,460		19,933		0.68		13,580
East Boulder Mine (2), (3)
Proven Reserves		660		0.43		285		648		0.48		308
Probable Reserves		22,248		0.53		11,854		21,359		0.53		11,386
Total Proven and Probable Reserves (1)		22,908		0.53		12,139		22,007		0.53		11,694
Total Company Reserves (2), (3)
Proven Reserves		2,712		0.62		1,672		3,138		0.66		2,085
Probable Reserves		37,676		0.58		21,927		38,802		0.60		23,189
Total Reserves (1)		40,388		0.58		23,599		41,940		0.60		25,274

The company’s proven ore reserves are generally expected to be extracted utilizing the existing mine infrastructure. Additional capital expenditures will be required to extract the company’s probable ore reserves. Based on current mining rates the 2003 proven ore reserves of 2.05 million tons at the Stillwater Mine and 0.66 million tons at the East Boulder mine represent approximately 2.8 years of production (2,000 tons per day) and 1.4  years of production (1,300 tons per day), respectively.

(1)	Reserves are defined as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Proven reserves are defined as 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. Probable reserves are defined as 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. The proven and probable reserves reflect variations in the PGM content and structural impacts on the J-M Reef. These variations are the result of localized depositional and structural influences on the distributions of economic PGM mineralization. Areas within the reserve boundaries of the two mines include areas where as little as 7% and up to 100% of the J-M Reef is economically mineable. There are significant portions of the reef that are known to be barren. The reserve estimate gives effect to these assumptions. See “Business and Properties — Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Future Results and Financial Condition.”
(2)	Expressed as palladium plus platinum in-situ ounces per ton at a ratio of 3.6 to 1. Stillwater Mine is at a 3.4 to 1 ratio and the East Boulder Mine is 3.7 to 1.
(3)	The proven and probable reserves represent in-situ contained ounces as determined by geostatistical estimation methodologies. Several mining and processing losses must be deducted to arrive at the estimated recoverable ounces.

Discussion

The company’s proven and probable ore reserve above shows a 7% decrease in contained ounces from December 31, 2002. The decrease is due to several factors:

•   A net increase of 4% in contained ounces of ore reserves at the East Boulder Mine due to favorable definition drilling and development activities during 2003, offset by,

•   A 16% decrease in contained ounces of ore reserves at the Stillwater Mine related to:

•   Adjustments in probable estimation factors, mine planning and economic factors resulting in reductions or reclassification of peripheral areas to mineralized material coupled with a net reduction in mined production versus ore reserve additions from drilling and development activities during 2004.

•   Modifications to the method used in estimating mineable ore tons and grade. In 2003, the company began using a full three-dimensional model to define the orebody. The company believes this is a more accurate method of extrapolating drill hole and geologic information.

•   Additional minor reductions due to changes in reserve estimation techniques.

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     The economic analysis with respect to 2003 included testing the potential ore reserves at various commodity prices. The results of this analysis identified the following relationships between prices and reserves as of December 31, 2003. Such relationship may vary with future ore reserves determinations.

     The analysis shows that at a combined average price for palladium and platinum above approximately $340 per ounce reserves are bounded by geologic certainty and do not continue increasing. The company has not tested the reserves beyond the level shown because of the expense of access and drilling to establish reserves and because of the extensive life of a 23.6 million ounce reserve. At a combined long-term average price for palladium and platinum below approximately $340 per ounce, reserves are constrained by economics and are estimated to decrease as shown.

IMPAIRMENT CHARGE

     The company follows Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal 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. Future cash flows include estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contract prices, price trends and related factors), production levels, capital and reclamation expenditures, all based on life-of-mine plans and projections.

     The company disclosed in its quarterly report on Form 10-Q for the quarter ended September 30, 2003 that a continuation of palladium prices, at then low levels, would lead to asset impairment writedowns and a reduction of ore reserves which could be material. The company disclosed that the timing of such writedown or reduction in ore reserves would be evaluated in light of palladium prices and other matters.

     Ore reserves are determined on an annual basis, and concurrently, mine plans and operating budgets are updated. The East Boulder Mine ore reserve at year-end 2003 increased 4% in contained ounces from that reported at year-end 2002. However, the Stillwater Mine ore reserve at year-end 2003 decreased 16% in contained ounces from that reported at year-end 2002. Overall the company’s estimated contained ounces declined by 7%. The company’s ore reserve determination for 2003, calculated at December 31, 2003, was ultimately bounded by geologic certainty and largely unaffected by price. Instead, the 2003 changes were adjustments for material mined, additions for extension of mine workings and drilling during 2003 and changes in mine plans.

     The year-end 2003 change in ore reserves at the Stillwater Mine prompted an impairment review of the carrying values of the company’s mine properties. The review determined that company investments in property, plant and equipment at the Stillwater Mine and East Boulder Mine were impaired. Consequently, the company performed a fair market value assessment of the assets and recorded an asset impairment charge of $390.3 million reducing the carrying value of the properties to their fair market value, as required. The impairment charge consists of $176.7 million at the Stillwater Mine, $178.0 million at the East Boulder Mine and $35.6 million at the processing and other facilities, reducing the carrying value of Stillwater Mine to $228.6 million, East Boulder Mine to $150.0 million and the processing and other facilities to $40.9 million. The company engaged an independent appraiser, Behre Dolbear, who utilized traditional mine valuation techniques including discounted cash flow analysis for purposes of determining fair market value.

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     The resulting net carrying value of the company’s mining assets as of December 31, 2003 and 2002 is as follows:

	2003						2002
	Before
	Impairment		Impairment
(in thousands)	Charge		Charge		Net Book Value		Net Book Value
Stillwater Mine	$	405,331	$	176,739	$	228,592	$	385,317
East Boulder Mine		328,053		178,036		150,017		328,974
Processing Assets		71,343		34,761		36,582		76,049
Other Assets		5,096		759		4,337		3,679
	$	809,823	$	390,295	$	419,528	$	794,019

     The reduction in carrying value of these mining assets is not expected to impact the company’s employees, mine operations, smelting and refinery operations, delivery of PGMs to customers or compliance with the covenants of the company’s bank credit facility.

     Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets resulting in potential additional impairment charges.

CURRENT OPERATIONS

     The company’s original long-term deposit development strategy and certain elements of its current planning and mining practices on the J-M Reef were founded with 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 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 specific to 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 characteristics of the mineralized zone (narrow – average width 5 feet, and long – approximately 28 miles in length)

•   Downward angle of mineralized zone dipping from near vertical to 38 degrees

•   A deposit which extends both laterally and to depth from available mine openings

•   Probable ore reserves extend for a lateral distance of approximately 32,000 feet at the Stillwater Mine and approximately 17,000 feet at the East Boulder Mine — a combined distance of approximately 9.3 miles.

STILLWATER MINE

     The company wholly owns and performs underground mining operations at the Stillwater Mine, near Nye, Montana. The mining operation accesses, extracts and processes PGM ores from the eastern portion of the J-M Reef from 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 structures and tailings management facilities are located within a 2,450 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 and Properties — Risk Factors.”

     The Stillwater Mine accesses and has developed a 5.6-mile segment of the J-M Reef, between the elevations of 7,000 and 2,900 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 200 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

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5,000 and 5,900 feet above sea level. Five principal levels have been developed below the valley floor by ramping down from the 5,000-foot level to extract ore from the reef down to the 3,800-foot elevation. Four additional major levels below the 5,000-foot level are accessed principally from a vertical shaft and shaft ramp system. The company is currently developing a decline system from 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.

     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 to increase efficiency of the operation. Ores 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 reduced haulage times and costs, improved the material handling of ore and waste and improved the grinding capabilities of the concentrator. Ore from those areas above the 5,000-foot west elevation is hauled to the surface by train. Waste not used for backfill in underground excavations is transported to the surface and used in the rock embankment of the tailings dam or placed in the permitted waste rock disposal sites.

     The Stillwater Mine currently uses its 28 footwall laterals 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 of 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 Mine Safety and Health Administration (“MSHA”) requirements. In addition, MSHA regulations contain requirements for 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 designed and intended to be used for the life of the mine.

     Prior to 1994, almost all of the company’s mining activities utilized “cut-and-fill” stoping methods. This method extracts the orebody in ten-foot high horizontal cuts. The open space created by the extraction of each cut is filled 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 succession of horizontal cuts are extracted from the orebody using mobile equipment. Access to the orebody is from ramps driven in or adjacent to the orebody 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 electric hydraulic 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. Mechanized mining accounted for approximately 93% of total tons mined in 2003. The company determines the appropriate mining method to be used on a stope-by-stope basis.

     The company processes ore from the Stillwater Mine through a concentrator plant adjacent to the Stillwater Mine shaft. The mill has an approximate capacity of 3,000 tons per day. Ore is fed into the concentrator, mixed with water and ground to a slurry in the concentrator’s mill circuit to liberate the PGM-bearing sulfide minerals from the rock matrix. Various reagents are added to the slurry to separate the valuable sulfides from the waste rock in a flotation circuit. In this circuit, the sulfide minerals are 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 and transported in bins approximately 46 miles to the company’s metallurgical complex in Columbus, Montana. Approximately 55% of the tailings material from this process is returned to the mine and used for backfill to provide a foundation upon which additional mining activities can occur. The balance is placed in tailings containment areas. No additional steps are necessary to treat any tailings placed back into the mine. Tailings placed into the impoundment areas require no additional treatment and are disposed of pursuant to the company’s operating permits. Mill recovery of PGM’s was 91%, 90% and 90% in 2003, 2002 and 2001, respectively.

     In 1998, the company received an amendment to its existing operating permit which provided for the construction of a lined tailings impoundment that would serve the Stillwater Mine for approximately the next 30 years. Construction commenced on the tailings impoundment in 1999 and was completed and placed into operation in late 2000. See “Business and Properties — Current Operations — Regulatory and Environmental Matters — Permitting and Reclamation”.

     During 2003, the Stillwater Mine produced approximately 428,000 ounces of palladium and platinum, compared to approximately 492,000 ounces in 2002 and approximately 504,000 ounces in 2001. See “Selected Financial and Operating Data.” The Stillwater Mine’s total cash costs were $262 per ounce in 2003 compared to $263 per ounce and $264 per ounce in 2002 and 2001, respectively.

EAST BOULDER MINE

     The East Boulder Mine is located in Sweet Grass County, Montana and provides access to the western portion of the J-M Reef.

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The mine is fully permitted independent of the Stillwater Mine and serves as a second access to the J-M Reef. Surface facilities for the East Boulder Mine are situated on unpatented mill site claims maintained on federal lands administered under the Gallatin National Forest. All facilities are wholly owned and operated by the company. Proven and probable ore reserves for the mine are controlled by patented mining claims owned by the company. The mine is located approximately 32 miles southeast of Big Timber, Montana, and is accessed by a public road. All surface facilities including the tailings management complex are located within a 977-acre operating permit area. Development of the mine commenced in 1998 and consists of underground mine development and surface support facilities, including a concentrator, shop and warehouse, changing facilities, storage facilities, office and tailings management facility. The mine commenced commercial production effective January 1, 2002.

     The J-M reef is accessed by two 18,500-foot, 15-foot diameter tunnels. The access tunnels intersect the orebody at an elevation 6,450 feet above sea level. The orebody is currently developed by three levels of footwall lateral drives parallel to the orebody totaling approximately 16,700 feet, and by two primary ramps totaling approximately 6,400 feet. The orebody is accessed vertically by ramp systems driven approximately every 1,200 feet along the length of the deposit. The predominant mining methods are sub-level stoping and ramp-and-fill mining methods. During the first half of 2002, a sand fill plant was constructed and commissioned underground to facilitate the application of the cut-and-fill mining method to portions of the orebody.

     The ore is transported by rail haulage to the surface and processed through a concentrator plant, which has a capacity of 2,000 tons per day, in which the ore is mixed with water and ground to a slurry in the concentrator’s mill circuit to liberate the PGM bearing sulfides from the rock matrix. Similar with the process at the Stillwater Mine, reagents are then added to the slurry to separate the valuable sulfide from the waste rock in a flotation circuit. The sulfide minerals are floated, recycled, reground and refloated to produce a concentrate. The flotation concentrate, which represents 1.9% of the original ore weight, is filtered and transported in bins approximately 90 miles to the company’s metallurgical complex in Columbus, Montana. Approximately 53% of the tailings material from this process is returned to the mine and used for backfill to provide a foundation upon which additional mining activities can occur. The balance is placed in tailings containment areas. No additional steps are necessary to treat any tailings placed back into the mine. Tailings placed into the impoundment areas require no additional treatment and are disposed of pursuant to the company’s operating permits. The impoundment area has an estimated life of approximately 20 years at the original planned production and processing rate of 2,000 tons per day. Mill recovery of PGM’s was 89% and 88% in 2003 and 2002, respectively.

     During 2003, the East Boulder Mine produced approximately 156,000 ounces of palladium and platinum, compared to approximately 125,000 ounces in 2002. During 2001, the mine recovered approximately 22,000 ounces of PGM’s generated from construction and development activities. Proceeds of $7.1 million received from the sale of this material were credited against capitalized mine development during 2001. The East Boulder Mine’s total cash costs were $343 per ounce in 2003 compared to $381 in 2002 due to higher production levels and cost reduction programs. See “Selected Financial and Operating Data.”

EXPLORATION AND DEVELOPMENT ACTIVITIES

     The J-M Reef has been explored from the surface along its entire 28-mile strike length by surface sampling and drilling. Surface exploration drilling consists of an array of over 900 drill holes with a maximum horizontal spacing between holes of 1,000 feet. Exploration activities have also included driving and underground drilling from two exploratory adits, the West Fork Adit and the Frog Pond Adit. Comprehensive evaluation of PGM mineralization encountered in the J-M Reef has allowed delineation of probable 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 reserves to sustain mining for a number of years in the future. It is the company’s practice to systematically convert its established probable reserves to the proven category coincident with planned advances of underground development. The company’s exploration focus is on its current delineated PGM reserves and adjacent mineralization along the J-M Reef within the company’s mining claims rather than the exploration of other mineral occurrences within the Stillwater Complex or at other prospective mineral properties. Consequently, exploration does not presently represent a significant expenditure for the company.

     As part of the company’s ongoing development activities, it continues to convert its established probable ore reserves to proven ore reserves through the lateral and vertical development of the Stillwater and East Boulder Mines. These ongoing activities involve the construction of mine development workings to access established ore reserves and the continuous advancement of definition drilling, engineering and mine plans to replace depleted ore reserves. During 2003, 2002, and 2001, $48.8 million, $43.9 million and $86.1 million respectively, were incurred in connection with capitalized mine development and are included in total capital expenditures.

     Diagrams of the Stillwater and East Boulder Mines as currently developed and as planned to be developed in the future are as follows:

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METALLURGICAL COMPLEX

     Smelter. The company owns the land and a smelter plant located in Columbus, Montana. Concentrates from the mine sites are fed to a 5.0-megawatt electric furnace, where the concentrates are melted and separated into a silica oxide rich slag and a PGM rich matte. The matte is tapped from the furnace and granulated. The granulated furnace matte is re-smelted in a top blown rotary converter (TBRC), which separates iron from the converter matte. The converter matte is poured from the TBRC, granulated and transferred to the refinery for further processing. The granulated converter matte, approximately 10% of the original smelter feed weight, consists of copper and nickel oxides containing about 2% PGMs.

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     The gasses released from the smelting operations are routed through a gas/liquid scrubbing system, which removes approximately 99.8% of the sulfur dioxide. Spent scrubbing solution is treated in a process that converts the sulfur dioxide to gypsum, or calcium sulfate, and regenerates clean scrubbing solution. The gypsum is used by local farmers as a soil amendment.

     The smelting facility consists of an electric arc furnace, two TBRC’s, a granulator and gas handling and solution regeneration systems. Smelter capacity is 100 tons of concentrate per day.

     Refinery. The company’s refinery is on property it owns adjacent to the smelter in Columbus, Montana. The refinery utilizes the patented Sherritt Process, whereby sulfuric acid is used to dissolve the nickel, copper, cobalt and iron from the converter matte. This process upgrades the converter matte product substantially from 2% PGMs to 55-60% PGMs.

     In the refinery, minor amounts of by-product copper, nickel, cobalt, and other metals are separated from the PGM bearing converter matte and 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 into sales contracts with a company in Canada. A copper electrowinning circuit removes copper from solution as cathode copper which is marketed into sales contracts with companies in the U.S.

     A PGM rich filter cake, which also contains minor amounts of gold and silver, is shipped to precious metals refineries in New Jersey and California and the metals are returned to of the company’s account as 99.95% sponge after approximately 18-35 days. The refined metal is then available for delivery to the company’s customers. The company pays its refiners a refining charge in United States dollars per ounce for the toll processing of the refinery filter cake.

     During 2003, 2002 and 2001, total by-product sales were approximately $12.1 million, $10.6 million and $8.2 million, respectively, and were credited against production costs.

     The Columbus Smelter and Refinery complex is planned to be idled for four to six weeks in the second quarter 2004 for a periodic re-bricking of the smelting furnace. The company estimates that the expenditures associated with the re-bricking will be approximately $0.9 million and that these costs will be charged to operations as incurred. Mine operations will continue during the re-bricking with concentrate production stored for processing following the restart of the smelter. Concentrate accumulated during the re-bricking is expected to be processed by year-end 2004. The smelter re-bricking is expected to reduce earnings and cash flow modestly during the second quarter of 2004, but in view of the plan to continue mining operations during the shutdown, the company does not believe that the shutdown will have any material effect on production, capital resources or cash flows for the full year 2004.

     The company’s significant repair and maintenance costs in connection with planned major maintenance activities are expensed as incurred. The Company does not accrue in advance for major maintenance activities, but, whenever practicable, discloses in advance in its public filings any planned major maintenance activities that may affect operations.

SECONDARY MATERIALS PROCESSING

     Secondary PGM metals contained in spent catalytic converter material are processed by the company through its metallurgical complex. A sampling facility for secondary materials is used to crush and sample spent autocatalysts prior to being blended for smelting in the electric furnace. The spent autocatalytic material is sourced primarily from automobile repair shops and automobile yards that disassemble old cars for the recycling of their parts. Spent petroleum refining catalysts are also processed by the company.

     The company has been processing small spot shipments of spent autocatalysts since 1997. In October 2003, the company entered into a long-term metal sourcing agreement with Power Mount Incorporated of Somerset, Kentucky under which it will contractually purchase secondary metals for recycling. The commercial terms of this agreement are confidential. In the event of a change in business circumstances, the company can terminate this agreement upon ninety days’ notice.

     The net proceeds from the processing of recycled autocatalysts in 2003, 2002 and 2001 reduced production costs by approximately $0.9 million, $1.0 million and $2.0 million, respectively.

OTHER PROPERTIES

     The company owns a 17,600 square foot warehouse facility and also leases 10,100 square feet of office space in buildings in Columbus. The annual lease expense for the executive offices in Columbus, Montana is approximately $61,500 per year. The company believes that its existing facilities are adequate to service current production levels. The company also owns parcels of rural land in Stillwater and Sweetgrass Counties, Montana near its mine sites totaling approximately 3,364 acres and additional properties in

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Columbus and Big Timber, Montana which are used as support facilities. All of the company’s fee properties are subject to a mortgage in favor of the company’s credit facility.

CREDIT AGREEMENT

     In February 2001, the company entered into a $250 million credit facility with a syndicate of financial institutions which replaced a previous $175 million bank facility. The credit facility has been amended or waivers have been obtained seven times with the most recent amendment effective March 20, 2003. The credit facility provides for a $65 million five-year term loan facility (Term A), a $135 million seven-year term loan facility (Term B) and a $25 million revolving credit facility (reduced from $50 million at the company’s request as of March 20, 2003). Amortization of the term loan facilities commenced on March 31, 2002.

     Pursuant to the terms of the credit facility, the company was required to apply $50.0 million of the $100.0 million cash proceeds received in the Norilsk Nickel transaction (see Note 12) to prepay its term loans. Consequently, the Term A facility was paid in full on June 30, 2003. In addition, in accordance with the terms of the credit agreement, the company is required to offer 50% of the net proceeds from the sale of palladium inventory received in the Norilsk Nickel transaction (see Note 12) to further prepay its term loans. Accordingly, $74.1 million of the long-term debt has been classified as a current liability. The lenders are not obligated to accept the offer for prepayment. If lenders do not accept the prepayment, the company retains the cash but the availability under the revolving credit facility is reduced by the amount of the prepayment not accepted. The Term B facility final maturity date is December 31, 2007. The final maturity date of the revolving credit facility is December 30, 2005.

     As of December 31, 2003, the company has $128.5 million outstanding under the Term B facility, bearing interest at a variable rate of 7.25%. The schedule of principal payments on the amounts outstanding as of December 31, 2003, without regard to the possible sale of the inventory received in connection with the Norilsk Nickel transaction, is as follows:

Year ended December 31, (in thousands)	Term B facility
2004	$	1,350
2005		1,350
2006		60,750
2007		65,002
Total	$	128,452

     During 2003, the company obtained a letter of credit in the amount of $7.5 million and carries an annual fee of 4.0%, which reduces amounts available under the revolving credit facility at December 31, 2003. The revolving credit facility requires an annual commitment fee of 0.5% on the remaining unadvanced amount. Of the $25 million revolving credit facility, $17.5 million remains available to the company. This revolving credit facility will be reduced in circumstances where lenders are offered a prepayment but do no accept the prepayment. (see above)

     The loans are required to be prepaid from excess cash flow, proceeds from asset sales and the issuance of debt or equity securities, subject to specified exceptions. Proceeds of the term loan facility were used to finance a portion of the company’s expansion plan. Proceeds of the revolving credit facility are being used for general corporate and working capital needs. The Term B credit facility bears interest at LIBOR, subject to a 2.5% minimum, plus a margin of 4.75% or an alternate base rate plus a margin of 3.25%. Substantially all the property and assets of the company and the stock of the company’s subsidiaries are pledged as security for the credit facility.

     Covenants in the credit facility include restrictions on: (1) additional indebtedness; (2) payment of dividends or redemption of capital stock; (3) liens; (4) investment, acquisitions, dispositions or mergers; (5) transactions with affiliates; (6) capital expenditures (other than those associated with the company’s mine plan); (7) refinancing or prepayment of subordinated debentures; (8) changes in the nature of business conducted or ceasing operations at the principal operating properties; and (9) commodities hedging based upon annual palladium and platinum production. The company is also subject to financial covenants including a debt to operating cash flow ratio, a debt service coverage ratio and a debt to equity ratio.

     Events of default in the credit facility include: (1) a cross-default to other indebtedness of the company; (2) any material modification to the life-of-mine plans; (3) a change of control of the company other than the Norilsk Nickel transaction (see Note 12); (4) the failure to maintain agreed-upon annual PGM production levels; (5) any breach or modification of any of the sales contracts. The company anticipates it will refinance the credit facility during 2004. The company is in compliance with its debt covenants at December 31, 2003.

PGM SALES AND HEDGING ACTIVITIES

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Mine Production:

     Palladium, platinum, rhodium and gold are sold to a number of consumers and dealers with whom the company has established trading relationships. Refined PGMs of 99.95% purity in sponge form are transferred upon sale from the company’s account at third party refineries to the account of the purchaser. By-product metals are purchased at market price by customers, brokers or outside refiners.

     During 1998, the company entered into three supply contracts with its customers that contain guaranteed floor prices for metal delivered. In late 2000 and in 2001, the company amended these contracts to extend the terms and to modify the pricing mechanisms. One of these contracts applies to the company’s production through December 2010, one through December 2006 and the other contract is estimated to be completed in 2007. Under the contracts, the company has committed between 80% to 100% of its palladium production and between 70% to 80% of its platinum production. Metal sales are priced at a modest discount to market. The remaining production is not committed under these contracts and remains available for sale at prevailing market prices.

     The following table summarizes the floor and ceiling price structures for the three supply contracts related to mine production. The first two columns for each commodity represent the percent of total mine production that is subject to floor prices and the weighted average floor price per ounce. The second two columns for each commodity represent the percent of total mine production that is subject to ceiling prices and the weighted average ceiling price per ounce.

	PALLADIUM					PLATINUM
	Subject to			Subject to		Subject to		Subject to
	Floor Prices			Ceiling Prices		Floor Prices		Ceiling Prices
	% of Mine		Avg. Floor	% of Mine	Avg. Ceiling	% of Mine	Avg. Floor	% of Mine	Avg. Ceiling
Year	Production		Price	Production	Price	Production	Price	Production	Price
2004		100%	$371	39%	$644	80%	$425	16%	$856
2005		100%	$355	31%	$702	80%	$425	16%	$856
2006		100%	$339	24%	$801	80%	$425	16%	$856
2007		100%	$360	19%	$975	70%	$425	14%	$850
2008		80%	$385	20%	$975	70%	$425	14%	$850
2009		80%	$380	20%	$975	70%	$425	14%	$850
2010		80%	$375	20%	$975	70%	$425	14%	$850

     At March 9, 2004, the London PM Fix market prices for palladium and platinum were $256 and $895 per ounce, respectively. The sales contracts provide for adjustments to ounces committed based on actual production. The sales contracts contain termination provisions that allow the purchasers to terminate in the event the company breaches certain provisions of the contract and the breach is not cured within periods ranging from 10 to 30 days of notice by the purchaser. The long-term sales contracts are not subject to the requirements of SFAS No. 133 as the contracts qualify for the normal sales exception provided in SFAS No. 138 since they will not settle net and will result in physical delivery. The floors and ceilings embedded within the long-term sales contracts are treated as part of the host contract, not a separate derivative instrument, and are therefore also not subject to the requirements of SFAS No. 133. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

     The percentage of the company’s sales ounces that were made pursuant to modified pricing mechanisms are summarized below:

	2003		2002		2001
Floor Pricing		67%		38%		13%
Market Pricing		26%		54%		61%
Ceiling Pricing		7%		8%		26%
Forward Pricing		—		—		—

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     The company has historically entered into hedging agreements from time to time to manage the effect of price changes in palladium and platinum on the company’s cash flow. Hedging activities consist of fixed forwards for future deliveries of specific quantities of PGMs at specific prices, the sale of call options and the purchase of put options and financially settled forwards. Gains or losses can occur as a result of hedging strategies. Hedging gains of $9.2 million and $5.5 million were realized in 2002 and 2001, respectively. No hedging gains or losses were realized in 2003.

     During 2003, the company entered in fixed forwards that were accounted for as cash-flow hedges. These sales of metals from processing secondary materials are sold forward at the time of receipt and delivered against the cash flow hedges when the ounces are recovered. All of these transactions settle in the first three months of 2004. The unrealized loss on these instruments due to changes in metal prices at December 31, 2003 was $0.9 million ($0.5 million net of tax). The company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for metals exceed the company’s hedge contract prices by a predetermined margin limit.

Palladium acquired in connection with Norilsk Nickel transaction:

     During 2003, the company entered into negotiations for the sale of the 877,169 ounces of palladium, which constituted a portion of the payment received from Norilsk Nickel when it acquired its initial 50.8% interest in the Company. In the first quarter of 2004, the company announced that it had entered into contracts or had reached understandings, under which all of the palladium will be sold, at a slight volume discount to market price at the time of delivery, over a period of two years primarily for use in automobile catalytic converters.

TITLE AND ROYALTIES

     The company holds 995 patented and unpatented lode or millsite claims covering approximately 16,000 acres along 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 remainder of the company’s unpatented claims either adjoin the apex of the J-M Reef or secure sites for surface operations. Prior to the moratorium on processing new applications for mining claim patents, the company had leasehold control on 1 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 rejected two mineral patent applications submitted prior to July 13, 1993 covering 123 acres in 9 mining claims held by the company in leasehold under the Mouat Agreement. The company has joined with the Mouat interests in appealing the decision to the U.S. Department of the Interior Board of Land Appeals (IBLA). In the event the decision is upheld, the 9 original claims will revert to unpatented mining claim status. The company does not believe that the final decision will have any adverse affect on the company’s operations or interest under the Mouat Agreement. The company presently maintains 825 active unpatented mining and millsite 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 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 millsite 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 995 controlled claims, 869 are subject to royalties, including 711 subject to a 5% net smelter royalty payable to Newmont Capital Limited, 56 subject to a 0.35% net smelter royalty payable to the Mouat family, and 102 subject to both royalties. During 2003, 2002 and 2001, the company incurred royalty expenses of approximately $6.0 million, $6.9 million and $7.0 million, respectively. At December 31, 2003, 100% of the company’s proven and probable ore reserves were secured by either its 161 patented mining claims or the 9 first-half certified claims pending the appeal ruling by the IBLA. Processing facilities at the East Boulder Mine are situated on 127 validated unpatented millsite claims.

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 implementation of the company’s G.E.T. (Guide, Educate and Train) Safe safety and health management systems. Efforts have focused on accident prevention seeking opportunities for safer mining methods and increased employee awareness and training. Areas of specific focus included enhanced work place examinations, joint union and management safety committees, critical task analysis and implementation

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of measurable safety standards. Employee led focus teams were successful in solving many safety related challenges. The company will continue to utilize focus teams to address specific safety and health related issues. The company has partnered with MSHA on several occasions for purposes of education, training, research, and technology sharing. As a result of this partnership, several breakthrough results were created. Most noteworthy were the completion of a jointly created training seminar for MSHA inspectors and Stillwater supervisors as well as study and research efforts for reducing employee exposures to noise and diesel particulate matter.

     During 2003, special attention to the safety performance of underground mining crews at the Stillwater Mine resulted in an improvement in incidence rate of 13%. This improvement was offset by a rise in incident rates for Stillwater Mine non-mining crews and an increased incident rate at the East Boulder Mine. The metallurgical complex in Columbus, Montana continued to maintain a low incidence rate while being recognized by the Montana Department of Labor and Industry as a leader in workplace safety. The smelter was the recipient of their tenth SHARPS Award and the refinery received their sixth. The SHARPS program recognizes employers who have demonstrated exemplary achievements in workplace safety and health. By meeting the SHARPS inspection requirements, these facilities may be exempt from general Occupational Safety and Heath Administration (OSHA) inspections for one year. The company’s total incidence rate through 2003, excluding contractor hours, was 8.0 for every 200,000 man hours worked as compared to 7.7 for 2002 and 10.1 for 2001.

     Safety performance continues to be an organizational focus. Consistent and sustained improvement is expected to be realized through increased safety accountability at all levels of the organization, auditing of workplace standards and practices and increased opportunities for employee involvement and participation.

EMPLOYEES

     As of December 31, 2003 and 2002, the company had 1,540 and 1,575 employees, respectively, in the following areas:

	NUMBER OF
	EMPLOYEES AT
	DECEMBER 31,
SITE	2003		2002
Stillwater Mine		990		1,067
East Boulder Mine		370		325
Metallurgical Complex		131		135
Columbus Administration and Support		49		48
Total		1,540		1,575

     All of the company’s hourly employees at the Stillwater Mine, the East Boulder Mine, the smelter and refinery are represented by the Paper, Allied Industrial, Chemical and Energy Workers International Union (PACE). On July 1, 1999, a five-year contract was negotiated which covers substantially all hourly workers at the Stillwater Mine, the smelter and the refinery and calls for an annual average wage increase of approximately 4% per annum. On July 1, 2002, a three-year contract was negotiated which covers all hourly workers at the East Boulder Mine and calls for an average wage increase of approximately 4% per annum.

     The contract with hourly employees at the Stillwater Mine and the smelter and refinery expires June 30, 2004. The company and Union representatives are expected to meet to negotiate a new contract during the second quarter of 2004.

REGULATORY AND ENVIRONMENTAL MATTERS

     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. Additionally, 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 benefication are handled, stored and reclaimed or reused are pending final revision which could affect the company’s facility design, operations, and permitting requirements. See “Business and Properties — Risk Factors.”

     The Stillwater Mine and East Boulder Mine are located on the northern edge of the Absaroka-Beartooth wilderness, about 30 miles

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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 which may adversely impact the company’s revenues. 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 and Properties — Risk Factors.”

     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 substances into the environment which cause the incurrence of cleanup 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 reports and keep records of its operations affecting 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 And Properties — Risk Factors.”

     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, including the East Boulder Mine. 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 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 2,450 acres at the Stillwater Mine located in Stillwater County, Montana and 977 acres at the East Boulder Mine located in Sweetgrass County, Montana. The permits delineate lands that may be subject to surface disturbance. At present, approximately 359 acres have been disturbed at the Stillwater Mine, and 180 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). Additional reclamation requirements may be imposed by the United States Forest Service (USFS) 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. Reclamation concerns include stabilization and vegetation of disturbed lands, controlling drainage from portals and waste rock dumps, removal of roads and structures, neutralization or removal of process solutions and visual aesthetics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Environmental Obligations.”

     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 permit requirements and mitigation measures.

     In April 1996, the company submitted a permit amendment application for the expansion of the Stillwater Mine. This expansion proposal included selection and construction of a new tailings impoundment and removal of the 2,000 tons of ore per day production cap. During 1997, as a result of this application, the Montana DEQ began preparation of an Environmental Impact Statement in order to assess the environmental impacts of the amendment. The Montana DEQ issued the final Environmental Impact Statement in 1998, subsequent to review of draft issuances and a public hearing. In November 1998, the Record of Decision was issued by the Montana DEQ and the USFS. There were no material changes from the original application.

     In the first quarter of 1999, an environmental group filed a complaint against the Montana DEQ challenging the adequacy of the Environmental Impact Statement and reclamation provisions developed in connection with the amendment to the permit. The company was not named in the complaint. In mid-2000, the company signed an agreement with the group and its affiliates (the Councils). Under the terms of the agreement, the Councils withdrew litigation against the Montana DEQ. The Councils also agreed not to file a protest against the renewal of the company’s water quality permit at the East Boulder Mine. For its part, the company agreed to programs that have reduce traffic flows to both the Stillwater Mine and the East Boulder Mine. In addition, the company is

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funding expanded monitoring programs and the development of a watershed partnership for the Boulder River basin to assist residents in improving the quality of surface and ground water. Included in this is the funding of a long-term fishery study. The company estimates the total cost of all the environmental programs associated with the implementation of the agreement to be approximately $320,000 annually.

     The company’s environmental expenses were $1.7 million, $1.8 million and $1.1 million, for 2003, 2002 and 2001, respectively. The company had capital expenditures for environmental facilities during 2003, 2002 and 2001 of $6.3 million, $0.3 million and $3.7 million, respectively. The company’s ongoing operating expenditures for environmental compliance are expected to exceed approximately $2.0 million per year and will be expensed as incurred.

STOCK PURCHASE AGREEMENT TRANSACTION WITH MMC NORILSK NICKEL

     On June 23, 2003, the company and Norilsk Nickel completed a stock purchase transaction whereby the company issued 45,463,222 new shares of its common stock to Norimet, a wholly-owned subsidiary of Norilsk Nickel. The company received consideration from Norimet consisting of $100.0 million in cash and 877,169 ounces of palladium valued at $148.2 million as of June 23, 2003. The aggregate value of the consideration was $248.2 million. The company was required to use one-half of the cash proceeds to prepay its term loans and is required to offer one half of the cash proceeds received from the sale of the ounces as a prepayment of the Term B facility See “Credit Agreement” above.

     On September 3, 2003, Norimet completed a cash tender offer to acquire 4,350,000 shares of the company’s outstanding common stock. Following completion of the cash tender offer, Norimet owned 49,813,222 shares or 55.5% of the company’s then outstanding common stock. As of March 9, 2004 Norimet owned 49,813,222 shares or 55.4% of the company’s outstanding common stock.

     The stock purchase agreement between the company and Norilsk Nickel provided that the parties would negotiate in good faith to enter into an agreement whereby the company would buy from Norilsk Nickel or its affiliates at least one million ounces of palladium annually. The company intended to resell this palladium under long-term customer contracts. The stock purchase agreement provided that the parties intended to execute this agreement within six months of the closing of Norilsk Nickel’s stock purchase, which occurred on June 23, 2003. Negotiations concerning this agreement have not occurred but the company anticipates discussing the subject with Norilsk Nickel during 2004.

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 which has the same characteristics as PGMs could have a material adverse effect on the company’s revenues. Although the company is unaware of any such alloy or material, there can be no assurance that none will be developed.

     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. See “Supply” below. New mines may open over the next several years, increasing supply. Furthermore, in certain industrialized countries, an industry has developed for the recovery of PGMs from scrap sources, mostly from spent automotive and industrial catalysts. There can be no assurance that the company will be successful in competing with these existing and emerging PGM producers. See “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

DEMAND

     Palladium demand increased or remained relatively stable for the period 1994 through 2000 and then dropped in 2001 and 2002, (see palladium chart below). In 2003, the palladium demand recovered approximately 16% as compared to the 2002 demand, although the demand remains approximately 40% below the high established in 1999, according to Johnson Matthey’s Platinum Interim Review Report published in November 2003 (Johnson Matthey or the Johnson Matthey report). The Johnson Matthey report cites the continued decrease in demand of palladium due to continued weakness in the electronics industry, coupled with relatively low levels of purchasing by the auto industry. According to Johnson Matthey, demand or purchases of palladium had grown from 4.9 million ounces in 1994 to 9.4 million ounces in 1999, thereafter decreasing to 6.8 million ounces in 2001, 4.9 million ounces in 2002 and an estimated 5.7 million ounces in 2003 as consumers switched to alternative materials, including platinum, engaged in thrifting (obtaining the same or better performance results with less material), and began to use safety stocks accumulated prior to 2001. While consumption of palladium as compared with demand is difficult to measure, Johnson Matthey estimates consumption for autocatalysts in 2003 likely exceeded demand as U.S. auto manufacturers used far less metals from inventory stocks than in 2002.

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     Charts reproduced from the Johnson Matthey Platinum 2003 Interim Review.

     Johnson Matthey also reported that platinum demand has increased from 4.6 million ounces in 1994 to 6.6 million ounces in 2003, a 44% increase and that demand for platinum exceeded supply in 2003 by 480,000 ounces, or 8%, (see platinum chart above).

     The unique physical qualities of PGMS’s include: (1) a high melting point; (2) superior conductivity and ductility; (3) a high level of resistance to corrosion; (4) strength and durability; and (5) strong catalytic properties. Palladium, like platinum, has numerous industrial applications.

     The largest application for palladium is in the automotive industry. This industry represented approximately 57% of the worldwide palladium demand in 2002, and remained relatively constant at 58% of the worldwide demand in 2003. According to Johnson Matthey, demand for palladium in the next several years is expected to resume growing, driven primarily by its use in the production of automotive catalysts which reduce harmful automobile emissions. In the U.S., the automobile industry have been required to comply with standards that decrease automotive emissions to National Low Emission Vehicle standards beginning with the 1999 model year vehicles. Europe and Japan have adopted more stringent standards for the future as well. With growing concern for cleaner air, it is expected that greater attention to automobile emissions will continue. This will have an undetermined effect on palladium and platinum. Prices of palladium reached record levels in 2001. On January 26, 2001, the price of palladium on the London PM Fix was $1,090. Given the 2001 prices, some substitution of platinum for palladium was experienced in the manufacturing and automotive catalyst sectors. Substitution subsided and reversed to a degree in 2002 and more rapidly in 2003 as the price of platinum strengthened exceeding a weakening palladium price. Nevertheless, inventories of palladium acted to keep its price in check.

     Johnson Matthey estimated that approximately 17% of the 2003 palladium supply is consumed in the production of electronic components for personal computers, cellular telephones, facsimile machines and other devices. However, given the higher palladium price during the first half of 2001, some substitution of base metals for lower end applications has occurred. Johnson Matthey also reported that dentistry continues to be a major user of palladium for gold-based dental alloys, and represented approximately 14% of the palladium demand for 2003.

     According to Johnson Matthey, approximately 63% of current world platinum production is used for industrial and manufacturing processes, most significantly for the manufacture of catalytic converters for the global auto industry. In addition to catalytic converters, industrial uses of platinum include the production of data storage disks, glass, paints, nitric acid, anti-cancer drugs, fiber optic cables, fertilizers, unleaded and high-octane gasoline’s and fuel cells. The balance of current platinum demand is for the production of jewelry, such as gem settings for rings, and for investment/collector coins. Johnson Matthey also reported that demand for platinum exceeded supply in 2003 by 480,000 ounces, or 8%. Consent to cite Johnson Matthey was neither sought nor obtained. See “Business and Properties — Risk Factors.”

SUPPLY

     The leading global sources of palladium and platinum production are mines located in the Republic of South Africa and Russia. The Johnson Matthey report estimated that South Africa provided approximately 36% of the palladium and 76% of the platinum worldwide during 2003. Johnson Matthey noted that the principal PGM mining companies in the Republic of South Africa are Anglo American Platinum Corporation, Ltd., Impala Platinum Holdings, Ltd. and Lonmin Ltd. The Johnson Matthey report estimated that Russia, as a by-product of nickel production, provided approximately 47% of the palladium and approximately 16% of the platinum worldwide in 2003. The Johnson Matthey report indicated that Russia held back from the spot market in 2002; however, Russia was

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expected to sell all of its palladium produced in 2003 (see charts below).

     Charts reproduced from the Johnson Matthey Platinum 2003 Interim Review.

     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 constitutes a significant year-to-year difference due to substantial inventories held by the Russian Government, accumulated in past years by auto companies and speculators. For platinum this is less significant as inventories held by governments or private institutions have not been as material. Annual worldwide mine production of palladium for 2003 is estimated at 6.3 million ounces. Annual worldwide production of platinum for 2003 is estimated at 6.1 million ounces.

     Johnson Matthey expects the supply of palladium will rise rapidly in 2004 as a result of the expansion of platinum production in South Africa and the settlement of a strike in Canada which affected production for three months during 2003. Johnson Matthey estimates that Norilsk Nickel in Russia produced approximately 2.95 million ounces of palladium in 2003 as a by-product of nickel mining, and that portions of Russian government stockpiles accumulated over the years also are exported each year. If Russian government stockpiles of palladium and platinum still exist and are extensive, and if they are disposed of in the market in significant quantities, the increased supply could result in lower prices.

     In addition to these sources, PGMs are recovered from automotive catalytic converters acquired from scrap dealers. A small but 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 converters. For the year ending 2003, it is estimated by CPM Group that recovery of PGM’s from scrap sources will account for 1,275,000 ounces of palladium, 610,000 ounces of platinum and 41,000 ounces of rhodium.

PRICES

     The company’s revenue and earnings depend upon world palladium and platinum prices. The company has no control over these prices, which tend to fluctuate widely. 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 PM Fix of annual high, low and average prices per ounce.

	PALLADIUM						PLATINUM
YEAR	HIGH		LOW		AVERAGE		HIGH		LOW		AVERAGE
1996	$	144	$	114	$	128	$	432	$	367	$	397
1997	$	239	$	118	$	177	$	497	$	343	$	396
1998	$	419	$	201	$	284	$	429	$	334	$	372
1999	$	454	$	285	$	358	$	457	$	342	$	377
2000	$	970	$	433	$	680	$	622	$	414	$	544
2001	$	1,090	$	315	$	604	$	640	$	415	$	529
2002	$	435	$	222	$	338	$	607	$	453	$	539
2003	$	269	$	148	$	201	$	840	$	603	$	691
2004*	$	256	$	192	$	229	$	900	$	816	$	855

* (Through March 9, 2004)

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     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, and 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 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

     Since the company’s sole source of revenue is the sale of platinum group metals, changes in the market price of platinum group metals significantly impacts 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 and production levels and costs in other platinum group metal producing countries, principally Russia and South Africa.

     Over the last few years, the market prices of palladium have been extremely volatile. The price for palladium reached a record high price level of $1,090 per ounce in January 2001 then fell to a low of $315 per ounce in November 2001 only to recover to approximately $440 per ounce by December 31, 2001. During 2002, palladium prices continued to decline, trading in a range of $325 to $350 per ounce until October 2002 at which point the price of palladium fell sharply to a low of $222 per ounce in December 2002, closing the year at $236 per ounce. The palladium price recovered slightly in January 2003 to $269 per ounce but then fell consistently to reach a low of $148 per ounce during April 2003. With speculative buying the palladium price increased during the latter half of 2003 to reach a high of $232 per ounce in September 2003 and then closed the year with a market price of approximately $195 per ounce at December 31, 2003. At March 9, 2004, the market price of palladium was approximately $256 per ounce.

     The price for platinum increased from $480 per ounce early in 2002 to approximately $600 per ounce by December 31, 2002 and continued to increase through 2003 to approximately $815 per ounce at December 31, 2003. At March 9, 2004, the market price of platinum was approximately $895 per ounce.

     A prolonged or significant economic contraction in the United States or worldwide could lead to further volatility in market prices of PGMs, particularly if demand for PGMs falls in connection with reduced automobile and electronics production. If other producers dispose of substantial amounts of platinum group metals from stockpiles or otherwise, the increased supply could reduce the prices of palladium and platinum.

     Reductions in PGM prices adversely impact the company’s revenues, profits and cash flows. Protracted periods of low metals prices could significantly reduce revenues and the availability of required development funds particularly after the company’s supply contracts expire, 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. See “Business and Properties — Competition: Palladium and Platinum Market” for further explanation of these factors.

     In consummating the Norilsk Nickel transaction, a substantial portion of the consideration received was paid in palladium. Norilsk Nickel paid the company 877,169 ounces of palladium, which was valued at approximately $148.2 million as of June 23, 2003 (see Note 12). During 2003, the company entered into negotiations for the sale of the 877,169 ounces of palladium. In the first quarter of 2004, the company announced that it had entered into contracts under which all of the palladium will be sold, at a slight volume discount to market price at the time of delivery, over a period of two years primarily for use in automobile catalytic converters. The amount to be received by the company under these contracts will be subject to market price changes.

THE COMPANY DEPENDS UPON A FEW CUSTOMERS AND ITS SALES AND OPERATIONS COULD SUFFER IF IT LOSES ANY OF THEM

     The company is party to long-term sales contracts with General Motors Corporation, Ford Motor Company and Mitsubishi Corporation, each of whom represents more than 10% of the company’s revenues and in aggregate represented 98% of the company’s revenues in 2003. For more information about these sales contracts, see “Business and Properties — Current Operations — Sales and Hedging Activities”.

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     As a result of these contracts, the company is subject to the customers’ compliance with the terms of the contracts, their ability to terminate or suspend the contracts and the customers’ willingness and ability to pay. The loss of any of these customers would require the company to sell at prevailing market prices, which may expose it to lower metal prices as compared to the floor price structures under the sales contracts. In the event the company becomes involved in a disagreement with one or more of its customers, their compliance with these contracts may be at risk. In such an event, the company’s operating plans could be threatened. In addition, under the company’s syndicated credit facility, a default or modification of the sales contracts could prohibit additional loans or require the repayment of outstanding loans. A termination or breach by a customer could impact the company’s operations and negatively impact the company’s financial results.

     During 2003, the company entered into negotiations for the sale of the 877,169 ounces of palladium, which constituted a portion of the payment received from Norilsk Nickel when it acquired its initial 50.8% interest in the Company. In the first quarter of 2004, the company announced that it had entered into contracts or had reached understandings, under which all of the palladium will be sold, at a slight volume discount to market price at the time of delivery, over a period of two years primarily for use in automobile catalytic converters. As a result of these contracts, the company is subject to the customer’s compliance with the terms of the contracts, their ability to terminate or suspend the contracts and the customer’s willingness and ability to pay. The loss of any of these would require the company to sell the metal in the open market which may have a negative impact on the price received. Alternatively, the company may choose not to sell the metal or seek alternative contracts. In such an event the company’s earnings and cash flows could be negatively impacted. See “Business and Properties — Current Operations — Sales and Hedging Activities” for additional information about the sales contracts.

FAILURE TO RENEW LONG-TERM SALES CONTRACTS FOR MINE PRODUCTION COULD RESULT IN MODIFIED OPERATIONS OR CURTAILMENT OF OPERATIONS

     During 1998, the company entered into long-term sales contracts with General Motors Corporation, Ford Motor Company and Mitsubishi Corporation, which, when combined, represented more than 98% of the company’s 2003 revenues. The contracts apply to the company’s production through December 2010. Under the contracts, the company has committed between 80% to 100% of its palladium production and between 70% to 80% of its platinum production. Metal sales are priced at a modest discount to market, with floor and ceiling prices. Accordingly, the company benefits if the market price drops below the floor price of the contract and is unable to realize the full benefit of the market price if the market price exceeds the ceiling price of the contract. The three car contracts will expire in 2006, 2007 and 2010, respectively. At that time the company will be directly dependent on market prices, without the price protection or risk due to the floors and ceilings of the long-term contracts. If the company is unable to extend or renew these contracts beyond 2010, with similar floor prices and the market price of PGM’s remain below the company’s total cash funding requirements to produce PGM’s, then operations may have to be modified or curtailed.

THE COMPANY HAS ONLY TWO PRINCIPAL SOURCES OF REVENUES FROM ITS MINING OPERATIONS

     In 2003, 73% and 27% of the company’s revenues was derived from its mining operations at the Stillwater Mine and East Boulder Mine, respectively. Prolonged interruption in operations at either location would have a negative impact on the company’s ability to generate revenues, profits and cash flow in the future. Material factors that could cause an interruption in operations at either mine are outlined in the “Risk Factors – Mining risks and potential inadequacy of insurance coverage — the company’s business is subject to significant risks that may not be covered by insurance.”

THE COMPANY IS A RELATIVELY HIGH COST PRIMARY PRODUCER

     The company’s products compete in a global market place with the products of other primary producers of PGM’s. They also compete with the products of mining companies who produce PGM’s as a by-product of their primary commodity, principally nickel.

     The company’s cash cost of production and associated annual capital required to produce its annual production is high relative to other primary producers of PGM’s. Most primary producers of PGM’s are located in South Africa.

     Because of the uncompetitive cost structure, in periods of low pricing, the company’s competitors may still be able to be profitable, while the company may not. Furthermore, the non-primary producers of PGM’s will generally continue to produce and sell PGM’s in low pricing periods as it is not their principal commodity.

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

     Based on the complexity and uncertainty involved in operating underground mines, it is difficult to provide accurate production and cost estimates. The company cannot be certain that either the Stillwater or East Boulder Mines will achieve the production forecast or that the expected operating cost levels will be achieved or that funding will be available from internal and external sources

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in necessary amounts or on acceptable terms to continue the necessary development work. Failure to achieve the company’s production forecast would negatively impact the company’s revenues, profits and cash flows. The reduction of production levels would also impact certain covenants under the company’s credit facility relating to the accomplishment of specified production and financial goals. As underground operations expand at depth and horizontally, it is likely that operating costs will increase unless employee productivity is increased. In addition, as additional underground infrastructure is constructed, amortization will increase unless additional ore reserves are identified. Such increase in costs could adversely affect the company’s profitability.

     New mining operations often experience unexpected problems during initial years of operation, which can result in substantial delays in reaching commercial production. The East Boulder Mine commenced commercial operations in 2002 and has an operating history of two years. As a result, estimates of future cash operating costs at East Boulder Mine are based largely on the company’s limited experience at the East Boulder Mine and operating experience at the Stillwater Mine portion of the J-M Reef. Actual production, cash operating costs and economic returns may differ significantly from those currently estimated or those established in future studies and estimates. At the East Boulder Mine, the company has experienced a decrease in total cash costs per PGM ounce from $381 in 2002 to $343 in 2003.

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 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, lithological data and assay results. This data is entered into a 3-dimensional modeling software package. The data 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 thickness and grade is 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 ore reserve tons and grade are calculated.

     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, average thickness, average grade and percent mineable. The area is calculated based on the 1,000-foot projections, the thickness and grade is calculated based on long-term proven ore reserve results in adjacent areas and the percent mineable is calculated based on long-term mine production results from proven areas. Contained ounces are calculated based on area (square feet) times thickness (feet) times grade (ounces per ton) times percent mineable (%) divided by density (expressed as cubic feet per ton). As a result, probable ore reserve estimates are less reliable than estimates of proven ore reserves. Both proven and probable ore reserve projections are limited by certain modifying factors, including geologic evidence, economic criteria and mining constraints.

     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 part of the “Reserve Process”. For the years 1997 through 2003 at the Stillwater Mine the conversion rates of probable to proven ore reserve tons were 163%, 150%, 66%, 111%, 104%, 71%, and 52%, respectively. At the East Boulder Mine, where production has been under way since 2001, conversion rates of probable ore reserves to proven ore reserves were 88% in 2001, 91% in 2002, 86% and 2003. Conversion rates are affected by a number of factors, including geological variability, applicable mining methods, changes in safe mining practices, economic factors and new regulatory requirements.

     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 its 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 assure that any particular level 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 orebody or the processing of new or different ore

27

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 A FURTHER ASSET IMPAIRMENT WRITEDOWN

     The company follows Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The company reviews and evaluates its long-lived assets for impairment when events and 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 carrying amount of the asset. Future cash flows include 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 impairment exists then a calculation of fair market value must be made. If fair market value is lower than the carrying value of the assets, then the carrying value must be rewritten down to the fair market value.

     An event in the future that might require management to perform an impairment calculation might be prolonged period of low PGM prices. In addition, prolonged low PGM prices might impact adversely the determination of ore reserves which would require an impairment calculation. Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets resulting in potential impairment charges.

USERS OF PGMS MAY SUBSTITUTE OTHER MATERIALS FOR PALLADIUM AND PLATINUM

     High PGM prices may lead users of PGMs to substitute other materials for palladium and platinum. The automobile, electronics and dental industries are the three largest sources of palladium demand. In response to supply questions and high market prices for palladium, some automobile manufacturers have sought alternatives to palladium and may reduce their PGM purchases. There has been some substitution of other metals for palladium in the automobile, electronics and dental applications. Substitution in all of these industries may increase significantly if the PGM market prices rise or if supply becomes unreliable. Significant substitution for any reason, in the absence of alternative uses for palladium being identified, could result in a material PGM price decrease, which would negatively impact the company’s revenues.

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

     The company is required to post surety bonds, letters of credit, cash or other acceptable financial instruments to guarantee performance of reclamation activities at the Stillwater and East Boulder Mines. As a result of a significant reduction of liquidity in the surety bond market, the total bonding capacity of the U.S. insurance industry has been severely reduced. In addition, the State of Montana has been requiring higher bonding levels at mining operations throughout the state. The bonded amount at the East Boulder Mine was $11.5 million during 2003. The Stillwater Mine currently posts a bond of $9.2 million which may require a substantial increase. The company expects that the Stillwater Mine bond will be reviewed and adjusted by the Agencies during 2004, and in all likelihood, be increased. In the event that increased bonding requirements are imposed and the company is unable to obtain the required bonds, the ability to operate under existing operating permits could be adversely affected.

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 and other mining or ground-related problems,

•   environmental hazards,

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•   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

•   the availability of critical materials and equipment.

     Such risks could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. Fatalities have occurred at the company’s mine since operations began in 1986. Industrial accidents could have a material adverse effect on its business and operations. The company cannot be certain that its insurance will cover certain of the risks associated with mining or that it will be able to maintain insurance to cover these risks at economically feasible premiums. Furthermore, the cost of insurance has dramatically increased as a result of worldwide economic conditions. The company might also become subject to liability for environmental damage or other hazards which it cannot insure against or which it may elect not to insure against because of premium costs or other reasons. Losses from such events could have a negative impact on the company’s business, financial condition and results of operations.

HEDGING AND LONG-TERM SALES CONTRACTS COULD LIMIT THE REALIZATION OF HIGHER METAL PRICES

     The company enters into hedging contracts from time to time in an effort to reduce the negative effect of price changes on its cash flow. These hedging activities 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 sale of call options and the purchase of put options. See “Business and Properties — Current Operations — Sales and Hedging Activities” for a discussion of the company’s hedge positions. While hedging transactions are intended to reduce the negative effects of price decreases, they can also prevent the company from benefiting from price increases. When PGM prices are above the price for which future production has been sold, the company would have an opportunity loss.

     The company has entered into long-term sales contracts that provide a floor price and a ceiling price for sales of a portion of its production. To the extent commodity prices exceed the ceiling price of the sales contracts, the company will not receive full market price at the time of sale. For a description of these contracts, see “Business and Properties—Current Operations—PGM Sales and Hedging Activities”.

CHANGES TO REGULATIONS AND COMPLIANCE WITH REGULATIONS COULD 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. These laws are continually changing and, as a general matter, are becoming more restrictive. Generally, compliance with these regulations requires the company to obtain permits issued by Federal, State and Local regulatory agencies. 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. Nonrenewal of permits or the imposition of additional conditions could prohibit the company’s ability to conduct its operations. See “Business and Properties — Regulatory and Environmental Matters”.

     Compliance with existing and future environmental laws and regulations may require additional control measures and expenditures which the company cannot predict. Environmental compliance requirements for new mines 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 may require new environmental permitting at the Stillwater Mine and mining and processing facilities at the East Boulder Mine. Private parties may pursue legal challenges of the company’s permits. See “Business and Properties — Regulatory and Environmental Matters”.

     The company’s activities are also subject to extensive federal, state and local laws and regulations governing matters relating to

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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 new requirements implemented under guidance of the Department of Homeland Security, could require additional capital outlays.

FURTHER AMENDMENTS OR WAIVERS OF THE COMPANY’S CREDIT AGREEMENT MAY BE NECESSARY AND MAY NOT BE OBTAINED

     The company’s agreement with a syndicate of financial institutions provides a credit facility which was used to finance a portion of the expansion plan and contains covenants relating to the accomplishment of specific production objectives, capital expenditures and financial targets. The credit facility consists of term loans and a revolving credit facility. The company has obtained amendments or waivers of various covenants on seven occasions. If significant operational problems are incurred, the company may breach one of its covenants and require a further amendment. Under such circumstances, if necessary amendments are not granted, the loans will be in default and immediately due and payable. For further information on the credit facility, see “Business and Properties – Current Operations — Credit Agreement.”

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 high turnover with respect to its miners. In addition, the company must compete for individuals skilled in the operation and development of 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. The company currently employs 427 miners. Failure to maintain an adequate supply of miners could limit the company’s ability to meet its contractual requirements. The company had approximately 1,540 employees at December 31, 2003, of which about 800 located at the Stillwater Mine and 100 at the Columbus facilities, which are covered by a collective bargaining agreement with PACE Local 8-001, expiring June 30, 2004. On July 1, 2002, employees at the East Boulder Mine became covered by a collective bargaining agreement with PACE Local 8-001, expiring June 30, 2005. About 290 employees were covered under this agreement at December 31, 2003. In the event the company’s employees were to engage in a strike or other work stoppage, it could result in a significant disruption of the company’s operations and higher ongoing labor costs.

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

     The company has a number of unpatented mining claims. See “Business and Properties — Current Operations — Title and Royalties”. The validity of unpatented mining claims on public lands, which constitute most of the company’s property holdings, is often uncertain and possessory rights of claimants subjected 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 the vulnerability to challenges of third parties or the federal government. The validity of an unpatented mining claim or millsite, 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 millsites. While the company pays annual maintenance fees and has obtained mineral title reports and legal opinions for some of the unpatented mining claims or millsites 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 and the company’s possessory rights to any of its unpatented claims may not be deemed defective and challenged.

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

     Producers of platinum group metals are required to conduct processing procedures and construct and operate additional facilities beyond those for gold and silver producers. In addition to concentration facilities at the mine site, the company operates its own smelting and refining facilities in Columbus, Montana to produce a filter cake that is shipped for final refining by a third party refiner. The operations of a smelter and refinery by the company require environmental steps and operational expertise not required of most other precious metals producers. This additional complexity of operations poses additional operational and environmental risks, such as solution spills, the release of sulfur dioxide from the storage vessels and product spills in transportation.

ITEM 3

LEGAL PROCEEDINGS

     The company is involved in various claims and legal actions arising in the ordinary course of business, including employee injury claims. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the company’s consolidated financial position, results of operations or liquidity, and the likelihood that a loss contingency will occur in connection with these claims is remote.

STOCKHOLDER SUITS

     In 2002, seven lawsuits were filed against the company and certain senior officers in United States District Court, Southern District of New York, purportedly on behalf of a class of all persons who purchased or otherwise acquired common stock of the company from April 20, 2001 through and including April 1, 2002. They assert claims against the company and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Plaintiffs challenge the accuracy of certain public disclosures made by the company regarding its financial performance and, in particular, its accounting for probable ore reserves. In September 2002, an amended complaint was filed which consolidated the cases and lead counsel was appointed to represent the plaintiffs. In October 2002, defendants moved to dismiss the complaint and to transfer the case to federal district court in Montana. The motion to transfer the case was granted May 9, 2003, and the case is now pending in the federal district court in Montana. On January 30, 2004, the court held a status conference at which time the plaintiffs were given until March 30, 2004 to file an amended complaint. The court also set the following briefing schedule for any motion to dismiss: defendants’ motion to dismiss must be filed on or before May 14, 2004, plaintiffs’ opposition must be filed on or before June 14, 2004 and defendants’ reply must be filed on or before June 28, 2004. The court anticipates setting a hearing date on the motion to dismiss in July 2004.

     On June 24, 2002, a stockholder derivative lawsuit was filed against the company and its directors in state court in Delaware. It arises out of allegations similar to the class actions and seeks damages allegedly on behalf of the stockholders of Stillwater for breach of fiduciary duties by the directors. The parties have agreed to suspend activity in this matter pending the outcome of the motion to dismiss in the above referenced class action suit.

     The company considers the lawsuits without merit and intends to vigorously defend itself in both of these actions.

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ITEM 4

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The company held its annual meeting of stockholders on October 23, 2003. The following table sets forth the proposals presented at the annual meeting and the votes cast in connection with each proposal. Further information regarding these proposals was included in the Company’s proxy statement filed with the Securities and Exchange Commission on September 24, 2003 and the exhibits thereto:

	Proposal	Votes Cast
		For		Against		Abstain		Withhold
1.	To amend the company’s Restated Certificate of Incorporation (the “charter”) to increase the company’s authorized common stock from 100,000,000 shares to 200,000,000 shares.		77,089,214		8,476,402		60,161	–
2.	To amend the charter to eliminate cumulative voting rights of stockholders.		56,179,373		14,130,360		68,182	–
3.	To amend the charter to eliminate the rights of stockholders to take action by written consent.		55,866,963		14,446,325		64,627	–
4.	To amend the charter to provide that the number of directors shall be set forth in accordance with the company’s by-laws, provided that the number shall be no less than seven and no more than ten.		66,767,564		1,982,028		1,628,323	–
5.	To approve a restatement of the current charter to include the amendments set forth in Proposals 1 through 4 in the event they are approved by the stockholders and to make other amendments set forth in the Proxy Statement.		55,013,336		12,112,202		3,252,377	–
6.	To amend the company’s by-laws to provide that: (i) the nomination of directors, (ii) the filling of vacancies in the Board, (iii) notice of Board meetings, (iv) the Board quorum requirements, (v) the election of officers and (vi) the appointment of Board committees shall be subject to the provisions of the Stockholders Agreement by and among the Company, Norimet and Norilsk Nickel, dated as of June 23, 2003.		62,879,470		5,834,388		1,663,057	–
7.	To amend and restate the company’s by-laws to include the amendments set forth in Proposal 6 in the event they are approved by the stockholders and to make other amendments set forth in the Proxy Statement.		59,227,797		9,447,348		1,695,362	–
8.	To elect nine directors to the company’s Board of Directors.
	Craig L. Fuller     Patrick M. James     Steven S. Lucas     Joseph P. Mazurek     Francis R. McAllister     Sheryl K. Pressler     Donald W. Riegle     Todd D. Schafer     Jack E. Thompson		82,706,041 82,724,529 82,734,758 82,760,683 82,682,255 82,707,541 82,725,069 82,740,360 82,769,300		– – – – – – – – –		– – – – – – – – –	2,919,736 2,901,248 2,891,019 2,865,094 2,943,522 2,918,236 2,900,708 2,885,417 2,856,477
9.	To amend and restate the company’s General Employee Stock Plan to increase the number of shares of Common Stock authorized for issuance from 1,100,000 shares to 1,400,000 shares and change the governing law from Colorado to Delaware.		55,925,956		12,838,299		1,613,660	–
10.	To ratify the appointment of KPMG LLP as the company’s independent accountants.		85,250,617		284,749		90,411	–

All proposals were approved at the meeting. The following persons were re-elected to the company’s board of directors: Craig L. Fuller, Patrick M. James, Steven S. Lucas, Joseph P. Mazurek, Francis R. McAllister, Sheryl K. Pressler, Donald W. Riegle, Todd D. Schafer and Jack E. Thompson

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ITEM 4A

EXECUTIVE OFFICERS OF REGISTRANT

     Set forth below is certain information concerning the individuals who were executive officers of the company as of December 31, 2003.

Name	Age		Position
Francis R. McAllister		61	Chairman of the Board and Chief Executive Officer
Stephen A. Lang		48	Executive Vice President and Chief Operating Officer
John R. Stark		51	Vice President, Human Resources, Secretary and Corporate Counsel
Terrell I. Ackerman		50	Vice President, Planning and Process Operations
Gregory A. Wing (1)		54	Vice President, and Chief Financial Officer

(1) Mr. Wing’s appointment is effective on March 22, 2004.

     The following are brief biographies of the company’s executive officers and directors:

EXECUTIVE OFFICERS

     Francis R. McAllister (age 61) was appointed Chairman of the Board and Chief Executive Officer of the company effective February 12, 2001. Mr. McAllister was appointed a Director of the company on January 9, 2001. Prior to his appointment to the Board, Mr. McAllister was with ASARCO Incorporated from 1966 to 1999, most recently serving as Chairman and Chief Executive Officer in 1999, Chief Operating Officer from 1998 to 1999, Executive Vice President — Copper Operations from 1993 to 1998, Chief Financial Officer from 1982 to 1993 and in various professional and management positions from 1966 to 1982. He currently serves on the Board of Directors of Cleveland Cliffs, Incorporated, an iron ore mining company. Mr. McAllister received his MBA from New York University, his Bachelor of Science — Finance from the University of Utah, and attended the Advanced Management Program at Harvard Business School.

     Stephen A. Lang (age 48) became the Company’s Executive Vice President and Chief Operating Officer effective September 2, 2003. Mr. Lang was employed with Barrick Gold Corporation from 2001 to 2003 as Vice President and General Manager of Barrick Gold’s Goldstrike/ Meikle operation. Prior to joining Barrick Gold, Mr. Lang served as Vice President of Engineering and Project Development of Rio Algom, Limited in Santiago, Chile from 1999 to 2001. From 1996 to 1999, Mr. Lang served as Vice President and General Manager of Kinross Gold Corporation/ Amax Gold Corporation’s Fort Knox Mine in Fairbanks, Alaska. From 1981 to 1996, he held various positions with Santa Fe Pacific Gold Minerals Corporation, including General Manager of the Twin Creeks Mine in Golconda, Nevada. Mr. Lang earned a Bachelor of Science in Mining Engineering from the University of Missouri-Rolla and a Master Degree in Mining Engineering from the University of Missouri-Rolla.

     John R. Stark (age 51) was appointed Vice President, Human Resources on September 21, 1999 and was subsequently appointed Secretary and Corporate Counsel on May 29, 2001 and July 17, 2001, respectively. Mr. Stark has a varied background in corporate administrations and human resources. He was previously with Molycorp, Inc. since 1996 as Manager of Sales and Administration; Western Mobile, Inc., an international construction material supplier, from 1992 to 1996; and with AMAX Inc. for 13 years until 1992. Mr. Stark received his Juris Doctor degree from the University of Denver School of Law and holds a Bachelor of Arts degree in economics from the University of Montana.

     Terrell I. Ackerman (age 50) is currently Vice President, Planning and Process Operations. Mr. Ackerman joined the company in March 2000 as Director of Corporate Planning after 2 years as an independent consultant. During 1998 and 1999 Mr. Ackerman conducted feasibility studies, operational and mine planning reviews for various underground operations. Prior to this time, Mr. Ackerman was VP and General Manager of BHP Copper’s San Manuel Operation in Arizona. Mr. Ackerman held increasing roles of accountability for Magma Copper Company starting as an underground engineer in training in 1976. Mr. Ackerman received a Bachelor of Science degree in Mine Engineering from the University of Idaho College of Mines.

     Gregory A. Wing (age 54) will become the Company’s Vice President and Chief Financial Officer effective March 22, 2004. Mr. Wing was with Black Beauty Coal Company as Vice President of Finance and Chief Financial Officer from 1995 through 2003. Prior to joining Black Beauty, Mr. Wing was with Pittsburg and Midway Coal Mining Company a subsidiary of Chevron Corporation as Manager of Financial Planning and Analysis in Englewood, CO. From 1986 to 1989, he was employed with Chevron Corporation as Senior Analyst in Corporation Planning, and from 1980 to 1986, he was with Arabian American Oil Company. Mr. Wing earned a Bachelor of Arts in Physics from the University of California at Berkeley and a M.B.A in Accounting and Finance from the University of California at Berkeley.

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PART II

ITEM 5

MARKET FOR REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

     On January 31, 2002, the company completed a $60 million private placement of its common stock involving approximately 4.3 million shares or approximately 10% of the outstanding shares after such issuance. The Company filed a registration statement for the resale of such shares, which was declared effective as of June 7, 2002.

     The company’s common shares are traded on the New York Stock Exchange (NYSE) under the trading symbol “SWC.” For the period from January 1, 2002 through December 31, 2003, the high and low sales prices for the company’s common stock for each quarter as reported by the NYSE were:

2003	HIGH		LOW
Fourth Quarter	$	10.17	$	6.16
Third Quarter		7.55		4.68
Second Quarter		5.46		2.25
First Quarter		5.80		2.20

2002	HIGH		LOW
Fourth Quarter	$	8.49	$	4.60
Third Quarter		16.28		5.72
Second Quarter		19.00		14.10
First Quarter		20.24		14.14

     STOCKHOLDERS. As of March 9, 2004, the company had 472 stockholders of record.

     DIVIDENDS. The company has never paid any dividends on its common stock and expects for the foreseeable future to use all of its cash flow from operations for use in expanding and developing its business. Any future decision as to the payment of dividends will be at the discretion of the company’s Board of Directors and will depend upon the company’s earnings, financial position, capital requirements, plans for expansion, loan covenants and such other factors as the Board of Directors deems relevant. Covenants in the company’s credit facility and its exempt facility revenue bond indenture significantly restrict the payment of dividends on common stock.

34

ITEM 6

SELECTED FINANCIAL AND OPERATING DATA

(in thousands, except where noted)	2003			2002			2001			2000			1999
INCOME STATEMENT
Revenues	$	240,229		$	275,599		$	277,381		$	225,232		$	150,691
Costs and expenses
Cost of metals sold		173,008			171,015			134,430			103,902			79,395
Depreciation and amortization		40,959			38,990			23,722			17,623			13,557
Total cost of revenues		213,967			210,005			158,152			121,525			92,952
General and administrative expenses		14,513			14,205			22,342			9,753			7,305
Norilsk Nickel transaction related expenses		3,043			—			—			—			—
Impairment of property, plant and equipment		390,295			—			—			—			—
Restructuring costs, net		(966	)		(5,938	)		10,974			—			—
Legal settlement		—			—			1,684			—			—
Total costs and expenses		620,852			218,272			193,152			131,278			100,257
Operating income (loss)		(380,623	)		57,327			84,229			93,954			50,434
Other income (expense)
Interest income		427			903			1,900			1,095			1,048
Interest expense, net of capitalized interest		(17,595	)		(17,601	)		—			—			(137	)
Income (loss) before income taxes and cumulative effect of accounting change		(397,791	)		40,629			86,129			95,049			51,345
Income tax benefit (provision) before provision for valuation allowance and reductions of deferred tax assets		161,921			(8,945	)		(20,325	)		(27,150	)		(14,174	)
Provision for valuation allowance for net deferred tax assets		(70,304	)		—			—			—			—
Reduction of deferred tax asset for net operating loss carryforwards resulting from ownership change		(16,678	)		—			—			—			—
Total income tax benefit (provision)		74,939			(8,945	)		(20,325	)		(27,150	)		(14,174	)
Income (loss) before cumulative effect of accounting change		(322,852	)		31,684			65,804			67,899			37,171
Cumulative effect of accounting change, net of income taxes		(408	)		—			—			(6,435	)		—
Net income (loss)		(323,260	)		31,684			65,804			61,464			37,171
Other comprehensive income (loss), net of tax		585			(7,139	)		12,872			—			—
Comprehensive income (loss)	$	(322,675	)	$	24,545		$	78,676		$	61,464		$	37,171
Basic earnings (loss) per share
Income (loss) before cumulative effect of accounting change	$	(4.76	)	$	0.74		$	1.70		$	1.76		$	1.01
Cumulative effect of accounting change		(0.01	)		—			—			(0.16	)		—
Net income (loss)	$	(4.77	)	$	0.74		$	1.70		$	1.60		$	1.01
Diluted earnings (loss) per share
Income (loss) before cumulative effect of accounting change	$	(4.76	)	$	0.74		$	1.68		$	1.73		$	0.96
Cumulative effect of accounting change		(0.01	)		—			—			(0.16	)		—
Net income (loss)	$	(4.77	)	$	0.74		$	1.68		$	1.57		$	0.96
Weighted average common shares outstanding
Basic		67,807			42,900			38,732			38,507			36,758
Diluted		67,807			43,004			39,214			39,250			38,597
Cash flow data
Net cash provided by operating activities	$	47,215		$	52,138		$	106,792		$	117,674		$	67,818
Net cash used by investing activities	$	55,256		$	55,887		$	195,648		$	191,481		$	194,253
Net cash provided by financing activities	$	29,639		$	14,751		$	85,548		$	89,180		$	79,470
Balance sheet data
Current assets	$	265,006		$	112,475		$	85,790		$	74,155		$	45,710
Total assets	$	690,588		$	914,214		$	868,221		$	679,026		$	478,838
Current liabilities	$	110,270		$	65,783		$	63,507		$	59,195		$	36,989
Long-term debt and capital lease obligations	$	85,445		$	198,866		$	246,803		$	157,256		$	84,404
Stockholder’s equity	$	479,297		$	559,214		$	475,123		$	400,614		$	323,104
Working capital	$	154,736		$	46,692		$	22,283		$	14,960		$	8,721

35

(in thousands, except where noted)	2003		2002		2001		2000		1999
OPERATING AND COST DATA
Consolidated:
Ounces produced
Palladium		450		476		405		330		315
Platinum		134		141		121		100		94
Total		584		617		526		430		409
Tons milled		1,185		1,257		829		678		689
Mill head grade (ounce per ton)		0.53		0.54		0.66		0.69		0.66
Sub-grade tons milled (1)		84		74		65		78		—
Sub-grade mill head grade (ounce per ton)		0.20		0.17		0.21		0.23		—
Total tons milled (1)		1,269		1,331		894		756		689
Combined mill head grade (ounce per ton)		0.51		0.52		0.63		0.64		0.66
Total mill recovery (%)		91		90		90		89		89
Total operating costs per ounce	$	249	$	256	$	230	$	223	$	178
Total cash costs per ounce (2), (3)	$	283	$	287	$	264	$	264	$	198
Total production costs per ounce (2), (3)	$	354	$	351	$	311	$	305	$	231
Total operating costs per ton milled	$	115	$	119	$	130	$	127	$	106
Total cash costs per ton milled (2), (3)	$	130	$	133	$	149	$	150	$	118
Total production costs per ton milled (2), (3)	$	163	$	163	$	175	$	173	$	138
Stillwater Mine:
Ounces produced
Palladium		328		379		388		330		315
Platinum		100		113		116		100		94
Total		428		492		504		430		409
Tons milled		730		892		829		678		689
Mill head grade (ounce per ton)		0.62		0.60		0.66		0.69		0.66
Sub-grade tons milled (1)		84		55		65		78		—
Sub-grade mill head grade (ounce per ton)		0.20		0.16		0.21		0.23		—
Total tons milled (1)		814		947		894		756		689
Combined mill head grade (ounce per ton)		0.58		0.58		0.63		0.64		0.66
Total mill recovery (%)		91		90		90		89		90
Total operating costs per ounce	$	231	$	235	$	230	$	223	$	178
Total cash costs per ounce (2), (3)	$	262	$	263	$	264	$	264	$	198
Total production costs per ounce (2), (3)	$	322	$	318	$	311	$	305	$	231
Total operating costs per ton milled	$	121	$	122	$	130	$	127	$	106
Total cash costs per ton milled (2), (3)	$	138	$	137	$	149	$	150	$	118
Total production costs per ton milled (2), (3)	$	169	$	165	$	175	$	173	$	138
East Boulder Mine:
Ounces produced
Palladium (4)		122		97		17		—		—
Platinum (4)		34		28		5		—		—
Total (4)		156		125		22		—		—
Tons milled (4)		455		365		85		—		—
Mill head grade (ounce per ton) (4)		0.39		0.39		0.31		—		—
Sub-grade tons milled (1)		—		19		—		—		—
Sub-grade mill head grade (ounce per ton)		—		0.20		—		—		—
Total tons milled (1), (4)		455		384		85		—		—
Combined mill head grade (ounce per ton) (4)		0.39		0.38		0.31		—		—
Total mill recovery (%) (4)		89		88		92		—		—
Total operating costs per ounce	$	299	$	335	$	—	$	—	$	—
Total cash costs per ounce (2), (3)	$	343	$	381	$	—	$	—	$	—
Total production costs per ounce (2), (3)	$	441	$	478	$	—	$	—	$	—
Total operating costs per ton milled	$	103	$	110	$	—	$	—	$	—
Total cash costs per ton milled (2), (3)	$	118	$	125	$	—	$	—	$	—
Total production costs per ton milled (2), (3)	$	151	$	156	$	—	$	—	$	—

36

(in thousands, except where noted)	2003		2002		2001		2000		1999
SALES AND PRICE DATA
Ounces sold (000)
Palladium		459		469		391		324		314
Platinum		131		143		114		100		94
Total		590		612		505		424		408
Average realized price per ounce (5)
Palladium	$	352	$	436	$	570	$	560	$	372
Platinum	$	602	$	511	$	498	$	481	$	383
Combined (6)	$	408	$	454	$	554	$	541	$	375
Average market price per ounce (5)
Palladium	$	201	$	338	$	604	$	680	$	358
Platinum	$	691	$	539	$	529	$	544	$	377
Combined (6)	$	315	$	384	$	586	$	649	$	362

(1)	Sub-grade tons milled includes reef waste material only. Total tons milled includes ore tons and sub-grade tons only. Prior period amounts have been adjusted to conform with the current year presentation.
(2)	Total cash costs include costs of mining, processing and administrative expenses at the mine site (including mine site overhead, taxes other than income taxes, royalties and credits for metals produced other than palladium and platinum). Total production costs include total cash costs plus depreciation and amortization. Income taxes, corporate general and administrative expenses, asset impairment writedowns, restructuring costs, Norilsk transaction expenses and interest income and expense are not included in either total cash costs or total production costs.
(3)	Cash cost per ton and cash cost per ounce represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements that management uses to monitor and evaluate the performance of its mining operations. Management believes cash costs per ounce and per ton provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as provide a meaningful basis to compare our results with those of other mining companies and other mining operating properties. See table “Reconciliation of Non-GAAP measures to cost of revenues.”
(4)	The ounces recovered and tons milled from the East Boulder Mine during 2001 were generated from construction and development activities. Proceeds generated from the ounces during 2001 were credited against capital mine development in 2001. Costs incurred for the mining of these tons during 2001 were charged to capital mine development in 2001.
(5)	The company’s average realized price represents revenues which include the impact of contract floor and ceiling prices and hedging gains and losses realized on commodity instruments and exclude contract discounts, divided by ounces sold. The average market price represents the average London PM Fix for the actual months of the period.
(6)	The company reports a combined average realized and market price of palladium and platinum at the same ratio as ounces that are produced from the refinery.

37

Reconciliation of Non-GAAP measures to cost of revenues

     The company utilizes certain non-GAAP measures as indicators in assessing the performance of its mining and processing operations during any period. Because of the processing time required to complete the extraction of finished PGM products, there are typically lags from one to three months between ore production and sale of the finished product. Sales in any period include some portion of material mined and processed from prior periods as the revenue recognition process is completed. Consequently, while cost of revenues (a GAAP measure included in the company’s Consolidated Statement of Operations and Comprehensive Income/(Loss)) appropriately reflects the expense associated with the materials sold in any period, the company has developed certain non-GAAP measures to assess the costs associated with its producing and processing activities in a particular period and to compare those costs between periods.

     While the company believes that these non-GAAP measures may also be of value to outside readers, both as general indicators of the company’s mining efficiency from period to period and as insight into how the company internally measures its operating performance, these non-GAAP measures are not standardized across the mining industry and in most cases will not be directly comparable to similar measures that may be provided by other companies. These non-GAAP measures are only useful as indicators of relative operational performance in any period, and because they do not take into account the inventory timing differences that are included in cost of revenues, they cannot meaningfully be used to develop measures of profitability. A reconciliation of these measures to cost of revenues for each period shown is provided as part of the following tables, and a description of each non-GAAP measure is provided below.

     Total Cost of Revenues: For the company on a consolidated basis, this measure is equal to consolidated cost of revenues, as reported in the Consolidated Statement of Operations and Comprehensive Income/(Loss). For the Stillwater Mine, East Boulder Mine, and other PGM activities, the company segregates the expenses within cost of revenues that are directly associated with each of these activities and then allocates the remaining facility costs included in consolidated cost of revenues in proportion to the monthly volumes from each activity. The resulting total cost of revenues measures for Stillwater Mine, East Boulder Mine and other PGM activities are equal in total to consolidated cost of revenues as reported in the company’s Consolidated Statement of Operations and Comprehensive Income/(Loss).

     Total Production Costs (Non-GAAP): Calculated as total cost of revenues (for each mine or consolidated) adjusted to exclude gains or losses on asset dispositions, costs and profit from secondary recycling, and changes in product inventories. This non-GAAP measure provides an indication of the total costs incurred in association with production and processing in a period, before taking into account the timing differences resulting from inventory changes and before any effect of asset dispositions or secondary recycling activities. It is used by the company as a comparative measure of the level of total production and processing activities in a period, and may be compared to prior periods or between the company’s mines. As noted above, because this measure does not take into account the inventory timing differences that are included in cost of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

     When divided by the total tons milled in the respective period, Total Production Cost per Ton Milled (Non-GAAP) – measured for each mine or consolidated – provides an indication of the cost per ton milled in that period. Because of variability of ore grade in the company’s mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Production Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Production Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

     When divided by the total recoverable PGM ounces from production in the respective period, Total Production Cost per Ounce (Non-GAAP) – measured for each mine or consolidated – provides an indication of the cost per ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because extracting PGM material is ultimately the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the company’s mines. Consequently, Total Production Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Production Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

     Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated by excluding the depreciation and amortization and asset retirement costs from Total Production Costs (Non-GAAP) for each mine or consolidated. The company uses this measure as a comparative indication of the cash costs related to production and processing in any period. As noted above, because this measure does not take into account the inventory timing differences that are included in cost of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

38

     When divided by the total tons milled in the respective period, Total Cash Cost per Ton Milled (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of cash costs incurred per ton milled in that period. Because of variability of ore grade in the company’s mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Cash Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Cash Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

     When divided by the total recoverable PGM ounces from production in the respective period, Total Cash Cost per Ounce (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the company’s mines. Consequently, Total Cash Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Cash Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

     Total Operating Costs (Non-GAAP): This non-GAAP measure is derived from Total Cash Costs (Non-GAAP) for each mine or consolidated by excluding royalty, tax and insurance expenses from Total Cash Costs (Non-GAAP). Royalties, taxes and insurance costs are contractual or governmental obligations outside of the control of the company’s mining operations, and in the case of royalties and most taxes, are driven more by the level of sales realizations rather than by operating efficiency. Consequently, Total Operating Costs (Non-GAAP) is a useful indicator of the level of production and processing costs incurred in a period that are under the control of mining operations. As noted above, because this measure does not take into account the inventory timing differences that are included in cost of revenues, it cannot be used to develop meaningful measures of earnings or profitability.

     When divided by the total tons milled in the respective period, Total Operating Cost per Ton Milled (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of controllable cash costs incurred per ton milled in that period. Because of variability of ore grade in the company’s mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces. And because ore tons are first actually weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Operating Cost per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Operating Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.

     When divided by the total recoverable PGM ounces from production in the respective period, Total Operating Cost per Ounce (Non-GAAP) – measured for each mine or consolidated– provides an indication of the level of controllable cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period. Because ultimately extracting PGM material is the objective of mining, the cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the company’s mines. Consequently, Total Operating Cost per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Operating Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.

39

(in thousands, except where noted)	2003		2002			2001		2000			1999
Consolidated:
Total operating costs (Non-GAAP)	$	145,381	$	157,649		$	116,097	$	95,809		$	72,790
Total cash costs (Non-GAAP)	$	165,457	$	177,175		$	132,810	$	113,272		$	81,178
Total production costs (Non-GAAP)	$	206,758	$	216,673		$	156,822	$	131,087		$	94,924
Divided by total ounces		584		617			504		430			409
Divided by total tons milled		1,269		1,331			894		756			689
Total operating cost per ounce (Non-GAAP)	$	249	$	256		$	230	$	223		$	178
Total cash cost per ounce (Non-GAAP)	$	283	$	287		$	264	$	264		$	198
Total production cost per ounce (Non-GAAP)	$	354	$	351		$	311	$	305		$	231
Total operating cost per ton milled (Non-GAAP)	$	115	$	119		$	130	$	127		$	106
Total cash cost per ton milled (Non-GAAP)	$	130	$	133		$	149	$	150		$	118
Total production cost per ton milled (Non-GAAP)	$	163	$	163		$	175	$	173		$	138
Reconciliation to cost of revenues:
Total operating costs (Non-GAAP)	$	145,381	$	157,649		$	116,097	$	95,809		$	72,790
Royalties, taxes and other		20,076		19,526			16,713		17,463			8,388
Total cash costs (Non-GAAP)		165,457		177,175			132,810		113,272			81,178
Asset retirement costs		342		508			290		192			189
Depreciation and Amortization		40,959		38,990			23,722		17,623			13,557
Total production costs (Non-GAAP)		206,758		216,673			156,822		131,087			94,924
Change in product inventory		7,115		(6,669	)		922		(10,113	)		(1,747	)
(Gain) or loss on sale of assets and other costs		94		1			408		551			(225	)
Total cost of revenues	$	213,967	$	210,005		$	158,152	$	121,525		$	92,952
Stillwater Mine:
Total operating costs (Non-GAAP)	$	98,669	$	115,561		$	116,097	$	95,809		$	72,790
Total cash costs (Non-GAAP)	$	111,885	$	129,355		$	132,810	$	113,272		$	81,178
Total production costs (Non-GAAP)	$	137,811	$	156,592		$	156,822	$	131,087		$	94,924
Divided by total ounces		428		492			504		430			409
Divided by total tons milled		814		947			894		756			689
Total operating cost per ounce (Non-GAAP)	$	231	$	235		$	230	$	223		$	178
Total cash cost per ounce (Non-GAAP)	$	262	$	263		$	264	$	264		$	198
Total production cost per ounce (Non-GAAP)	$	322	$	318		$	311	$	305		$	231
Total operating cost per ton milled (Non-GAAP)	$	121	$	122		$	130	$	127		$	106
Total cash cost per ton milled (Non-GAAP)	$	138	$	137		$	149	$	150		$	118
Total production cost per ton milled (Non-GAAP)	$	169	$	165		$	175	$	173		$	138
Reconciliation to cost of revenues:
Total operating costs (Non-GAAP)	$	98,669	$	115,561		$	116,097	$	95,809		$	72,790
Royalties, taxes and other		13,216		13,794			16,713		17,463			8,388
Total cash costs (Non-GAAP)		111,885		129,355			132,810		113,272			81,178
Asset retirement costs		280		322			290		192			189
Depreciation and Amortization		25,646		26,915			23,722		17,623			13,557
Total production costs (Non-GAAP)		137,811		156,592			156,822		131,087			94,924
Change in product inventory		6,155		(287	)		922		(10,113	)		(1,747	)
(Gain) or loss on sale of assets and other costs		52		2			408		551			(225	)
Total cost of revenues	$	144,018	$	156,307		$	158,152	$	121,525		$	92,952

40

(in thousands, except where noted)	2003		2002			2001		2000		1999
East Boulder Mine:
Total operating costs (Non-GAAP)	$	46,712	$	42,088		$	—	$	—	$	—
Total cash costs (Non-GAAP)	$	53,572	$	47,820		$	—	$	—	$	—
Total production costs (Non-GAAP)	$	68,947	$	60,081		$	—	$	—	$	—
Divided by total ounces		156		125			—		—		—
Divided by total tons milled		455		384			—		—		—
Total operating cost per ounce (Non-GAAP)	$	299	$	335		$	—	$	—	$	—
Total cash cost per ounce (Non-GAAP)	$	343	$	381		$	—	$	—	$	—
Total production cost per ounce (Non-GAAP)	$	441	$	478		$	—	$	—	$	—
Total operating cost per ton milled (Non-GAAP)	$	103	$	110		$	—	$	—	$	—
Total cash cost per ton milled (Non-GAAP)	$	118	$	125		$	—	$	—	$	—
Total production cost per ton milled (Non-GAAP)	$	151	$	156		$	—	$	—	$	—
Reconciliation to cost of revenues:
Total operating costs (Non-GAAP)	$	46,712	$	42,088		$	—	$	—	$	—
Royalties, taxes and other		6,860		5,732			—		—		—
Total cash costs (Non-GAAP)		53,572		47,820			—		—		—
Asset retirement costs		62		186			—		—		—
Depreciation and Amortization		15,313		12,075			—		—		—
Total production costs (Non-GAAP)		68,947		60,081			—		—		—
Change in product inventory		960		(6,382	)		—		—		—
(Gain) or loss on sale of assets and other costs		42		(1	)		—		—		—
Total cost of revenues	$	69,949	$	53,698		$	—	$	—	$	—

41

ITEM 7

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the company’s Consolidated Financial Statements and Notes, included elsewhere in this report, and the information contained in “Selected Financial and Operating Data.”

EXECUTIVE SUMMARY

     Two overriding factors have heavily influenced the company in recent years and will continue to affect the company in the future: the volatility of metal prices and the company’s high unit cost structure. As to metal prices, they are dictated by market forces beyond the control of the company. As to its unit cost structure, the company has experienced difficulty meeting production targets, achieving sufficient cost efficiencies and realizing anticipated ore grades. In addition, the company must spend significant amounts of capital annually to maintain sufficient developed areas of the mines to maintain production.

     In 1998, the company entered long-term sales contracts which, in some cases extend to 2010, and cover the majority of the mines’ production. These contracts have floor prices which, in recent years, have been higher than market prices and higher than the company’s total cash requirements including capital. These contracts have allowed the company to continue to generate operating profits in low pricing environments. If not extended or modified, as to which there can be no assurance, these contracts will expire by 2010. At that time, the company could be fully subject to market prices and the absence of these contracts could negatively affect the company’s operating results.

     The determination to build a second mine at East Boulder was made in 1998, a time when palladium prices were rising, and forecast to go higher. The financing of East Boulder was largely done through available cash and bank borrowings, which, ultimately put a financial strain on the company when combined with higher than anticipated capital costs for construction and development. In recent years the company was obliged to amend its credit agreement on numerous occasions, to seek additional funding through a private placement and to revise its mining plans on several occasions in an effort to optimize its production in light of financial limitations. Ultimately, the company sought a financial partner and considered numerous alternatives. The company’s process led to the stock purchase transaction whereby Norilsk Nickel acquired 50.8% of the company through the acquisition of new common shares. Norilsk Nickel subsequently completed a cash tender offer thereby increasing their ownership to 55.5%. The company believes that it has adequate liquidity for its contemplated needs in view of the cash and palladium received in connection with the share issuance in the Norilsk Nickel transaction. The palladium is expected to be sold over the next two years, at a slight volume discount to market price at the time of sale, with the banks having the option under the credit agreement to receive 50% of the cash proceeds.

     The asset impairment charge taken at the end of 2003 was precipitated by a decline in reported ore reserves. The value which the assets were written down to reflects the decreased, and continuing low, palladium price, the high cost structure of the company and uncertainty about the company’s ability to obtain favorable long-term sales contracts beyond 2010.

     In looking to the future, the company’s primary focus will be on profitability. Reducing its costs in relation to revenue from production will continue to be a priority. The company expects to continually review alternative opportunities to increase revenue and profitability, including promoting new uses for palladium. While automobile catalytic converters and jewelry have been the largest consumers of PGM’s, the company desires to explore other uses on a worldwide basis.

PRODUCTION

     The company’s production of palladium and platinum is a result of the tons of ore mined, the mill head grade and metallurgical recovery. The company measures its mine production by ounces contained in concentrate reduced by subsequent processing losses expected to be incurred when shipped to the company’s smelter, which generally occurs within four days of the ore being mined. The company defines a unit “produced” for purposes of recording amortization expense as an ounce shipped from the mine site adjusted for downstream metal losses incurred at the company’s metallurgical complex and third party refineries. Depreciation and amortization costs are inventoried at each stage of production. Because of the length of the processing cycle and the different cutoff points for identifying production and sales, production may not always correspond to sales in a particular accounting period. However, any production not shipped from the metal refinery at the end of an accounting period is generally shipped during the first two weeks of the subsequent period and the material is included in the company’s in-process inventory. The company records revenue when title passes to its customers.

     The ore grade of the company’s ore reserves is an average of the composite of all samples. As is common in an underground

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mine, the grade mined and the recovery rate achieved will vary depending on the area being mined. In particular, mill head grade can be expected to vary by up to 10% depending on the area of the mine where extraction is occurring. During 2003, 2002 and 2001, the average mill head grade of total tons processed from the Stillwater Mine was 0.58, 0.58, and 0.63, ounce of PGMs per ton of ore, respectively. The East Boulder Mine commenced commercial production in 2002. During 2003 and 2002 the average mill head grade of total tons processed from the East Boulder Mine was 0.39 and 0.38 ounce of PGMs per ton of ore, respectively. During 2001, comparable mill head grade for the East Boulder Mine was 0.31 ounce per ton, however, the proceeds of all production of PGM’s was credited against capitalized mine development as the mine was in the pre-production phase.

     During 2003, the company’s operations produced a total of 584,000 ounces, which included 450,000 ounces of palladium and 134,000 ounces of platinum. PGM production decreased 5% from 2002, and was 5% below the company’s forecast PGM production for 2003. In 2002, the company increased the level of production at the Stillwater Mine in an area of the mine known as the upper west. The ore grade from the upper west was lower than the grade for the other ore mined by the company, thus impacting the company’s ability to produce ore in line with its prior forecasts. In addition, production was affected by issues arising from increased MSHA enforcement activity, which primarily dealt with machinery noise levels, new interpretations of standards and renewed emphasis on explosives use and handling driven by directives from the U.S. Department of Homeland Security.

CAPITALIZED MINE DEVELOPMENT

     Through the end of 2003, mine development expenditures incurred to increase existing production, develop new orebodies or develop mineral property substantially in advance of production were capitalized and amortized using a units-of-production method over the mine life based upon the total proven and probable reserves at each mine. Mine development expenditures include shafts, surface adits and underground infrastructure development including footwall laterals, ramps rail and transportation, electrical and ventilation systems, shop facilities, material handling areas, ore handling facilities, dewatering and pumping facilities. These facilities are required not only for current operations, but also as continuing infrastructure in support of all future planned operations. Accordingly, these costs were amortized based upon the total proven and probable ore reserves at the respective location using the units of production method.

     In accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the company recorded an impairment charge of $390.3 million at December 31, 2003. The carrying values of the Stillwater Mine, the East Boulder Mine and processing facilities in Columbus, Montana were each reduced to their fair market value. As provided in SFAS No. 144, this adjusted carrying amount became the new cost basis for depreciation and amortization calculations as of December 31, 2003.

     The company calculates amortization of capitalized mine development costs by the application of an amortization rate to current production. The amortization rate is based upon un-amortized capitalized mine development costs, and the related ore reserves. Capital expenditures are added to the un-amortized capitalized mine development costs as the related assets are placed into service. In the calculation of the amortization rate, changes in ore reserves are accounted for, as a prospective change in estimate. Ore reserves and the further benefit of capitalized mine development costs are based on significant management assumptions. Any changes in these assumptions, such as a change in the mine plan or a change in estimated proven and probable ore reserves, could have a material effect on the expected period of benefit resulting in a potentially significant change in the amortization rate and/or the valuations of related assets. The company’s proven ore reserves are generally expected to be extracted utilizing its existing mine development infrastructure. Additional capital expenditures will be required to access the company’s estimated probable ore reserves. These anticipated capital expenditures are not included in the current calculation of depreciation and amortization.

     Expenditures incurred to sustain existing production and to access specific reserve blocks or stopes provide benefit to ore reserve production over limited periods of time (secondary development) and are charged to operations as incurred. These costs include ramp and stope access excavations from primary haulage levels (footwall laterals), stope material rehandling/laydown excavations, stope ore and waste pass excavations and chute installations, stope ventilation raise excavations and stope utility and pipe raise excavations.

     During 2004, depreciation and amortization rates were affected by the impairment charge in 2003 that reduced the carrying value

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of the East Boulder Mine, the Stillwater Mine and the processing and other facilities, which in turn reduced their depreciation and amortization bases, and by the change in the accounting method used to amortize capitalized mine development costs. Due to the change in accounting method certain capitalized mine development costs will be amortized over a shorter period, which the company expects to result in a higher amortization expense than the company has experienced in the past.

REVENUE

     The company’s revenue and earnings are significantly influenced by worldwide prices of palladium and platinum, which can be volatile and over which the company has no control. Sales to three significant customers represented approximately 98%, 97% and 96% of total revenues for the years ended December 31, 2003, 2002 and 2001, respectively. Sales to these customers were pursuant to long-term sales contracts which provide floor and ceiling price structures. For a description of these contracts see “Business and Properties-Current Operations – Sales and Hedging Activities.” Although the company sells its metals to a small number of customers and brokers, the company could, if the need were to arise, readily sell its metal on PGM markets throughout the world.

     From time to time, the company uses basic hedging techniques involving fixed forwards, cashless put and call option collars and financially settled forwards, in an attempt to lock in prices for its production, benefit from price increases or protect against price decreases for a portion of its production within the floor and ceiling prices which exist in the long-term sales contracts. Terminal markets exist for both metals and prices are established as metal is traded each day. Such hedging contracts may preclude the company from obtaining the benefit of increased market prices for its contracted metals. As a result of the company’s hedging activities, the company’s revenues were favorably impacted in 2002 and 2001 by $9.2 million and $5.5 million, respectively. There were no recognized gains or losses on hedging transactions during 2003. See “Business and Properties — Sales and Hedging Activities.”

     The company may continue to use forward contract and put and call option strategies to manage the potential negative effects of metal price volatility on its financial results. During 2003, the company entered into fixed forwards that were accounted for as cash-flow hedges. All of these transactions settle in the first three months of 2004. The unrealized loss on these instruments due to changes in metal prices was $0.9 million ($0.5 million, net of tax) at December 31, 2003. The company’s put and call options are financially settled at maturity. There were no put or call options outstanding at December 31, 2003. The company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for metals exceed the company’s hedge contract prices by a predetermined margin limit.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     PGM Production. During 2003, the company produced approximately 584,000 ounces of palladium and platinum, which included 450,000 ounces of palladium and approximately 134,000 ounces of platinum, compared with approximately 617,000 ounces which included 476,000 ounces of palladium and approximately 141,000 ounces of platinum during 2002. The decrease is due to the Stillwater Mine’s lower mined production levels of 14% which was partially offset by a 25% increase in production at the East Boulder Mine. The Stillwater Mine produced approximately 428,000 ounces of palladium and platinum, consisting of 328,000 ounces of palladium and 100,000 ounces of platinum during 2003 and the East Boulder Mine produced approximately 156,000 ounces consisting of 122,000 ounces of palladium and 34,000 ounces of platinum during 2003.

     Revenues. In 2003, the company’s total revenues consisted of $161.6 million from sales of palladium and $78.6 million from sales of platinum or 67.3% and 32.7% of total revenues, respectively, compared to $202.9 million from sales of palladium and $72.7 million from sales of platinum, or 73.6% and 26.4% of total revenues, respectively, for 2002. Revenues were $240.2 million for the year ended December 31, 2003, compared with $275.6 million in 2002, a 13% decrease, and were the result of a decrease in combined realized PGM prices of 10%, and by a 4% decrease in the quantity of metal sold.

     Palladium sales decreased to approximately 459,000 ounces in 2003 from approximately 469,000 ounces in 2002. Platinum sales decreased to approximately 131,000 ounces in 2003 from approximately 143,000 ounces in 2002. As a result, the total quantity of metal sold decreased 4% to approximately 590,000 ounces in 2003 from approximately 612,000 ounces in 2002.

     The company has long-term contracts with its customers for the majority of the production of the mines. These contracts have floor and ceiling prices which mitigate somewhat the price volatility evident in PGM markets.

     The company’s combined average realized price per ounce of palladium and platinum sold in 2003 decreased 10% to $408 per ounce, compared to $454 per ounce in 2002. The combined average market price, as determined in the PGM markets, decreased 18% to $315 per ounce in 2003, compared with $384 per ounce in 2002. The company’s average realized price per ounce of palladium was

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$352 per ounce in 2003, a 19% decrease, compared to $436 per ounce for 2002, while the average market price decreased 41% to $201 per ounce in 2003 from $338 per ounce in 2002. The company’s average realized price of platinum sold was $602 per ounce in 2003, compared with $511 per ounce in 2002, while the platinum average market price was $691 per ounce in 2003 compared to $539 per ounce in 2002.

     Cost of revenues increased 2% from $210.0 million in 2002 to $214.0 million in 2003, as the cost of increased production at the East Boulder site was largely offset by the benefit of overall corporate cost reduction efforts. The net increase included a $2 million increase in depreciation and amortization expense resulting from modest growth in fixed assets during 2003 (before the effect of the asset impairment adjustment at December 31, 2003).

     The non-GAAP measures in the following discussion are comparative indicators of extraction efficiency and are not indicators of profitability. For a more extensive discussion of these measures, please see the description under Item 6, Selected Financial and Operating Data.

     Cost of metals sold. Cost of metals sold increased $2.0 million primarily as a result of an increase of $13.8 million due to changes of product inventory levels, offset by a decrease of $11.7 million in consolidated cash costs. This is due to cost cutting measures implemented by the company and an increase in by-product credits of $1.5 million as compared to the year ended December 31, 2002 (see further discussion in “Production Costs” analysis). The amount of by-product credits included as an offset of cost of metals sold in 2003 and 2002 was $12.2 million and $10.6 million, respectively. The company’s principal by-products are rhodium, copper, nickel and gold. The proportion of by-products produced varies by mining area, and the magnitude of by-product credit also is affected by changing market prices for these by-products. Therefore by-product revenue can vary substantially from one period to the next.

     Depreciation, depletion and amortization. During 2003, depreciation, depletion and amortization increased $2.0 million due to an increase in the asset base of property, plant and equipment as compared to 2002.

     Expenses. General and administrative expenses increased $0.3 million, or 2%, during the year ended December 31, 2003 primarily due to higher corporate administration expense. The increase of $3.0 million of Norilsk Nickel transaction related expenses was for costs recorded in the second quarter relating to the transaction with Norilsk Nickel. These costs are not expected to reoccur.

     During the year ended December 31, 2003, the company revised its estimate of accrued restructuring costs as a result of negotiations of certain termination clauses of construction contracts which had been cancelled. The company made adjustments to reduce the accrual by $1.0 million and $7.0 million during 2003 and 2002, respectively. During 2002, the company increased its restructuring accrual by $1.1 million to reflect the decision to eliminate six management positions, which resulted in a net increase in pre-tax income of $5.9 million in 2002.

     Interest expense remained constant due to the company’s higher loan costs in 2003 on its credit facility, offset by the decrease in debt as a result of the Norilsk Nickel transaction (see Note 12). The higher loan costs are a result of obtaining amendments to the credit agreement.

     Impairment Charge. The company follows Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal 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. Future cash flows include estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contract prices, price trends and related factors), production levels, capital and reclamation expenditures, all based on life-of-mine plans and projections.

     The company disclosed in its quarterly report on Form 10-Q for the quarter ended September 30, 2003 that a continuation of palladium prices, at then low levels, would lead to asset impairment writedowns and a reduction of ore reserves which could be material. The company disclosed that the timing of such writedown or reduction in ore reserves would be evaluated in light of palladium prices and other matters.

     Ore reserves are determined on an annual basis, and concurrently, mine plans and operating budgets are updated. The East Boulder Mine ore reserve at year-end 2003 increased 4% in contained ounces from that reported at year-end 2002. However, the Stillwater Mine ore reserve at year-end 2003 decreased 16% in contained ounces from that reported at year-end 2002. Overall the company’s estimated contained ounces declined by 7%. The company’s ore reserve determination for 2003 calculated at December 31, 2003 was ultimately bounded by geologic certainty and largely unaffected by price. Instead, the 2003 changes were adjustments for material mined, additions for extension of mine workings and drilling during 2003 and changes in mine plans and estimates.

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     The year-end 2003 change in ore reserves at the Stillwater Mine prompted an impairment review of the carrying values of the company’s mine properties. The review determined that company investments in property, plant and equipment at the Stillwater Mine and East Boulder Mine were impaired. Consequently, the company performed a fair market value assessment of the assets and recorded an asset impairment charge of $390.3 million reducing the carrying value of the properties to their fair market value, as required. The impairment charge consists of $176.7 million at the Stillwater Mine, $178.0 million at the East Boulder Mine and $35.6 million at the processing and other facilities, reducing the carrying value of Stillwater Mine to $228.6 million, East Boulder Mine to $150.0 million and the processing and other facilities to $40.9 million. The company engaged an independent appraiser, Behre Dolbear, who utilized traditional mine valuation techniques including discounted cash flow analysis for purposes of determining fair market value.

     The resulting net carrying value of the company’s mining assets as of December 31, 2003 and 2002 is as follows:

	2003						2002
	Before
	Impairment		Impairment
(in thousands)	Charge		Charge		Net Book Value		Net Book Value
Stillwater Mine	$	405,331	$	176,739	$	228,592	$	385,317
East Boulder Mine		328,053		178,036		150,017		328,974
Processing Assets		71,343		34,761		36,582		76,049
Other Assets		5,096		759		4,337		3,679
	$	809,823	$	390,295	$	419,528	$	794,019

     The reduction in carrying value of these mining assets is not expected to impact the company’s employees, mine operations, smelting and refinery operations, delivery of PGMs to customers or compliance with the covenants of the company’s bank credit facility.

     Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets resulting in potential additional impairment charges.

     Income Taxes. The company reported an income tax benefit of $74.9 million or 18.8% of pre-tax loss for the year ended December 31, 2003 compared to an income tax provision of $8.9 million for the year ended December 31, 2002. The tax benefit is comprised of a $161.9 million benefit offset by a $70.3 million provision for a valuation allowance of the amount of the company’s net deferred tax assets. The tax benefit is further offset by a reduction of deferred tax asset of $16.7 million resulting from a limitation on the company’s net operating loss carry forwards attributed to the ownership change resulting from the Norilsk Nickel transaction (see Note 12). This compares to an income tax provision of $8.9 million, or 22.0% of pre-tax earnings for the year ended December 31, 2002. The change in the effective tax rate was primarily due to a reduction in taxable income from mining that limits the company’s statutory depletion for tax purposes, the reversal of timing differences resulting from the asset impairment charges and the valuation allowance provided for the net deferred tax assets (see Note 11).

     Other Comprehensive Income (Loss), net of tax. For the year of 2003, other comprehensive income (loss), net of tax, included a decline in the market value of commodity instruments of $0.5 million and of the interest rate swaps of $0.3 million offset by reclassification adjustments to interest expense of $1.5 million. For the same period of 2002, other comprehensive loss of $7.1 million net of tax, included a decline in the market value on commodity instruments of $0.2 million and a decline in the market value of the interest rate swaps of $2.3 million. Other comprehensive loss in 2002 also includes reclassification adjustments to earnings of $5.6 million associated with deferred gains on commodity instruments offset by $0.9 million associated with losses on interest rate swaps.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     PGM Production. During 2002, the company produced approximately 476,000 ounces of palladium and approximately 141,000 ounces of platinum, respectively, compared with approximately 388,000 ounces of palladium and approximately 116,000 ounces of platinum during 2001, which excludes the development ounces recovered from the East Boulder Mine in 2001 of approximately 17,000 ounces of palladium and 5,000 ounces of platinum. The increase was primarily due to the East Boulder Mine, which commenced commercial production in 2002 and produced 97,000 ounces of palladium and 28,000 ounces of platinum in 2002. This was partially offset by a 2% decrease in production at the Stillwater Mine primarily due to the lower mill head grade as a result of an increased emphasis in mining the upper west area, which produced 379,000 ounces of palladium and 113,000 ounces of platinum in 2002.

     The company’s PGM production increased 113,000 ounces from 2001, or 22%, but was 23,000 ounces, or 3.6% below the

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company’s September 4, 2002 revised forecast PGM production for 2002. At the Stillwater Mine, the production shortfall was a result of an industrial relations problem experienced during the third quarter of 2002, interruptions arising from increased MSHA enforcement activity during the fourth quarter of 2002 and a lower ore grade than plan as a result of mining in the upper west area. At the East Boulder Mine, production was affected by ore grade, which was below the company’s target.

     Revenues. In 2002, the company’s total revenues consisted of $202.9 million from sales of palladium and $72.7 million from sales of platinum, or 73.6% and 26.4% of total revenues respectively, compared to $220.4 million from sales of palladium and $57.0 million from sales of platinum or 79.5% and 20.5% of total revenues, respectively for 2001. Revenues were $275.6 million for the year ended December 31, 2002, compared with $277.4 million in 2001, a 1% decrease, and were the result of a decrease in combined realized PGM prices of 18%, offset by a 21% increase in the quantity of metal sold.

     Palladium sales increased to approximately 469,000 ounces in 2002 from approximately 391,000 ounces in 2001. Platinum sales increased to approximately 143,000 ounces in 2002 from approximately 114,000 ounces in 2001. As a result, the total quantity of metal sold increased 21% to approximately 612,000 ounces in 2002 from approximately 505,000 ounces in 2001.

     The company has long-term contracts with its customers for the majority of the production of the mines. These contracts have floor and ceiling prices which mitigate somewhat the volatility evident in PGM markets.

     The company’s combined average realized price per ounce of palladium and platinum sold in 2002 decreased 18% to $454 per ounce, compared to $554 per ounce in 2001. The combined average market price, as determined in the PGM markets, decreased 34% to $384 per ounce in 2002, compared with $586 per ounce in 2001. The company’s average realized price per ounce of palladium was $436 per ounce in 2002, compared to $570 per ounce for 2001, while the average market price decreased 44% to $338 per ounce in 2002 from $604 per ounce in 2001. The company’s average realized price per ounce of platinum sold was $511 per ounce in 2002, compared with $498 per ounce in 2001. The platinum average market price was $539 per ounce in 2002 compared to $529 per ounce in 2001.

     Cost of revenues increased to $210.0 million in 2002 from $158.2 million in 2001, primarily driven by the start of commercial operations at the company’s East Boulder facilities at the beginning of 2002. During 2001, the East Boulder complex was still in the development phase, and consequently costs there were capitalized. Depreciation and amortization expense, a component of cost of revenues, increased from $23.7 million in 2001 to $39.0 million in 2002, also as a result of the East Boulder assets being placed in service at the start of 2002.

     The non-GAAP measures in the following discussion are comparative indicators of extraction efficiency and are not indicators of profitability. For a more extensive discussion of these measures, please see the description under Item 6, Selected Financial and Operating Data.

     Total cash costs per ounce (non-GAAP) in the year ended December 31, 2002 increased $23, or 9%, to $287 per ounce from $264 per ounce in the year ended December 31, 2001. The increase in total cash costs per ounce (non-GAAP) is attributed to a $22 per ounce increase in total cash cost primarily related to placing the East Boulder Mine into commercial production in 2002 and lower production ounces at the Stillwater Mine due to lower grade.

     Total production costs per ounce (non-GAAP) in the year ended December 31, 2002 increased $40, or 13%, to $351 per ounce from $311 per ounce in the year ended December 31, 2001. The increase is due to the $23 increase in total cash costs per ounce (non-GAAP) and an increase in depreciation and amortization costs of $17 per ounce, due to lower production ounces at the Stillwater Mine and the impact of placing the East Boulder Mine assets into commercial production during 2002, combined with changes in ore reserve estimates used in calculating depreciation.

     Cost of metals sold. Cost of metals sold increased $36.6 million due to an increase of $44.4 million in consolidated cash costs primarily related to placing the East Boulder Mine into commercial production during 2002, offset by a decrease of $7.6 million due to changes in product inventory levels and an increase in by-product credits of $2.4 million as compared to the year ended December 31, 2002 (see further discussion in “Production Costs” analysis). The amount of by-product credits included as an offset of cost of metals sold in 2002 and 2001 was $10.6 million and $8.2 million, respectively. The company’s principal by-products are rhodium, copper, nickel and gold. The proportion of by-products produced varies by mining area and the magnitude of by-product credit also is affected by changing market prices for these by-products. Therefore by-product revenue can vary substantially from one period to the next.

     Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $15.3 million is primarily related to placing the East Boulder Mine assets into commercial production during 2002 and changes in ore reserve estimates used in calculating depreciation.

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     Expenses. General and administrative expenses decreased $8.1 million, or 36%, during the year ended December 31, 2002, primarily as a result of; (1) lower costs of $2.5 million related to reduced project management and recruiting activities associated with the company’s previous expansion plan and (2) during the year ended December 31, 2001, the company incurred $1.7 million of severance costs attributable to a management realignment and consulting fees of $3.3 million. During the year ended December 31 2001, the company incurred $1.7 million related to a settlement of a legal dispute with a terminated refining contract.

     During the year ended December 31, 2002, the company revised its estimate of accrued restructuring costs as a result of negotiations of certain termination clauses of construction contracts cancelled. The company made adjustments to reduce the accrual by $7.0 million during 2002. Also, during 2002, the company made an addition to its restructuring accrual of $1.1 million to reflect the decision to eliminate six management positions, which resulted in a net adjustment to increase pre-tax income by $5.9 million.

     Interest expense increased $17.6 million as a result of placing the East Boulder Mine into production in 2002, which resulted in interest being expensed rather than capitalized.

     Income Taxes. The company has provided for income taxes of $8.9 million, or 22% of pretax income, for the year ended December 31, 2002 compared to $20.3 million, or 23.6% of pretax income, for the year ended December 31, 2001.

     Other Comprehensive Loss. For the year ended December 31, 2002, other comprehensive loss of $7.1 million, net of tax, includes a decline in the market value of the interest rate swaps of $2.3 million and a decline in the market value of commodity instruments of $0.2 million. Other comprehensive loss also includes reclassification adjustments to earnings of $5.6 million associated with deferred gains on commodity instruments and $0.9 million associated with losses on interest rate swaps. For 2002, the company recorded other comprehensive income of $12.9 million, net of tax, due to the increase in the market value of commodity derivative instruments of $16.5 million, off set by reclassification adjustments to earnings of $3.6 million associated with the gains realized on commodity instruments.

LIQUIDITY AND CAPITAL RESOURCES

     Working capital at December 31, 2003 was $154.7 million, compared to $46.7 million at December 31, 2002. The ratio of current assets to current liabilities was 2.4 at December 31, 2003, compared to 1.7 at December 31, 2002. The improved ratio is attributable to the Norilsk Nickel transaction which resulted in the company receiving cash proceeds, after debt reduction, of $50 million and palladium inventory valued at $148.2 million.

     For the year ended December 31, 2003, net cash provided by operations was $47.2 million compared to $52.1 million for 2002. The decrease of $4.9 million was primarily a result of decreased net income of $354.9 million, an increase in non-cash expenses of $320.9 million, a decrease in the payments on the restructuring accrual of $2.8 million and an increase in net operating assets and liabilities of $26.3 million.

     A net total of $55.3 million of cash was used in investing activities in 2003, compared to a net total of $55.9 million in 2002, a decrease of $0.6 million. The decrease of $0.6 million is primarily due to a reduction of capital expenditures attributed to the company’s focus on reducing its capital expenditures. The company expects to invest approximately $80.8 million in capital items in 2004. The increase in 2004 is primarily due to increased production levels at the East Boulder Mine from 1,200 tons per day, to approximately 1,650 tons per day, additional capital investment of metallurgical facilities related to East Boulder’s increased production levels and the capital expenditures related to smelter furnace re-brick.

     For the year ended December 31, 2003, cash flow from financing activities was $29.6 million compared to $14.8 million for the year ended December 31, 2002. The cash provided by financing activities in 2003 were primarily attributed to net proceeds of $90.2 million from the Norilsk Nickel stock purchase transaction, offset by payments of $59.2 million on the company’s credit facility and payments for debt issuances costs of $1.6 million. For the same period of 2002, cash flow from financing activities of $14.8 million was primarily attributed to net proceeds of $56.0 million from the stock purchase transaction, offset by payments of $38.6 million on the company’s credit facility. At December 31, 2003, cash and cash equivalents had increased by $21.6 million to $47.5 million, compared with an increase of $11.0 million to $25.9 million at December 31, 2002.

     The Company’s cash flow from operations is affected by several key factors, including prices for its products, cash costs of production, and the level of PGM production from the mines. At the PGM price levels prevailing at December 31, 2003, a change in the price of platinum generally would flow through dollar-for-dollar to cash flow from operations, subject only to price ceilings on a small portion of the company’s long-term sales contracts, and certain costs – severance taxes and royalties on mine production – which adjust upward or downward with market prices. A change in the market price of palladium, at prices prevailing on December 31, 2003, would not flow through to cash flow from operations under the long-term sales contracts unless it was a very large increase,

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as the market price for palladium was well below the price floors in the company’s long-term sales contracts; however, sales of palladium from secondary recycling and sales out of the palladium inventory received in conjunction with the Norilsk Nickel transaction are not subject to price floors and therefore affect cash flow from operations. Changes in the cash costs of production generally flow through dollar-for-dollar into cash flow from operations. A reduction due to grade in total mine production of 10%, or about 60,000 ounces per year, would reduce cash flow from operations by an estimated $23 million per year at the price and cost levels prevailing at December 31, 2003. The company’s forecasts indicate that such a 10% reduction in mine production would not impair the company’s ability to repay its outstanding debt or to maintain its planned level of capital expenditures, although a significantly larger reduction in mine production could adversely affect the company’s financial position.

     At December 31, 2003, the company’s available cash was $47.5 million and it had $128.5 million outstanding under its term loan facility. Letters of credit of $7.5 million were outstanding under the revolving credit facility. During 2004, the company will be required to make total payments of approximately $2.0 million in principal reductions to its debt which includes $1.4 million in scheduled principal payments on the outstanding borrowings under the credit facility. The company will also be required to pay approximately $13.9 million in total interest payments.

     At December 31, 2003, the company owned 877,169 ounces of palladium inventory received on June 23, 2003 in the Norilsk Nickel stock transaction. The inventory is carried on the balance sheet at $169 per ounce, which results in a carrying value $148.2 million. At December 31, 2003 the palladium market price was $195 per ounce. In the first quarter of 2004, the company announced that it had entered into contracts under which all of the palladium will be sold at a slight volume discount to market price at the time of sale. The company is required to offer 50% of the proceeds from the sale of the inventory to repay loans under the company’s credit agreement. The lenders are not obligated to accept the pre-payment amount. If the lenders do not accept the prepayment, the company retains the cash but availability under the revolving credit facility is reduced by the amount of the prepayment not accepted.

CREDIT AGREEMENT

     In February 2001, the company entered into a $250 million credit facility with a syndicate of financial institutions which replaced a previous $175 million bank facility. The credit facility has been amended or waivers have been obtained seven times with the most recent amendment effective March 20, 2003. The credit facility provides for a $65 million five-year term loan facility (Term A), a $135 million seven-year term loan facility (Term B) and a $25 million revolving credit facility (reduced from $50 million at the company’s request as of March 20, 2003). Amortization of the term loan facilities commenced on March 31, 2002.

     As of December 31, 2003, the terms of the company’s credit facility allow the company to choose between LIBOR loans plus a spread of 4.75% or an alternate base rate plus a spread of 3.25%. The alternate base rate is a rate determined by the administrative agent under the credit agreement, and has generally been equal to the prevailing bank prime loan rate, which was 4.0% at December 31, 2003. The alternate base rate applies only to that portion of the Term B facility in any period for which the company has not elected to use LIBOR contracts. The company might choose to use the alternative base rate if the resulting interest expense charged on the loan would be less than under the LIBOR rate. As of December 31, 2003, the company has $128.5 million outstanding under the Term B facility bearing interest at a variable rate of 7.25%. During 2003, the company obtained a letter of credit in the amount of $7.5 million, which reduces amounts available under the revolving credit facility at December 31, 2003. The letter of credit carries an annual fee of 4.0%. The revolving credit facility requires an annual commitment fee of 0.5% on the remaining unadvanced amount. Of the $25 million revolving credit facility, $17.5 million remains available to the company. This revolving credit facility will be reduced in circumstances where lenders are offered a prepayment but do not accept the prepayment. (see below)

     The loans are required to be prepaid from excess cash flow, proceeds from asset sales and the issuance of debt or equity securities, subject to specified exceptions. Proceeds of the term loan facility were used to finance a portion of the company’s expansion plan. Proceeds of the revolving credit facility are being used for general corporate and working capital needs. Substantially all the property and assets of the company and its subsidiaries and the stock of the company’s subsidiaries are pledged as security for the credit facility. The Term B facility bears interest at LIBOR, subject to a 2.5% minimum, plus a margin of 4.75% or an alternate base rate plus a margin of 3.25%.

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     Pursuant to the terms of the credit facility the company was required to apply $50.0 million of the $100.0 million cash proceeds received in the Norilsk Nickel transaction (see Note 12) to prepay its term loans. Consequently, the Term A facility was paid in full on June 30, 2003. In addition, in accordance with the terms of the credit agreement, the company is required to offer 50% of the net proceeds from the sale of palladium received in the Norilsk Nickel transaction (see Note 12) to further prepay its term loan. Accordingly, $74.1 million of the long-term debt has been classified as a current liability. The lenders are not obligated to accept the offer for prepayment. If lenders do not accept the prepayment, the company retains the cash but the availability under the revolving credit facility is reduced by the amount of the prepayment not accepted. The Term B facility final maturity date is December 31, 2007. The final maturity date of the revolving credit facility is December 30, 2005.

     Covenants in the credit facility include restrictions on: (1) additional indebtedness; (2) payment of dividends or redemption of capital stock; (3) liens; (4) investment, acquisitions, dispositions or mergers; (5) transactions with affiliates; (6) capital expenditures (other than those associated with the company’s mine plan); (7) refinancing or prepayment of subordinated debt; (8) changes in the nature of business conducted or ceasing operations at the principal operating properties; and (9) commodities hedging based upon annual palladium and platinum production. The company is also subject to financial covenants including a debt to operating cash flow ratio, a debt service coverage ratio and a debt to equity ratio.

     Events of default in the credit facility include: (1) a cross-default to other indebtedness of the company; (2) any material modification to the life-of-mine plans; (3) a change of control of the company other than the Norilsk Nickel transaction (see Note 12); (4) the failure to maintain agreed-upon annual PGM production levels; and (5) any breach or modification of any of the sales contracts. The company expects to refinance the credit facility in 2004. The company is in compliance with its debt covenants at December 31, 2003.

     Management believes with access to draw upon the $17.5 million available under the revolving credit facility, together with the cash on hand and expected to be generated from operations, including the sale of a portion of the palladium inventory received in the Norilsk Nickel transaction, will be adequate to meet the company’s liquidity needs through 2004.

     The required principal payments for the Term B facility total $1.4 million in 2004 and 2005, $60.8 million in 2006 and $65.0 million in 2007. Any outstanding balance under the revolving credit facility will be due in its entirety on December 30, 2005.

CONTRACTUAL OBLIGATIONS

     The company is obligated to make future payments under various contracts such as debt agreements and capital lease agreements. The following table represents certain of our significant contractual cash obligations and other commercial commitments as of December 31, 2003:

	2004		2005		2006		2007		2008		Thereafter		Total
Term B Facility	$	1,350	$	1,350	$	60,750	$	65,002	$	—	$	—	$	128,452
Capital lease obligations	$	445	$	479	$	443	$	424	$	458	$	534	$	2,783
Special Industrial Education Impact Revenue Bonds	$	140	$	153	$	165	$	178	$	190	$	96	$	922
Exempt Facility Revenue Bonds	$	—	$	—	$	—	$	—	$	—	$	30,000	$	30,000
Operating leases	$	3,439	$	2,679	$	339	$	242	$	242	$	—	$	6,941
Other noncurrent liabilities	$	—	$	7,147	$	—	$	—	$	—	$	4,116	$	11,263
Total	$	5,374	$	11,808	$	61,697	$	65,846	$	890	$	34,746	$	180,361

     Debt obligations referred to in the table are presented as due for repayment under the terms of the loan agreements, and before any effect of the sale of palladium acquired in the Norilsk Nickel transaction (see Note 12). Under the terms of the Term B facility, the company is required to offer 50% of the net proceeds of the sale of palladium received in the Norilsk transaction to repay its Term B facility. The lenders are not obligated to accept the offer for repayment. As of December 31, 2003, the company has not sold any of the palladium received in the Norilsk Nickel transaction. Amounts included in other noncurrent liabilities that are anticipated to be paid in 2004 include, workers’ compensation costs, property taxes and severance taxes. Amounts included in other noncurrent liabilities that are anticipated to be paid after 2008 consists of asset retirement obligation costs. Assuming no early extinguishments of debt or no changes in interest rates, the estimated total interest payments will be approximately $11.9 million, $11.8 million, $10.0 million, $5.4 million, $2.5 million and $27.6 million for 2004, 2005, 2006, 2007, 2008, and the years thereafter, respectively.

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FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

     Some statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, therefore, involve uncertainties or risks that could cause actual results to differ materially. These statements may contain words such as “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates” or similar expressions. These statements are not guarantees of the company’s future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Such statements include, but are not limited to, comments regarding expansion plans, costs, grade, production and recovery rates, permitting, financing needs, the terms of future credit facilities and capital expenditures, increases in processing capacity, cost reduction measures, safety, timing for engineering studies, and environmental permitting and compliance, litigation and the palladium and platinum market. Additional information regarding factors which could cause results to differ materially from management’s expectations is found in the section entitled “Risk Factors” above.

CRITICAL ACCOUNTING POLICIES

Mine Development Expenditures — Capitalization and Amortization

     Mining operations are inherently capital intensive, generally requiring substantial capital investment for the initial and concurrent development and infrastructure of the mine. Many of these expenditures are necessarily incurred well in advance of actual extraction of ore. Underground mining operations such as those conducted by the company require driving tunnels and sinking shafts that provide access to the underground orebody and construction and development of infrastructure, including electrical and ventilation systems, rail and other forms of transportation, shop facilities, material handling areas and hoisting systems. Ore mining and removal operations require significant underground facilities used to conduct mining operations and to transport the ore out of the mine to processing facilities located above ground.

     Contemporaneously with mining, additional development is undertaken to provide access to ongoing extensions of the orebody, allowing more ore to be produced. In addition to the development costs that have been previously incurred, these ongoing development expenditures are necessary to access and support all future mining activities.

     Mine development expenditures incurred to date to increase existing production, develop new orebodies or develop mineral property substantially in advance of production are capitalized and amortized using a units-of-production method based upon the associated proven and probable ore reserves. Mine development expenditures consist of a vertical shafts, multiple surface adits and underground infrastructure development including footwall laterals, ramps, rail and transportation, electrical and ventilation systems, shop facilities, material handling areas, ore handling facilities, dewatering and pumping facilities. Many such facilities are required not only for current operations, but also for all future planned operations.

     Expenditures incurred to sustain existing production and access specific ore reserve blocks or stopes provide benefit to ore reserve production over limited periods of time (secondary development) and are charged to operations as incurred. These costs include ramp and stope access excavations from primary haulage levels (footwall laterals), stope material rehandling/laydown excavations, stope ore and waste pass excavations and chute installations, stope ventilation raise excavations and stope utility and pipe raise excavations.

     The company calculates amortization of capitalized mine development costs by the application of an amortization rate to current production. The amortization rate is based upon un-amortized capitalized mine development costs, and the related ore reserves. Capital expenditures are added to the un-amortized capitalized mine development costs as the related assets are placed into service. In the calculation of the amortization rate, changes in ore reserves are accounted for as a prospective change in estimate. Ore reserves and the further benefit of capitalized mine development costs are based on significant management assumptions. Any changes in these assumptions, such as a change in the mine plan or a change in estimated proven and probable ore reserves, could have a material effect on the expected period of benefit resulting in a potentially significant change in the amortization rate and/or the valuations of related assets. The company’s proven ore reserves are generally expected to be extracted utilizing its existing mine development infrastructure. Additional capital expenditures will be required to access the company’s estimated probable ore reserves. These anticipated capital expenditures are not included in the current calculation of depreciation and amortization.

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     The calculation of the amortization rate, and therefore the annual amortization charge to operations, could be materially impacted to the extent that actual production in the future is different from current forecasts of production based on proven and probable ore reserves. This would generally occur to the extent that there were significant changes in any of the factors or assumptions used in determining ore reserves. These factors could include: (1) an expansion of proven and probable ore reserves through development activities (2) differences between estimated and actual costs of mining due to differences in grade or metal recovery rates and (3) differences between actual commodity prices and commodity price assumptions used in the estimation of ore reserves.

Asset Impairment

     The company follows Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The company reviews and evaluates its long-lived assets for impairment when events and 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 carrying amount of the asset. Future cash flows include 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. The significant assumptions in determining the future undiscounted cash flows at December 31, 2003 included estimated long-term palladium and platinum prices of $250 and $530 per ounce, respectively. 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.

     Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets resulting in potential additional impairment charges. (see Note 4)

Income Taxes

     Income taxes are determined using the asset and liability approach in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. This method gives consideration to the future tax consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on currently enacted tax rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

     In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Each quarter, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. A valuation allowance has been provided at December 31, 2003 for the portion of the company’s net deferred tax assets for which more likely than not will not be realized (see Note 11). Based on the company’s current financial projections, and in view of the level of tax depreciation and depletion deductions available, it appears unlikely that the company will owe any income taxes for the foreseeable future. However, if average realized PGM prices were to increase substantially in the future, the company could owe income taxes prospectively on the resulting higher than projected taxable income.

Reclamation and Environmental Costs

     Effective January 1, 2003, the company adopted SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset.

     SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the company will recognize a gain or loss on settlement.

     Under SFAS No. 143, accounting for reclamation obligations requires management to make estimates for each mining operation of the future costs the company will incur to complete final reclamation work required to comply with existing laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. Additionally, future changes to environmental laws and

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regulations could increase the extent of reclamation and remediation work required to be performed by the company. Any such increases in future costs could materially impact the amounts charged to operations for reclamation and remediation.

     The company’s current bonding requirements total approximately $13.2 million at December 31, 2003. The current bond amount is an estimate of reclamation and closure costs. The regulatory agencies review the bonding requirements and reclamation estimates on a 5-year rotation or anytime a major amendment to the operating permits is approved. The company expects that the Stillwater Mine bond will be reviewed and adjusted by the regulatory agencies during 2004. Any differences between the estimated amounts and actual post-closure reclamation and site restoration costs could have a material effect on the company’s estimated liability resulting in a change in the recorded amount. The accrued reclamation liability was approximately $4.1 million at December 31, 2003 (see Note 3).

Hedging Program

     From time to time, the company enters into derivative financial instruments, including fixed forwards, cashless put and call option collars and financially settled forwards to manage the effect of changes in the prices of palladium and platinum on the company’s revenue. Prior to the adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, these instruments were accounted for as hedges when the instrument is designated as a hedge of the related production and there exists a high degree of correlation between the fair value of the instrument and the fair value of the hedged production. The degree of correlation is assessed periodically for effectiveness or ineffectiveness. In the event that an instrument no longer meets the criteria for hedge designation, any subsequent gain or loss on the instrument is recognized immediately in earnings. Otherwise, gains or losses related to hedging transactions are recognized as adjustments to the revenue recorded for the related production. If an instrument is settled early, any gains or losses are deferred and recognized as adjustments to the revenue recorded for the related hedged production. Costs associated with the purchase of certain hedging instruments are deferred and amortized against revenue related to the hedged production.

     The company accounts for its derivatives in accordance with SFAS No. 133 which requires that derivatives be reported on the balance sheet at fair value and, if the derivative is not designated as a hedging instrument, changes in fair value must be recognized in earnings in the period of change. If the derivative is designated as a hedge and to the extent such hedge is determined to be effective, changes in fair value are either (a) offset by the change in fair value of the hedged asset or liability (if applicable) or (b) reported as a component of other comprehensive income in the period of change, and subsequently recognized in the determination of net income in the period the offsetting hedged transaction occurs. The company primarily uses derivatives to hedge metal prices and manage interest rate risk. As of December 31, 2003 the outstanding derivatives associated with commodity instruments are valued at an unrealized loss of $0.9 million ($0.5 million, net of tax), and are reported as a component of accumulated other comprehensive income. As of December 31, 2003, the outstanding interest rate swaps are valued at an unrealized loss of $0.3 million, net of tax, and are reported as a component of accumulated other comprehensive income (see Note 14).

ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The company is exposed to market risk, including the effects of adverse changes in metal prices and interest rates as discussed below.

COMMODITY PRICE RISK

     The company produces and sells palladium, platinum and associated by-product metals directly to its customers and also through third parties. As a result, financial risks are materially affected when prices for these commodities fluctuate. In order to manage commodity price risk and to reduce the impact of negative fluctuation in prices, the company enters into long-term contracts and uses various derivative financial instruments. Because the company hedges only with instruments that have a high correlation with the value of the hedged transactions, changes in the fair value of the derivatives are expected to be offset by changes in the value of the hedged transaction.

     The company has entered into long-term sales contracts with General Motors Corporation, Ford Motor Company and Mitsubishi Corporation. The contracts apply to the portions of the company’s production over the period through December 2010 and provide for a floor and ceiling price structure. In the first quarter of 2004 the company also entered new sales contracts or had reached understandings, under which all of the 877,169 ounces of palladium will be sold, at a slight volume discount to market price at the time of delivery, over a period of two years primarily for use in automobile catalytic converters. See “Business and Properties- PGM Sales and Hedging Activities” (see Note 13).

     During 2003, the company entered in fixed forwards that were accounted for as cash-flow hedges. These sales of metals from processing secondary materials are sold forward at the time of receipt and delivered against the cash flow hedges when the ounces are

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recovered. The company expects these transactions to settle in the first three months of 2004. The unrealized loss on these instruments due to changes in metal prices at December 31, 2003 was $0.9 million ($0.5 million net of tax). There was no recognized gain or loss on commodity instruments during 2003. The company utilizes financially settled forwards and cashless put and call option collars. Under financially settled forwards, at each settlement date, the company receives the difference between the forward price and the market price if the market price is below the forward price and the company pays the difference between the forward price and the market price if the market price is above the forward price. The company’s financially settled forwards are settled at maturity. Under cashless put and call option collars, at each settlement, the company receives the difference between the put price and the market price if the market price is below the put price and the company pays the difference between the call price and the market price of the market price is above the call price.

     A period of continuous low commodity prices could have a material adverse effect on the calculation of the company’s ore reserves.

INTEREST RATE RISK

     As of December 31, 2003, the company had $128.5 million outstanding under the Term B facility, bearing interest at a variable rate of 7.25% based upon the greater of the LIBOR (1.18% at December 31, 2003) or 2.5%, plus a spread of 4.75% (see Note 7). During the first quarter of 2002, the company entered into two identical interest rate swap agreements. These swaps fixed the interest rate on $100 million of the company’s debt. The interest rate swap agreements were effective March 4, 2002 and mature on March 4, 2004. The agreements require the company to pay interest at a fixed rate of 3.67% and receive interest at a rate based on London Interbank Offered Rate (LIBOR), which is adjusted on a quarterly basis. The total effective fixed interest rate, including the spread and the effect of the hedge, on $100 million of the Term B facility was 8.42% at December 31, 2003. The floating interest rate on the remainder ($28.5 million) of the Term B facility was 7.25% (LIBOR plus 4.75%) as of December 31, 2003. The company is exposed to changes in interest rates on the portion of its credit facility in excess of $100 million, since the credit facility carries a variable interest rate.

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

     Management is responsible for the preparation of the accompanying consolidated financial statements and for other financial and operating information in this report. Management believes that its accounting systems and internal accounting controls, together with other controls, provide assurance that all accounts and records are maintained by qualified personnel in requisite detail, and accurately and fairly reflect transactions of Stillwater Mining Company and its subsidiary in accordance with established policies and procedures.

     The Board of Directors has an Audit Committee, none of whose members are officers or employees of the company or its affiliates. The Audit Committee recommends independent accountants to act as auditors for the company; reviews the company’s financial statements; confers with the independent accountants with respect to the scope and results of their audit of the company’s financial statements and their reports thereon; reviews the company’s accounting policies, tax matters and internal controls; and oversees compliance by the company with the requirements of federal and state regulatory agencies. Access to the Audit Committee is given to the company’s financial and accounting officers and independent accountants.

Francis R. McAllister
Chairman of the Board and Chief Executive Officer
 

Gregory A. Wing
Vice President and Chief Financial Officer
 

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     The company’s Audit Committee is comprised of three independent members. The Audit Committee reviews the accounting principles and procedures of the company and its annual financial reports and statements, recommends to the Board of Directors the engagement of the company’s independent accountants, reviews with the independent accountants the plans and results of the auditing engagement and considers the independence of the company’s auditors.

     The main function of the Audit Committee is to ensure that effective accounting policies are implemented and that internal controls are put in place in order to deter fraud, anticipate financial risks and promote accurate, high quality and timely disclosure of financial and other material information to the public markets, the Board and the stockholders. The Audit Committee also reviews and recommends to the Board the approval of the annual financial statements and provides a forum, independent of management, where the company’s auditors can communicate any issues of concern.

     The independent members of the Audit Committee believe that the present composition of the Committee accomplishes all of the necessary goals and functions of an audit committee as recommended by the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees and adopted by the U.S. stock exchanges and the Securities & Exchange Commission. The Audit Committee has adopted a formal, written charter approved by the full Board of Directors of the company. The charter specifies the scope of the Audit Committee’s responsibilities and how it should carry out those responsibilities. The Audit Committee has reviewed and discussed the audited consolidated financial statements of the company for the fiscal year ended December 31, 2003, with the company’s management. The Audit Committee has discussed with KPMG LLP, the company’s independent public accountants, the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees) as amended by SAS No. 90 (Audit Committee Communications). The Audit Committee has also received the written disclosures from KPMG LLP required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees), has considered whether the provision of non-audit services provided by KPMG LLP to the company is compatible with maintaining KPMG LLP’s independence and has discussed the independence of KPMG LLP with that firm.

     In reliance on the reviews and discussions referred to above, and subject to the limitations on the role and responsibilities of the committee set forth in its charter, based on the review of the company’s financial statements, accounting system and its accounting policies and procedures and discussions with the company’s auditors for the fiscal year ended December 31, 2003, the Audit Committee recommended to the Board of Directors that the consolidated financial statements for the fiscal year ended December 31, 2003 be included in the company’s Annual Report on Form 10-K, as amended.

Sheryl K. Pressler, Chairperson
Craig Fuller
Patrick M. James
 

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REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
Stillwater Mining Company:

We have audited the accompanying consolidated balance sheets of Stillwater Mining Company and subsidiary as of December 31, 2003 and 2002, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Stillwater Mining Company and subsidiary as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, the company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, effective January 1, 2003.

/s/ KPMG LLP
Billings, Montana
February 24, 2004

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STILLWATER MINING COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

December 31,	2003			2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	47,511		$	25,913
Restricted cash equivalents		2,650			2,250
Inventories		202,485			52,058
Accounts receivable		3,777			18,647
Deferred income taxes		4,313			5,779
Other current assets		4,270			7,828
Total current assets		265,006			112,475
Property, plant and equipment, net		419,528			794,019
Other noncurrent assets		6,054			7,720
Total assets	$	690,588		$	914,214
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	9,781		$	14,310
Accrued payroll and benefits		10,654			10,071
Property, production and franchise taxes payable		8,504			10,998
Current portion of long-term debt and capital lease obligations		1,935			21,461
Portion of debt repayable upon liquidation of palladium in finished goods inventory		74,106			—
Accrued restructuring costs		680			1,926
Other current liabilities		4,610			7,017
Total current liabilities		110,270			65,783
Long-term debt and capital lease obligations		85,445			198,866
Deferred income taxes		4,313			80,615
Other noncurrent liabilities		11,263			9,736
Total liabilities		211,291			355,000
Commitments and Contingencies (Note 15)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value, 200,000,000 and 100,000,000 shares authorized, 89,849,239 and 43,587,107 shares issued and outstanding		899			436
Paid-in capital		592,974			351,605
Retained earnings (accumulated deficit)		(113,756	)		209,504
Accumulated other comprehensive loss		(820	)		(1,405	)
Unearned compensation – restricted stock awards		—			(926	)
Total stockholders’ equity		479,297			559,214
Total liabilities and stockholders’ equity	$	690,588		$	914,214

The accompanying notes are an integral part of the consolidated financial statements.

57

STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

Year ended December 31,	2003			2002			2001
REVENUES	$	240,229		$	275,599		$	277,381
COSTS AND EXPENSES
Cost of metals sold		173,008			171,015			134,430
Depreciation and amortization		40,959			38,990			23,722
Total cost of revenues		213,967			210,005			158,152
General and administrative		14,513			14,205			22,342
Norilsk Nickel transaction related expenses		3,043			—			—
Impairment of property, plant and equipment		390,295			—			—
Restructuring costs, net		(966	)		(5,938	)		10,974
Legal settlement		—			—			1,684
Total costs and expenses		620,852			218,272			193,152
OPERATING INCOME (LOSS)		(380,623	)		57,327			84,229
OTHER INCOME (EXPENSE)
Interest income		427			903			1,900
Interest expense, net of capitalized interest of $17,806 in 2001		(17,595	)		(17,601	)		—
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE		(397,791	)		40,629			86,129
Income tax benefit (provision) before provision for valuation allowance and reduction of deferred tax assets		161,921			(8,945	)		(20,325	)
Provision for valuation allowance for net deferred tax assets		(70,304	)		—			—
Reduction of deferred tax asset for net operating loss carry forwards resulting from ownership change		(16,678	)
Total income tax benefit (provision)		74,939			(8,945	)		(20,325	)
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE		(322,852	)		31,684			65,804
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF INCOME TAX BENEFIT OF $264		(408	)		—			—
NET INCOME (LOSS)		(323,260	)		31,684			65,804
Other comprehensive income (loss), net of tax		585			(7,139	)		12,872
COMPREHENSIVE INCOME (LOSS)	$	(322,675	)	$	24,545		$	78,676
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of accounting change	$	(4.76	)	$	0.74		$	1.70
Cumulative effect of accounting change		(0.01	)		—			—
Net income (loss)	$	(4.77	)	$	0.74		$	1.70
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of accounting change	$	(4.76	)	$	0.74		$	1.68
Cumulative effect of accounting change		(0.01	)		—			—
Net income (loss)	$	(4.77	)	$	0.74		$	1.68
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		67,807			42,900			38,732
Diluted		67,807			43,004			39,214

The accompanying notes are an integral part of the consolidated financial statements.

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STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year ended December 31,	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(323,260	)	$	31,684		$	65,804
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,959			38,990			23,722
Deferred income taxes		(74,733	)		4,453			23,844
Cumulative effect of accounting change		672			—			—
Restructuring costs, net		(966	)		(5,938	)		10,974
Cash paid on accrued restructuring costs		(280	)		(3,110	)		—
Impairment of property, plant and equipment		390,295			—			—
Stock issued under employee benefit plans		3,456			3,407			—
Amortization of debt issuance costs		3,069			1,104			422
Amortization of restricted stock compensation		670			464			—
Changes in operating assets and liabilities:
Inventories		(2,214	)		(9,114	)		(319	)
Accounts receivable		14,870			3,126			(21,773	)
Accounts payable		(4,529	)		(7,229	)		(171	)
Restricted cash		(400	)		(2,250	)		—
Other		(394	)		(3,449	)		4,289
NET CASH PROVIDED BY OPERATING ACTIVITIES		47,215			52,138			106,792
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(55,256	)		(57,169	)		(197,155	)
Proceeds from sale/leaseback transactions		—			1,282			1,507
NET CASH USED IN INVESTING ACTIVITIES		(55,256	)		(55,887	)		(195,648	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock related to Norilsk Nickel transaction (1)		100,000			—			—
Stock issuance costs		(9,801	)		—			—
Issuance of common stock, net of stock issue costs		175			56,047			2,059
Payments on long-term debt and capital lease obligations		(59,191	)		(38,570	)		(153,431	)
Issuance of long-term debt		—			—			252,652
Net metals repurchase agreement transactions		—			—			(9,386	)
Payments for debt issuance costs		(1,606	)		(1,613	)		(5,111	)
Other		62			(1,113	)		(1,235	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		29,639			14,751			85,548
CASH AND CASH EQUIVALENTS
Net increase (decrease)		21,598			11,002			(3,308	)
Balance at beginning of year		25,913			14,911			18,219
BALANCE AT END OF YEAR	$	47,511		$	25,913		$	14,911

(1) Non-cash financing activities
Fair value of common stock issued	$	248,213		$	—	$	—
Inventory received in connection with the Norilsk Nickel transaction		(148,213	)		—		—
Issuance of common stock related to Norilsk Nickel transaction	$	100,000		$	—	$	—

The accompanying notes are an integral part of the consolidated financial statements.

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STILLWATER MINING COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

									Retained			Accumulated			Unearned
									Earnings			Other			Compensation–			Total
	Shares								(Accumulated			Comprehensive			Restricted			Stockholders’
	Outstanding			Common Stock		Paid-in Capital			Deficit)			Income (Loss)			_Stock			Equity
BALANCE AT DECEMBER 31, 2000		38,646			386	$	288,212		$	112,016		$	—		$	—		$	400,614
Net income		—			—		—			65,804			—			—			65,804
Change in net unrealized gains on derivative financial instruments, net of tax		—			—		—			—			12,872			—			12,872
Cumulative effect of change in accounting method for derivative financial instruments, net of tax		—			—		—			—			(7,139	)		—			(7,139	)
Common stock issued under stock plans		131			2		2,057			—			—			—			2,059
Tax benefit from stock options exercised		—			—		1,099			—			—			—			1,099
Repurchase and retirement of common stock		(6	)		—		(186	)		—			—			—			(186	)
BALANCE AT DECEMBER 31, 2001		38,771			388		291,182			177,820			5,733			—			475,123
Net income		—			—		—			31,684			—			—			31,684
Change in net unrealized gains on derivative financial instruments, net of tax		—			—		—			—			(7,138	)		—			(7,138	)
Issuance of shares pursuant to a private placement		4,286			43		53,938			—			—			—			53,981
Common stock issued under employee benefit plans		354			3		3,404			—			—			—			3,407
Common stock issued under stock plans		58			1		731			—			—			—			732
Tax benefit from stock options exercised		—			—		87			—			—			—			87
Restricted shares of common stock granted to officers and employees		135			1		2,593			—			—			(2,594	)		—
Amortization of unearned restricted stock		—			—		—			—			—			1,338			1,338
Forfeiture of unearned restricted stock		(17	)		—		(330	)		—			—			330			—
BALANCE AT DECEMBER 31, 2002		43,587			436		351,605			209,504			(1,405	)		(926	)		559,214
Net loss		—			—		—			(323,260	)		—			—			(323,260	)
Change in net unrealized gains on derivative financial instruments, net of tax		—			—		—			—			585			—			585
Common stock issued under employee benefit plans		769			8		3,448			—			—			—			3,456
Common stock issued under stock plans		45			—		175			—			—			—			175
Tax benefit from stock options exercised		—			—		63			—			—			—			63
Amortization of unearned restricted stock		—			—		—			—			—			670			670
Forfeiture of unearned restricted stock		(13	)		—		(256	)		—			—			256			—
Repurchase and retirement of common stock		(2	)		—		(18	)		—			—			—			(18	)
Common stock issued in connection with Norilsk Nickel transaction (see Note 12)		45,463			455		237,957			—			—			—			238,412
BALANCE AT DECEMBER 31, 2003		89,849			899	$	592,974		$	(113,756	)	$	(820	)	$	—		$	479,297

     The accompanying notes are an integral part of the consolidated financial statements.

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STILLWATER MINING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1
NATURE OF OPERATIONS

     Stillwater Mining Company, a Delaware corporation, is engaged in the exploration, development, extraction, processing and refining of palladium, platinum and associated minerals from the J-M Reef located in Stillwater and Sweet Grass Counties, Montana. The J-M Reef is a twenty-eight (28) mile long geologic formation containing one of the largest deposits of platinum group metals (PGMs) in the world.

     The company’s operations consist of the Stillwater Mine located on the J-M Reef in Nye, Montana, the East Boulder Mine, which commenced commercial production during 2002, located at the western end of the J-M Reef in Sweet Grass County, Montana and a smelter and refinery located in Columbus, Montana.

     The company’s operations can be significantly impacted by risks and uncertainties associated with the mining industry as well as those specifically related to its operations. The risks and uncertainties that can impact the company include but are not limited to the following: price volatility of palladium and platinum, economic and political events affecting supply and demand for these metals, mineral reserve estimation, environmental obligations, government regulations, ownership of and access to mineral reserves and compliance with credit agreement covenants.

NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of Stillwater Mining Company and its wholly owned subsidiary (collectively referred to as the “company”). All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform with the current year presentation.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of all cash balances and all highly liquid investments purchased with a maturity of three months or less.

RESTRICTED CASH EQUIVALENTS

     Restricted cash equivalents consist of cash equivalents which have been pledged as collateral on two letters of credit issued during 2003. The restrictions on the balances lapse upon expiration of the letters of credit, which currently have terms of less than one year.

INVENTORIES

     Metals inventories are carried at the lower of current market value taking into consideration on the company’s long-term sales contracts or average unit cost. Production costs include the cost of direct labor and materials, depreciation and amortization, as well as overhead costs relating to mining and processing activities. Materials and supplies inventories are valued at the lower of average cost or fair market value.

     The 877,169 ounces of palladium received in connection with the Norilsk Nickel transaction (see Note 12) were valued at $169 per ounce. The value was determined based on the market price of palladium of $179 per ounce on June 23, 2003 (the closing date of the transaction) less an estimated discount for disposal and marketing expenses. If the palladium price were to decline below $169 per ounce, the company would be required to write down the unsold palladium to market with a charge to earnings. If the price of the palladium increases, the increase in value will only be recognized when the palladium is sold. The market price of palladium was $195 per ounce on December 31, 2003.

PROPERTY, PLANT AND EQUIPMENT

     Plant and equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives ranging from three to seven years or, for capital leases, the term of the related leases if shorter. Maintenance and repairs are charged to cost of

61

revenues as incurred.

     Capitalized mine development costs are capital expenditures incurred to increase existing production, develop new orebodies or develop mineral property substantially in advance of production. Capitalized mine development costs include a vertical shaft, multiple surface adits and underground infrastructure development including footwall laterals, ramps, rail and transportation, electrical and ventilation systems, shop facilities, material handling areas, ore handling facilities, dewatering and pumping facilities. These expenditures are capitalized and amortized over the life of the mine or over a shorter mining period, depending on the period benefited by those expenditures, using a units-of-production method. The company utilizes total proven and probable ore reserves, measured in tons, as the basis for determining the life of mine and uses the ore reserves in the immediate and relevant vicinity as the basis for determining the shorter mining period.

     The company calculates amortization of capitalized mine development costs by the application of an amortization rate to current production. The amortization rate is based upon un-amortized capitalized mine development costs, and the related ore reserves. Capital expenditures are added to the un-amortized capitalized mine development costs as the related assets are placed into service. In the calculation of the amortization rate, changes in ore reserves are accounted for, as a prospective change in estimate. Ore reserves and the further benefit of capitalized mine development costs are based on significant management assumptions. Any changes in these assumptions, such as a change in the mine plan or a change in estimated proven and probable ore reserves, could have a material effect on the expected period of benefit resulting in a potentially significant change in the amortization rate and/or the valuations of related assets. The company’s proven ore reserves are generally expected to be extracted utilizing its existing mine development infrastructure. Additional capital expenditures will be required to access the company’s estimated probable ore reserves. These anticipated capital expenditures are not included in the current calculation of depreciation and amortization.

     Expenditures incurred to sustain existing production and access specific ore reserve blocks or stopes provide benefit to ore reserve production over limited periods of time (secondary development) and are charged to operations as incurred. These costs include ramp and stope access excavations from primary haulage levels (footwall laterals), stope material rehandling/laydown excavations, stope ore and waste pass excavations and chute installations, stope ventilation raise excavations and stope utility and pipe raise excavations.

     Interest is capitalized on expenditures related to construction or development projects and is amortized using the same method as the related asset. Interest capitalization is discontinued when the asset is placed into operation or when development and construction cease.

ASSET IMPAIRMENT

     The company follows Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The company reviews and evaluates its long-lived assets for impairment when events and 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 carrying amount of the asset. Future cash flows include 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 assets are impaired, a calculation of fair market value is performed, and if the fair market value is lower than the carrying value of the assets, the assets are reduced to their fair market value.

     Assumptions underlying future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets resulting in potential additional impairment charges (see Note 4).

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The company’s non-derivative financial instruments consist primarily of cash equivalents, accounts receivable, debt and capital lease obligations. The carrying amounts of cash equivalents and accounts receivable approximate fair value due to their short

62

maturities. The carrying amounts of long-term debt approximate fair values as interest rates on the majority of such debt are variable. At December 31, 2003 and 2002, based on rates available for similar types of leases, the fair values of capital lease obligations were not materially different from their carrying amounts.

REVENUE RECOGNITION

     Revenues consist of the sales of palladium and platinum, including any realized hedging gains or losses, and are reduced by sales discounts associated with long-term sales contracts. By-product metals proceeds and secondary materials processing proceeds are included as a reduction to the cost of metals sold rather than an increase in revenue.

     Pursuant to the guidance in Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition for Financial Statements, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred through an irrevocable transfer of metals to customers’ accounts or physical delivery of metals, the price is fixed or determinable, no obligations remain and collectibility is probable. Under the terms of sales contracts and purchase orders received from customers, the company recognizes revenue when the product is in a refined and saleable form and title passes, which is typically when the product is transferred from the account of the company to the account of the customer. Sales discounts are recognized when the related revenue is recorded. By way of clarification, under certain of its sales agreements, the company instructs a third-party refiner to transfer metal from the company’s account to the customer’s account; at this point, the company’s account at the third party refinery is reduced and the purchaser’s account is increased by the number of ounces of metal sold. These transfers are irrevocable and the company has no further responsibility for the delivery of the metals. Under other sales agreements, physical conveyance occurs by the company arranging for shipment of metal from the third party refinery to the purchaser. In these cases, revenue is recognized at the point when delivery occurs and title passes to the purchaser.

     The company follows Emerging Issues Task Force (EITF) Issue No. 00-14, Accounting for Certain Sales Incentives. The consensus reached by the EITF requires a company to classify any cash sales discounts as a reduction in revenue.

HEDGING PROGRAM

     From time to time, the company enters into derivative financial instruments, including fixed forwards, cashless put and call option collars and financially settled forwards to manage the effect of changes in the prices of palladium and platinum on the company’s revenue. Prior to the adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, these instruments were accounted for as hedges when the instrument is designated as a hedge of the related production and there exists a high degree of correlation between the fair value of the instrument and the fair value of the hedged production. The degree of correlation is assessed periodically for effectiveness or ineffectiveness. In the event that an instrument no longer meets the criteria for hedge designation, any subsequent gain or loss on the instrument is recognized immediately in earnings. Otherwise, gains or losses related to hedging transactions are recognized as adjustments to the revenue recorded for the related production. If an instrument is settled early, any gains or losses are deferred in accumulated other comprehensive income and recognized as adjustments to the revenue recorded for the related hedged production. Costs associated with the purchase of certain hedging instruments are deferred and amortized against revenue related to the hedged production.

     The company accounts for its derivatives in accordance with SFAS No. 133, which require that derivatives be reported on the balance sheet at fair value and, if the derivative is not designated as a hedging instrument, changes in fair value must be recognized in earnings in the period of change. If the derivative is designated as a hedge and to the extent such hedge is determined to be effective, changes in fair value are either (a) offset by the change in fair value of the hedged asset or liability (if applicable) or (b) reported as a component of other comprehensive income in the period of change, and subsequently recognized in the determination of net income in the period the offsetting hedged transaction occurs. The company primarily uses derivatives to hedge metal prices and manage interest rate risk. As of December 31, 2003 the outstanding derivatives associated with commodity instruments are valued at an unrealized loss of $0.5 million, net of tax, and are reported as a component of accumulated other comprehensive income. As of December 31, 2003, the outstanding interest rate swaps are valued at an unrealized loss of $0.3 million, net of tax, and are reported as a component of accumulated other comprehensive income (see Note 14).

METALS REPURCHASE TRANSACTIONS

     The company may enter into transactions for the sale and repurchase of excess metals held in the company’s account at third party refineries. Under these transactions, the company will enter into an agreement to sell a certain number of ounces to counter parties at the prevailing current market price. The company will simultaneously enter into a separate agreement with the same counter party, to repurchase the same number of ounces at the same price at the repurchase date. The company records a liability for the amount to be paid to repurchase the metals upon entering into the agreement. In accordance with SFAS 49, no sales revenue or inventory effect is recognized on these transactions; the net financing proceeds of the sale and repurchase transaction are recorded as interest income in

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the period earned.

RECLAMATION AND ENVIRONMENTAL COSTS

     Effective January 1, 2003, the company adopted SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset.

     SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the company will recognize a gain or loss on settlement.

     The current bonding requirements total approximately $13.2 million at December 31, 2003. The current bond amount is an estimate of reclamation and closure costs. The regulatory agencies review the bonding requirements and reclamation estimates on a 5-year rotation or anytime a major amendment to the operating permits is approved. The company expects that the Stillwater Mine bond will be reviewed and adjusted by the regulatory agencies during 2004. Any differences between the estimated amounts and actual post-closure reclamation and site restoration costs could have a material effect on the company’s estimated liability resulting in a change in the recorded amount. The accrued reclamation liability was approximately $4.1 million at December 31, 2003 (See Note 3).

INCOME TAXES

     Income taxes are determined using the asset and liability approach in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. This method gives consideration to the future tax consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on currently enacted tax rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

     In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. A valuation allowance has been provided at December 31, 2003 for the portion of the company’s net deferred tax assets for which it is more likely than not that they will not be realized (see Note 11).

STOCK-BASED COMPENSATION

     The company has elected to account for stock options and other stock-based compensation awards using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, because stock options are granted at fair market value, no compensation expense has been recognized for stock options issued under the company’s stock option plans. The company records compensation expense for other stock-based compensation awards over the vesting periods. The company has adopted the disclosure only provisions of SFAS No. 123, Accounting for Stock-Based Compensation.

     Pro forma information regarding net income and earnings per share is required by SFAS No. 123 and has been determined as if the company had accounted for its stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

Year ended December 31,	2003			2002			2001
Weighted average expected lives (years)		3.8			3.7			3.7
Interest rate		2.4	%		3.1	%		4.5	%
Volatility		64	%		58	%		56	%
Dividend yield		—			—			—

     Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because

64

the company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

65

(in thousands)	2003			2002			2001
Net income (loss), as reported	$	(323,260	)	$	31,684		$	65,804
Add stock-based employee compensation expense included in reported net income (loss), net of tax		670			464			—
Deduct total stock-based employee compensation expense determined under fair-value based method for all rewards, net of tax		(1,836	)		(3,393	)		(5,116	)
Pro forma net income (loss)	$	(324,426	)	$	28,755		$	60,688
Earnings (loss) per share, as reported:
Basic	$	(4.77	)	$	0.74		$	1.70
Diluted	$	(4.77	)	$	0.74		$	1.68
Pro forma earnings (loss) per share:
Basic	$	(4.78	)	$	0.67		$	1.57
Diluted	$	(4.78	)	$	0.67		$	1.55

EARNINGS PER SHARE

     The company follows SFAS No. 128, Earnings per Share, which requires the presentation of basic and diluted earnings per share.

     Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. No adjustments were made to reported net income in the computation of earnings per share.

     The effect of outstanding stock options on diluted weighted average shares outstanding was 0, 74,248, and 481,442 shares for 2003, 2002, and 2001 respectively. Outstanding options to purchase 2,754,938; 2,416,238; and 820,616 shares of common stock were excluded from the computation of diluted earnings per share for the years ended December 31, 2003, 2002 and 2001, respectively, because the effect of inclusion would have been antidilutive. All stock options were antidilutive in 2003 because the company reported a net loss and inclusion of any of these options would have reduced the net loss per share amounts. In 2002 and 2001 certain stock options were excluded as antidilutive for purposes of calculating earnings per share using the treasury stock method because the exercise price of the options was greater than the average market price of the common shares.

     The effect of outstanding restricted stock was to increase diluted weighted average shares outstanding by 29,661 shares for 2002.

COMPREHENSIVE INCOME

     Comprehensive income includes net income, as well as other changes in stockholders’ equity that result from transactions and events other than those with stockholders. The company’s only significant element of other comprehensive income is unrealized gains and losses on derivative financial instruments.

START-UP COSTS

     The costs of start-up activities, including organization costs, are expensed as incurred.

DEBT ISSUANCE COSTS

     Costs associated with the issuance of debt are included in other noncurrent assets and are amortized over the term of the related debt using the effective interest method.

STOCK ISSUANCE COSTS

     Payment of specific costs directly attributable to a proposed issuance of the company’s common stock are capitalized and included in other current assets. Upon issuance of the common stock, the capitalized costs are reclassified to equity as an offset to the proceeds received from the issuance of the shares.

USE OF ESTIMATES

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     The preparation of the company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. The more significant areas requiring the use of management’s estimates relate to mineral reserves, reclamation and environmental obligations, valuation allowance for deferred tax assets, useful lives utilized for depreciation, amortization and accretion calculations, future cash flows from long-lived assets and accruals for restructuring costs. Actual results could differ from these estimates.

NOTE 3
ASSET RETIREMENT OBLIGATION

     The company adopted SFAS No. 143 on January 1, 2003. Upon adoption, the company increased its post-closure reclamation liability by approximately $1.9 million, increased the carrying value of its assets by approximately $1.2 million and recorded a cumulative effect adjustment to decrease income by $0.7 million ($0.4 million net of tax). At December 31, 2003, the company was required to post surety bonds with the State of Montana in the amount of $13.2 million, which also represents the company’s current estimate of mine closure and reclamation costs for current operations. The accrued reclamation liability, included in other noncurrent liabilities, was approximately $4.1 million, $1.9 million and $1.4 million, respectively at December 31, 2003, 2002 and 2001. Had SFAS No. 143, been applied during 2002 and 2001 the accrued reclamation liability would have been approximately $3.8 million and $2.8 million at December 31, 2002 and 2001, respectively.

     The following summary sets forth the changes of the Asset Retirement Obligations:

			East
	Stillwater		Boulder
(in thousands)	Mine		Mine		Total
Balance at January 1, 2003	$	3,093	$	681	$	3,774
Liabilities incurred		—		—		—
Liabilities settled		—		—		—
Accretion expense		280		62		342
Revision of estimated cash flows		—		—		—
Balance at December 31, 2003	$	3,373	$	743	$	4,116

NOTE 4
ASSET IMPAIRMENT

     The company follows SFAS No. 144, Accounting for the Impairment or Disposal 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. Future cash flows include estimates of recoverable ounces, PGM prices (considering current and historical prices, long-term sales contract prices, price trends and related factors), production levels, capital and reclamation expenditures, all based on life-of-mine plans and projections.

     The results of the company’s year-end ore reserve review led management to conclude that proven and probable reserves at the Stillwater Mine had declined sufficiently during 2003 to constitute a change in circumstances that required it to assess whether the carrying value of its long-lived assets would be recoverable from future undiscounted cash flows. While there was no decrease in proven and probable reserves at the East Boulder Mine, the two mines share common processing facilities and are therefore interrelated economically. A reduced reserve life at Stillwater Mine would require East Boulder Mine to carry a larger share of these common facility costs in the future. Consequently, management determined that it was required to complete an impairment test at both locations.

     The change in proven and probable ore reserves reported at December 31, 2003 for the Stillwater Mine represents the combined effect of ores mined during the year, the addition of reserves to the proven category as the result of development drilling completed during the year, the addition to probable reserves from mineralized material, reclassification of probable reserves to mineralized material in peripheral areas excluded from current mine development plans, a net reduction to proven reserves from revised modeling and optimization of near-term stope designs, and adjustment to probable reserves by updating long-term mine planning parameters affecting areas to be mined, mining widths, grade, and extraction. The net effect of these factors on the December 31, 2003 Stillwater Mine reserves was a reduction of 2,120,000 ounces or 16.2% from the December 31, 2002 reserves.

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     The change in proven and probable ore reserves reported at December 31, 2003 for the East Boulder Mine represents the combined effect of ores mined during the year, the addition of reserves to the proven category as the result of development drilling completed during the year, and conversion of mineralized material to probable reserve as mine development and drilling advanced during the year. The net effect of these factors on the December 31, 2003 East Boulder Mine reserves was an increase of 445,000 ounces or 3.4% from the December 31, 2002 reserves.

     The company completed impairment tests for the Stillwater and East Boulder Mines at December 31, 2003, in accordance with SFAS 144 by determining the undiscounted future cash flows for each mine and comparing the results to the carrying value of the company’s assets at each mine. Undiscounted future cash flows were determined using the company’s long-range plan adopted in December 2003 and pricing assumptions developed by Behre Dolbear & Company, independent geological consultants. The company determined the assets were impaired in each case because the carrying value exceeded the sum of the undiscounted cash flow projections. Consequently, the company was required to write down the carrying value of each of the mines to fair value. Market. The estimated fair market value of each mine was determined by Behre Dolbear & Company.

     The resulting carrying value of the company’s mining assets as of December 31, 2003 and 2002 is as follows:

	2003						2002
	Before
	Impairment		Impairment
(in thousands)	Charge		Charge		Net Book Value		Net Book Value
Stillwater Mine	$	405,331	$	176,739	$	228,592	$	385,317
East Boulder Mine		328,053		178,036		150,017		328,974
Processing Assets		71,343		34,761		36,582		76,049
Other Assets		5,096		759		4,337		3,679
	$	809,823	$	390,295	$	419,528	$	794,019

     Assumptions underlying estimates of future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and market conditions such as PGM prices, lower than expected recoverable ounces, and/or the company’s operating performance could have a material effect on the company’s determination of ore reserves, or its ability to recover the carrying amounts of its long lived assets, resulting in potential additional impairment

NOTE 5
INVENTORIES

(in thousands)	2003		2002
Metals inventory
Raw ore	$	661	$	783
Concentrate and in-process		17,393		14,090
Finished goods		173,715		25,630
		191,769		40,503
Materials and supplies		10,716		11,555
	$	202,485	$	52,058

     Inventories are stated at the lower of current market value taking into consideration the company’s long-term sales contracts, or average unit cost. Metal inventory costs include direct labor and materials, depreciation and amortization, as well as overhead costs relating to mining and processing activities. The 877,169 ounces of palladium received in connection with the Norilsk Nickel transaction (see Note 12) were valued at $169 per ounce. The value was determined based on the market price of palladium of $179 per ounce on June 23, 2003 (the closing date of the transaction) less an estimated discount for disposal and marketing expenses. If the palladium price were to decline below $169 per ounce, the company would be required to write down the unsold palladium to market with a charge to earnings. If the price of the palladium increases, the increase in value will only be recognized when the palladium is sold. The market price of palladium was $195 per ounce on December 31, 2003.

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NOTE 6
PROPERTY, PLANT AND EQUIPMENT

(in thousands)	2003		2002
Machinery and equipment	$	83,443	$	93,355
Leased equipment		1,700		10,394
Buildings and structural components		31,932		261,152
Mine development		264,813		549,953
Land		7,325		10,033
Construction-in-progress:
East Boulder Mine		7,453		5,256
Stillwater Mine		22,318		15,885
Other construction-in-progress		544		2,154
		419,528		948,182
Less accumulated depreciation and amortization		—		(154,163	)
	$	419,528	$	794,019

     As of December 31, 2003, the company recorded an asset impairment charge of $390.3 million, thereby reducing the carrying value of these assets to their estimated fair values.

     The company’s capital expenditures were as follows:

(in thousands)	2003			2002			2001
East Boulder Mine	$	13,037		$	19,215		$	105,224
Stillwater Mine		41,985			38,166			72,563
Other construction-in-progress		571			1,452			18,970
Other		(6	)		140			398
Total net asset additions		55,587			58,973			197,155
Acquired by capital lease transactions		(331	)		(1,804	)		—
Total capital expenditures	$	55,256		$	57,169		$	197,155

     All capital expenditures related to East Boulder Mine for fiscal years ending December 31, 2001 were included in construction-in-progress prior to the start-up of the East Boulder Mine on January 1, 2002. For fiscal year ending December 31, 2001, the East Boulder Mine capital expenditures are net of proceeds of $7.1 million generated during construction and development activities.

NOTE 7
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

CREDIT FACILITY

     In February 2001, the company entered into a $250 million credit facility with a syndicate of financial institutions which replaced a previous $175 million bank facility. The credit facility has been amended or waivers have been obtained seven times with the most recent amendment effective March 20, 2003. The credit facility provides for a $65 million five-year term loan facility (Term A), a $135 million seven-year term loan facility (Term B) and a $25 million revolving credit facility (reduced from $50 million at the company’s request as of March 20, 2003). Amortization of the term loan facilities commenced on March 31, 2002.

     As of December 31, 2003, the company has $128.5 million outstanding under the Term B facility bearing interest at a variable rate of 7.25%. During 2003, the company obtained a letter of credit in the amount of $7.5 million, which reduces amounts available under the revolving credit facility at December 31, 2003. The letter of credit carries an annual fee of 4.0%. The revolving credit facility requires an annual commitment fee of 0.5% on the remaining unadvanced amount. Of the $25 million revolving credit facility, $17.5 million remains available to the company. This revolving credit facility will be reduced in circumstances where lenders are offered a prepayment but do not accept the prepayment. (see below)

     The loans are required to be prepaid from excess cash flow, proceeds from asset sales and the issuance of debt or equity securities,

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subject to specified exceptions. Proceeds of the term loan facility were used to finance a portion of the company’s expansion plan. Proceeds of the revolving credit facility are being used for general corporate and working capital needs. The Term B facility bears interest at LIBOR, subject to a 2.5% minimum, plus a margin of 4.75% or an alternate base rate plus a margin of 3.25%. Substantially all the property and assets of the company and its subsidiary and the stock of the company’s subsidiary are pledged as security for the credit facility.

     Pursuant to the terms of the credit facility the company was required to apply $50.0 million of the $100.0 million cash proceeds received in the Norilsk Nickel transaction (see Note 12) to prepay its term loans. Consequently, the Term A facility was paid in full on June 30, 2003. In addition, in accordance with the terms of the credit agreement, the company is required to offer 50% of the net proceeds from the sale of palladium received in the Norilsk Nickel transaction (see Note 12) to further prepay its term loans. Accordingly, $74.1 million of the long-term debt has been classified as a current liability. The lenders are not obligated to accept the offer for prepayment. If lenders do not accept the prepayment, the company retains the cash but the availability under the revolving credit facility is reduced by the amount of the prepayment not accepted. The Term B facility final maturity date is December 31, 2007. The final maturity date of the revolving credit facility is December 30, 2005.

     Covenants in the credit facility include restrictions on: (1) additional indebtedness; (2) payment of dividends or redemption of capital stock; (3) liens; (4) investment, acquisitions, dispositions or mergers; (5) transactions with affiliates; (6) capital expenditures (other than those associated with the company’s mine plan); (7) refinancing or prepayment of subordinated debt; (8) changes in the nature of business conducted or ceasing operations at the principal operating properties; and (9) commodities hedging based upon annual palladium and platinum production. The company is also subject to financial covenants including a debt to operating cash flow ratio, a debt service coverage ratio and a debt to equity ratio.

     Events of default in the credit facility include: (1) a cross-default to other indebtedness of the company; (2) any material modification to the life-of-mine plans; (3) a change of control of the company other than the Norilsk Nickel transaction (see Note 11); (4) the failure to maintain agreed-upon annual PGM production levels; and (5) any breach or modification of any of the sales contracts. The company anticipates it will refinance the credit facility during 2004. The company is in compliance with its debt covenants at December 31, 2003.

     The following is a schedule by year of required principal payments to be made in quarterly installments on the amounts outstanding under the Term B facility at December 31, 2003:

Year ended December 31, (in thousands)	Term B facility
2004	$	1,350
2005		1,350
2006		60,750
2007	$	65,002
Total	$	128,452

EQUIPMENT LEASE AGREEMENTS

     The company leases certain underground mining equipment under leasing agreements containing purchase options that can be exercised at the end of the original lease terms. The duration of these leases range from three to seven years. The following is a schedule by year of future minimum lease payments under capital leases together with the present value of the net minimum lease payments:

Year ended December 31, (in thousands)
2004	$	624
2005		640
2006		569
2007		519
2008		519
2009 and thereafter		551
Total minimum lease payments		3,422
Less amount representing interest		639
Present value of net minimum lease payments		2,783
Less current portion		445
Total long-term capital lease obligation	$	2,338

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EXEMPT FACILITY REVENUE BONDS

     On July 6, 2000, the company completed a $30 million offering of Exempt Facility Revenue Bonds, Series 2000, through the State of Montana Board of Investments. The bonds were issued by the State of Montana Board of Investments to finance a portion of the costs of constructing and equipping certain sewage and solid waste disposal facilities at both the Stillwater Mine and the East Boulder Mine. The bonds mature on July 1, 2020 and have a stated interest rate of 8.00% with interest paid semi-annually. The bonds have an effective interest rate of 8.57%. Net proceeds from the offering were $28.7 million. The balance outstanding at December 31, 2003 and 2002 was $29.3 million, which is net of unamortized discount of $0.7 million.

SPECIAL INDUSTRIAL EDUCATION IMPACT REVENUE BONDS

     These bonds were issued by the company in 1989 in three series to finance impact payments to local school districts. The bonds bear interest at varying rates between 6.5% and 7.8% and mature in increasing annual principal amounts through 2009. The balance outstanding at December 31, 2003 and 2002 was $0.9 million and $1.0 million, respectively, of which approximately $0.1 million was classified as current in each year. The bonds, which are collateralized by the company’s real estate, are secured by guarantees from Chevron Corporation and Manville Corporation. Scheduled principal repayment during 2004 is approximately $0.1 million, and during the years 2005 through 2008 the scheduled payments are approximately $0.2 million in each year. Scheduled principal repayments thereafter total $0.1 million.

CASH PAID FOR INTEREST

     The company made cash payments for interest of $16.2 million, $15.4 million and $17.0 million for the years ended December 31, 2003, 2002, and 2001, respectively.

NOTE 8
RESTRUCTURING COSTS

     In the fourth quarter of 2001, the company began implementing a revised operating plan, which included a reduction of the company’s previously planned capital expenditures and production levels. In accordance with the plan, the company terminated certain contracts related to ongoing mine development and accrued a pre-tax charge of approximately $11.0 million for early contract termination costs. The accrual was based on the termination provisions of the related contracts. During 2003 and 2002, the company reduced its accrued restructuring costs resulting in a net gain of $1.0 million and $7.0 million, respectively, primarily as a result of negotiations of certain termination clauses of the construction contracts. Any adjustments to the original estimate of the accrual have been included in the company’s results of operations when determined.

     In accordance with the revised operating plan, during the second quarter of 2002, the company eliminated six management positions and recorded an addition to the restructuring accrual of $1.1 million. There were no additions to the restructuring accrual during 2003.

     The following summary sets forth the changes of the restructuring accrual during 2002 and 2003:

							Total
	Contract			Employee			Restructuring
(in thousands)	Terminations			Terminations			Accrual
Balance at December 31, 2001	$	10,974		$	—		$	10,974
Additional accrual		—			1,089			1,089
Cash paid		(2,288	)		(822	)		(3,110	)
Accrual adjustments		(7,027	)		—			(7,027	)
Balance at December 31, 2002		1,659			267			1,926
Cash paid		(13	)		(267	)		(280	)
Accrual adjustments		(966	)		—			(966	)
Balance at December 31, 2003	$	680		$	—		$	680

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NOTE 9
EMPLOYEE BENEFIT PLANS

     The company has adopted two savings plans, which qualify under section 401(k) of the U.S. Internal Revenue Code covering all non-bargaining and bargaining employees. Effective January 1, 2002, the company amended the provisions of these plans. Under the amended provisions, employees may elect to contribute up to 20% of their cash compensation, subject to the Employee Retirement Income Security Act of 1974 (ERISA) limitations. The company is required to make matching contributions equal to 100% of the employee’s contribution up to 6% of the employee’s compensation. Matching contributions can be paid with common stock of the company. During 2003 and 2002, the company issued 769,222 and 353,976 shares of common stock with a market value of approximately $3.4 million and $3.4 million, respectively, to match employees’ contributions. Cash contributions made to the plans were $0.0 million, $0.4 million, and $3.8 million in 2003, 2002,and 2001, respectively.

NOTE 10
COMMON STOCK PLANS AND AGREEMENTS

STOCK PLAN

     The company sponsors stock option plans that enable the company to grant stock options or restricted stock to employees and non-employee directors. As of December 31, 2003, there were 6,150,000 shares of common stock authorized for issuance under the plans.

     Awards granted under the plans may consist of incentive stock options (ISOs) or non-qualified stock options (NQSOs), stock appreciation rights (SARs), restricted stock or other stock-based awards, with the exception that non-employee directors may not be granted SARs and only employees of the company may be granted ISOs.

     The plans are administered by the Compensation Committee of the company’s Board of Directors, which determines the exercise price, exercise period, vesting period and all other terms. Officers’ and directors’ options expire ten years after the date of grant. All other options expire five to ten years after the date of grant, depending upon the original grant date.

     There were approximately 754,000 shares available for grant as of December 31, 2003. During 2002, the company granted 135,119 shares of restricted stock to certain of its officers and employees, of which 58,237 and 46,344 shares vested during 2003 and 2002, respectively. The market value of the restricted stock awarded totaled approximately $2.6 million on the grant date and was recorded as a separate component of stockholders’ equity. During 2003 and 2002, 13,333 and 17,205 shares of restricted stock were forfeited, respectively. During 2003 and 2002, approximately $670,000 and $464,000, respectively, was recognized as compensation expense and during 2002 approximately $874,000 was amortized against a liability that had been recorded at December 31, 2001.

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     Stock option activity for the years ended December 31, 2003, 2002, and 2001 is summarized as follows:

						Weighted Average
				Weighted Average		Fair Value of
	Shares			Exercise Price		Options Granted
Options outstanding at January 1, 2001 (1,191,443 exercisable)		1,884,969		$	20.61		—
2001 Activity:
Options granted		518,988			32.98	$	13.56
Options exercised		(120,980	)		15.87		—
Options canceled		(37,947	)		30.99		—
Options outstanding at December 31, 2001 (1,664,652 exercisable)		2,245,030		$	23.55		—
2002 Activity:
Options granted		558,179			18.18	$	7.10
Options exercised		(58,125	)		12.83		—
Options canceled		(148,221	)		25.37		—
Options outstanding at December 31, 2002 (1,954,633 exercisable)		2,596,863		$	22.54		—
2003 Activity
Options granted		252,075			5.08	$	2.16
Options exercised		(42,797	)		4.11		—
Options canceled		(51,203	)		24.00		—
Options outstanding at December 31, 2003 (2,440,332 exercisable)		2,754,938		$	22.53		—

     The following table summarizes information for outstanding and exercisable options as of December 31, 2003:

			Options Outstanding				Options Exercisable
			Average		Weighted				Weighted
Range of	Number		Remaining		Average		Number		Average
Exercise Price	Outstanding		Contract Life		Exercise Price		Exercisable		Exercise Price
$  4.66		128,661		5.7	$	3.16		50,761	$	3.93
$  4.66 - - $  9.33		197,187		9.1	$	6.37		69,524	$	5.45
$  9.33 - - $13.99		188,982		2.6	$	12.57		185,646	$	12.60
$13.99 - $18.65		554,893		1.7	$	15.70		544,929	$	15.69
$18.65 - $23.31		535,076		4.9	$	19.78		463,238	$	19.83
$23.31 - $27.98		456,210		1.0	$	26.61		448,650	$	26.62
$27.98 - $32.64		359,948		1.0	$	30.04		354,772	$	30.03
$32.64 - $37.30		156,950		5.3	$	34.30		155,950	$	34.31
$37.30 - $41.97		173,731		3.2	$	38.16		163,562	$	38.17
$41.97 - $46.63		3,300		1.0	$	43.83		3,300	$	43.83
		2,754,938		3.2	$	21.21		2,440,332	$	22.53

     The company has elected to follow the intrinsic value method of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock options. Under APB Opinion No. 25, because the exercise price of the company’s stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

RIGHTS AGREEMENT

     In October 1995, the Board of Directors of the company adopted a Rights Agreement under which Stillwater stockholders of record as of November 15, 1995 received a dividend in the form of Preferred Stock Purchase Rights (the “Rights”). The Rights permit the holder to purchase one one-thousandth of a share (a unit) of Series A Preferred Stock, par value $0.01 per share (the “Preferred Stock”), at a purchase price of $53 per unit, subject to adjustment. All outstanding Rights may be redeemed by the company at any time until such time as the Rights become exercisable. Until a Right is exercised, the holder thereof has no rights as a stockholder of the company, including the right to vote or receive dividends. Subject to certain conditions, the Rights become exercisable ten business days after a person or group acquires or commences a tender or exchange offer to acquire a beneficial ownership of 15% or

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more of the company’s outstanding common stock. The company amended the Rights Agreement effective November 20, 2002, so that the transaction with Norilsk Nickel would not cause the Rights to become exercisable. The Rights expire on October 26, 2005 unless earlier redeemed or exercised.

NOTE 11
INCOME TAXES

     The components of the provision (benefit) for income taxes are as follows:

Year ended December 31, (in thousands)	2003			2002		2001
Current federal	$	—		$	—	$	202
Current state		—			—		—
Total current		—			—		202
Deferred federal		(60,620	)		7,447		16,632
Deferred state		(14,583	)		1,498		3,491
Total deferred		(75,203	)		8,945		20,123
Total income tax provision (benefit)		(75,203	)		8,945		20,325
Less: Income tax allocated to cumulative effect adjustment		264			—		—
Net income tax provision (benefit)	$	(74,939	)	$	8,945	$	20,325

     The components of the company’s deferred tax liabilities (assets) are comprised of the following temporary differences and carryforwards:

December 31, (in thousands)	2003			2002
Property and equipment	$	—		$	29,408
Mine development costs		59,437			127,698
Capital lease obligations		1,209			1,126
Total deferred tax liabilities		60,646			158,232
Noncurrent liabilities		(3,973	)		(4,096	)
Property and equipment		(43,913	)		—
Current liabilities		(2,696	)		(2,564	)
Derivative financial instruments		(533	)		(913	)
Inventory		(1,258	)		(2,301	)
Net operating loss and other carryforwards		(78,577	)		(73,522	)
Total deferred tax assets		(130,950	)		(83,396	)
Valuation allowance		70,304			—
Net deferred tax assets		(60,646	)		(83,396	)
Net deferred tax liabilities	$	—		$	74,836

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     In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The company provided a valuation allowance to reflect the estimated amount of deferred tax assets which may not be realized principally due to the expiration of the net operating loss carry forwards (NOL’s) as management considers it more likely than not that the NOL’s will not be realized based upon projected future taxable income. There was no valuation allowance recorded in 2002 or 2001.

     A reconciliation from the federal income tax provision at the applicable statutory income tax rate to the effective rate is as follows:

Year ended December 31, (in thousands)	2003			2002			2001
Income (loss) before income taxes and cumulative effect of accounting change	$	(397,791	)	$	40,629		$	86,129
Income tax (benefit) at statutory rate of 35%	$	(139,227	)	$	14,220		$	30,145
State income tax benefit, net of federal benefit		(17,453	)		989			2,304
Excess percentage depletion		—			(6,372	)		(15,483	)
Adjustments to prior years’ tax provisions		(3,333	)		—			3,224
Reduction of net operating losses resulting from ownership change		16,678			—			—
Increase in valuation allowance		70,304			—			—
Other		(1,908	)		108			135
Net income tax provision (benefit)	$	(74,939	)	$	8,945		$	20,325

     Under the United States Internal Revenue Code, if more than 50% of the stock of a company changes hands within a specified period, it constitutes an “ownership change” which may limit the future utilization of existing NOLs. The Norilsk Nickel transaction triggered such an “ownership change” for the company which limits future utilization of NOLs as an offset to income. The annual limitation is generally equal to the product of (1) a statutorily prescribed interest rate (approximately 4.5%) and (2) the company’s equity value at the time of closing. For the year ended December 31, 2003, the company recorded a $16.7 million valuation allowance for the effect of this limitation on the company’s NOL’s.

     At December 31, 2003, the company had approximately $216 million of regular tax net operating loss carryforwards expiring during 2009 through 2023. Usage of these net operating losses is limited to approximately $9.5 million annually as a result of the change in control of the company that occurred in connection with the Norilsk Nickel transaction (see Note 12).

     There was no cash payments for income taxes due or made during 2003. The company made cash payments for income taxes of $0.4 million and $0.4 million for the years ended December 31, 2002 and 2001, respectively.

NOTE 12
CAPITAL TRANSACTIONS

     On January 31, 2002, the company completed a $60 million private placement of its common stock involving approximately 4.3 million shares or approximately 10% of the outstanding shares after such issuance. The price of $14 per share represents an approximate 10% discount from the closing price of $15.61 on January 29, 2002. Proceeds from the offering were approximately $54.0 million, net of offering costs of $6.0 million. The proceeds were used to pay down $25 million under the revolving credit facility and the remaining proceeds were used for general corporate purposes.

     On June 23, 2003, the company and Norilsk Nickel a Russian mining company, completed a stock purchase transaction whereby the company issued 45,463,222 shares of its common stock to Norimet, a wholly-owned subsidiary of Norilsk Nickel, representing 50.8% of the company’s then outstanding shares. The company received consideration from Norimet consisting of $100.0 million in cash and 877,169 ounces of palladium valued at $148.2 million as of June 23, 2003. The aggregate value of the consideration was $248.2 million as of June 23, 2003. As contemplated by the stock purchase transaction on September 3, 2003, Norimet completed a cash tender offer at $7.50 per share to acquire 4,350,000 shares of the company’s outstanding common stock. Following completion of the tender offer, Norimet owned 49,813,222 shares or 55.5% of the then outstanding common stock.

     On October 23, 2003 the stockholders approved an increase in the common stock authorized from 100,000,000 to 200,000,000.

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NOTE 13
LONG-TERM SALES CONTRACTS

Mine Production:

     Palladium, platinum, rhodium and gold are sold to a number of consumers and dealers with whom the company has established trading relationships. Refined PGMs of 99.95% purity in sponge form are transferred upon sale from the company’s account at third party refineries to the account of the purchaser. By-product metals are purchased at market price by customers, brokers or outside refiners.

     During 1998, the company entered into three supply contracts with its customers that contain guaranteed floor prices for metal delivered. In late 2000 and in 2001, the company amended these contracts to extend the terms and to modify the pricing mechanisms. One of these contracts applies to the company’s production through December 2010 one through December 2006 and the other contract is estimated to be fulfilled in 2007. Under the contracts, the company has committed between 80% to 100% of its palladium production and between 70% to 80% of its platinum production through 2010. Metal sales are priced at a modest discount to market. The remaining production is not committed under these contracts and remains available for sale at prevailing market prices. The contracts provide for floor and ceiling price structures as summarized below:

	PALLADIUM										PLATINUM
	Subject to					Subject to					Subject to					Subject to
	Floor Prices					Ceiling Prices					Floor Prices					Ceiling Prices
	% of Mine			Avg. Floor		% of Mine			Avg. Ceiling		% of Mine			Avg. Floor		% of Mine			Avg. Ceiling
Year	Production			Price		Production			Price		Production			Price		Production			Price
2004		100	%	$	371		39	%	$	644		80	%	$	425		16	%	$	856
2005		100	%	$	355		31	%	$	702		80	%	$	425		16	%	$	856
2006		100	%	$	339		24	%	$	801		80	%	$	425		16	%	$	856
2007		100	%	$	360		19	%	$	975		70	%	$	425		14	%	$	850
2008		80	%	$	385		20	%	$	975		70	%	$	425		14	%	$	850
2009		80	%	$	380		20	%	$	975		70	%	$	425		14	%	$	850
2010		80	%	$	375		20	%	$	975		70	%	$	425		14	%	$	850

     The sales contracts provide for adjustments to ounces committed based on actual production. The sales contracts contain termination provisions that allow the purchasers to terminate in the event the company breaches certain provisions of the contract and the breach is not cured within periods ranging from 10 to 30 days of notice by the purchaser. The long-term sales contracts are not subject to the requirements of SFAS No. 133 as the contracts qualify for the normal sales exception provided in SFAS No. 138 since they will not settle net and will result in physical delivery. The floors and ceilings embedded within the long-term sales contracts are treated as part of the host contract, not a separate derivative instrument and are therefore also not subject to the requirements of SFAS No. 133.

     The percentage of the company’s sales ounces that are made pursuant to modified pricing mechanisms are summarized below:

	2003			2002			2001
Floor Pricing		67	%		38	%		13	%
Market Pricing		26	%		54	%		61	%
Ceiling Pricing		7	%		8	%		26	%
Forward Pricing		—			—			—

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     The company has historically entered into hedging agreements from time to time to manage the effect of price changes in palladium and platinum on the company’s cash flow. Hedging activities consist of “fixed forwards” for future deliveries of specific quantities of PGMs at specific prices, the sale of call options and the purchase of put options and financially settled forwards. Gains or losses can occur as a result of hedging strategies. Hedging gains of $9.2 million and $5.5 million were realized in 2002 and 2001, respectively. No gains or losses were realized in 2003.

     During 2003, the company entered into fixed forwards that were accounted for as cash-flow hedges. These sales of metals from processing secondary materials are sold forward at the time of receipt and delivered against the cash flow hedges when the ounces are recovered. All of these transactions settle in the first three months of 2004. The unrealized loss on these instruments due to changes in metal prices at December 31, 2003 was $0.9 million ($0.5 million net of tax). The company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for metals exceed the company’s hedge contract prices by a predetermined margin limit.

Palladium acquired in connection with Norilsk Nickel transaction:

     During 2003, the company entered into negotiations for the sale of the 877,169 ounces of palladium, which constituted a portion of the payment received from Norilsk Nickel when it acquired its initial 50.8% interest in the Company. In the first quarter of 2004, the company announced that it had entered into contracts or had reached understandings, under which all of the palladium will be sold at a slight volume discount to market price at the time of sale over a period of two years primarily for use in automobile catalytic converters.

NOTE 14
DERIVATIVE INSTRUMENTS

     The company uses various derivative financial instruments to manage the company’s exposure to market prices associated with changes in palladium and platinum commodity prices and interest rates. Because the company hedges only with instruments that have a high correlation with the value of the hedged transactions, changes in derivatives’ fair value are expected to be offset by changes in the value of the hedged transaction.

Commodity Derivatives

     The company utilizes the following types of derivative financial instruments: fixed forwards, cashless put and call option collars, financially settled forwards and interest rate swaps. For derivative instruments, the company designates derivatives as a hedge of a forecasted transaction (“cash flow” hedge). Currently, all derivatives have been assessed as highly effective cash-flow hedges that link to a specific firm commitment or forecasted transaction. Changes in fair value of derivatives that are highly effective as hedges and that are designated and qualified as a cash-flow hedge are reported in other comprehensive income until the related specific firm commitments or forecasted transactions occur. Hedging gains on commodity instruments of $9.2 million and $5.5 million were recognized as an adjustment to revenue in 2002 and 2001, respectively. There were no recognized hedging gains or losses on commodity instruments during 2003.

     The company enters into cashless put and call option collars under which the company receives the difference between the put price and the market price only if the market price is below the put price and the company pays the difference between the call price and the market price only if the market price is above the call price. The company’s put and call options are financially settled at maturity. Since the put/call instruments hedge forecasted transactions, they qualify for cash flow hedge accounting. They are considered to be highly effective since the intrinsic value of the put/call will offset the change in value associated with future production not subject to the long-term sales contract. The company recorded $2.4 million in losses for the settlement of cashless put and call option collars in 2001. There were no gains or losses on put an call option collars in 2003 and 2002.

     The company may enter into fixed forward contracts to sell metals at a future date and at a fixed price in order to reduce the risk associated with future metals prices for ounces produced in excess of the company’s long-term sales contracts. These instruments are considered to be highly effective derivatives that will qualify for cash flow hedge accounting since they are an “all-in-one-hedge” instrument, meaning that all of the components (ounces, delivery date, and price) are fixed as part of the original commitment. No significant fixed forward contracts were settled during 2003, 2002 or 2001.

     The company also enters into financially settled forwards. They differ from fixed forwards in that they are settled net in cash. The company uses the financially settled forwards as a mechanism to hedge the fluctuations in metal prices associated with future production not subject to the long-term sales contracts. The financially settled forwards qualify as a cash flow hedge and are considered to be highly effective, since the change in the value of the financially settled forward will offset changes in the expected future cash flows related to future production not subject to the long-term sales contracts. The company recorded $9.2 million and

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$7.9 million in gains on the settlement of financially settled forwards in 2002 and 2001, respectively. No financially settled forwards were settled in 2003.

Interest Rate Derivatives

     During the first quarter of 2002, the company entered into two identical interest rate swap agreements with a combined notional amount totaling $100 million. The interest rate swap agreements were effective March 4, 2002 and mature on March 4, 2004. The agreements required the company to pay interest at a fixed rate of 3.67% and receive interest at a rate based on London Interbank Offered Rate (LIBOR), which was adjusted on a quarterly basis. The adjusted quarterly rate at December 31, 2003 was 1.18%. The interest rate swap agreements qualified as a cash flow hedge and were considered to be highly effective since the change in the value of the interest rate swap will offset changes in the future cash flows related to interest payments on the company’s debt. Hedging losses on interest rate swaps of $2.4 million were recognized as additional interest expense during 2003. As of December 31, 2003, the fair value of the interest rate swaps was a loss of $0.4 million ($0.3 million net of tax) of which the company expects to reclassify to interest expense during the next 12 months.

     In accordance with the transition provisions of SFAS No. 133, the company recorded a cumulative-effect loss adjustment of $10.0 million ($7.1 million net of tax) in accumulated other comprehensive loss to recognize at fair value all derivatives that are designated as cash-flow hedging instruments at January 1, 2001. At December 31, 2001, substantially all financially settled forwards outstanding were closed and cash had been received. The gains were deferred until the 2002 original contract settlement dates. The company reclassified to earnings the entire $9.5 million ($5.7 million net of tax) of unrealized gains that existed at December 31, 2001. During 2003, the company entered into financially settled forwards that were accounted for as cash-flow hedges. All of these transactions settle in the first three months of 2004. The unrealized loss on these instruments due to changes in metal prices at December 31, 2003 was $0.9 million ($0.5 million, net of tax). The following summary sets forth the changes in other comprehensive income (loss) accumulated in stockholders’ equity during 2002 and 2003:

							Total Derivative
	Commodity						Financial
(in thousands)	Instruments			Interest Rate Swaps			Instruments
Balance at December 31, 2001	$	9,458		$	—		$	9,458
Reclassification to earnings		(9,158	)		1,545			(7,613	)
Change in fair value		(300	)		(3,863	)		(4,163	)
Balance at December 31, 2002		—			(2,318	)		(2,318	)
Reclassification to earnings		—			2,425			2,425
Change in fair value		(910	)		(550	)		(1,460	)
Balance at December 31, 2003	$	(910	)	$	(443	)	$	(1,353	)

The net of tax balances in other accumulated comprehensive income (loss) at December 31, 2003, and 2002 were $(0.8) million and $(1.4) million, respectively.

NOTE 15
COMMITMENTS AND CONTINGENCIES

     The company believes that the likelihood that a material loss will occur in connection with the following claims and contingencies is remote.

REFINING AGREEMENTS

     The company has contracted with two entities to refine its filter cake production. Even though there is a limited number of PGM refiners, the company believes that it is not economically dependent upon any one refiner.

SECONDARY MATERIALS PROCESSING

     The company has been processing small spot shipments of spent autocatalysts since 1997. In October 2003, the company entered into a long-term metal sourcing agreement with PowerMount Incorporated of Somerset Kentucky under which it will contractually purchase secondary metals for recycling. The commercial terms of this agreement are confidential.

OPERATING LEASES

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     In September 1998, the company completed the sale and leaseback of a tunnel boring machine and miscellaneous other mining equipment. The leases are non-cancelable with terms of seven years and are classified as operating leases for financial reporting purposes. In September 2000, the company entered into an additional operating lease through the sale and leaseback of mining equipment. The lease is non-cancelable with a term of five years and is classified as an operating lease for financial reporting purposes. In December 2001, the company entered into an additional operating lease through the sale and leaseback of mining equipment. The lease is cancelable after one year with a term of seven years and is classified as an operating lease for financial reporting purposes. Rental expense amounted to approximately $4.6 million, $5.0 million, and $2.1 million in 2003, 2002, and 2001, respectively.

     Future minimum lease payments for non-cancelable operating leases with terms in excess of one year are $3.4 million, $2.7 million, $0.4 million, $0.2 million and $0.2 million in 2004, 2005, 2006, 2007 and 2008, respectively.

SIGNIFICANT CUSTOMERS

     Sales to significant customers represented approximately 98%, 97%, and 96% of total revenues for the years ended December 31, 2003, 2002, and 2001, respectively.

LABOR UNION CONTRACT

     As of December 31, 2003, the company had approximately 59% and 19% of its labor forces covered by collective bargaining agreements expiring in June 30, 2004, and June 30, 2005, respectively.

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LEGAL PROCEEDINGS

     The company is involved in various claims and legal actions arising in the ordinary course of business, including employee lawsuits, ___and ___. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the company’s consolidated financial position, results of operations or liquidity.

NOTE 16
QUARTERLY DATA (UNAUDITED)

     Quarterly earnings data for the years ended December 31, 2003 and 2002 were as follows:

	2003 Quarter Ended
(in thousands, except per share data)	March 31			June 30			September 30			December 31
Revenue	$	62,620		$	58,910		$	58,221		$	60,478
Operating income (loss)	$	2,552		$	(4,059	)	$	4,038		$	(383,154	)
Net income (loss)	$	(1,757	)	$	(19,261	)	$	(1,628	)	$	(300,614	)
Comprehensive income (loss)	$	(1,726	)	$	(18,940	)	$	(1,238	)	$	(300,771	)
Basic earnings (loss) per share (1)	$	(0.04	)	$	(0.40	)	$	(0.02	)	$	(3.35	)
Diluted earnings (loss) per share (1)	$	(0.04	)	$	(0.40	)	$	(0.02	)	$	(3.35	)

	2002 Quarter Ended
	March 31		June 30		September 30		December 31
Revenue	$	75,977	$	75,007	$	65,970	$	58,645
Operating income	$	25,888	$	17,069	$	9,675	$	4,695
Net income (loss)	$	16,565	$	11,060	$	4,659	$	(600	)
Comprehensive income (loss)	$	15,120	$	8,628	$	2,444	$	(1,647	)
Basic earnings (loss) per share (1)	$	0.40	$	0.26	$	0.11	$	(0.01	)
Diluted earnings (loss) per share (1)	$	0.40	$	0.26	$	0.11	$	(0.01	)

(1) The sum of the quarterly basic and diluted earnings (loss) per share does not agree to the year-to-date basic and diluted earnings (loss) per share due to the effect of stock transactions during the periods on determining the weighted average shares outstanding each quarterly and annual period.

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ITEM 9
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

ITEM 9A
CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures
	Our Chief Executive Officer and Vice President and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2003, as required under Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Vice President and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective and timely provided them with material information required to be disclosed in the reports we file or submit under the Exchange Act.
(b)	Changes in Internal Controls
	There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the review and evaluation. There were no significant deficiencies or material weaknesses identified in the review and evaluation, and therefore no corrective actions were taken.

PART III

ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     For information concerning the company’s executive officers, reference is made to the information set forth under the caption “Executive Officers of the Registrant” located in Item 1 of this Form 10-K. For information concerning the company’s directors and compliance by the company’s directors, executive officers and significant stockholders with the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended, reference is made to the information set forth under the captions “Election of Directors” and “Compliance with Section 16(a) - Beneficial Ownership Reporting Compliance,” respectively, in the company’s Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Audit Committee Financial Expert

     Newly created federal regulations and New York Stock Exchange listing requirements require the board to determine if a member of its audit committee is an “audit committee financial expert.” According to these new requirements, an audit committee member can be designated an audit committee financial expert only when the audit committee member satisfies five specified qualification requirements, such as experience (or “experience actively supervising” others engaged in) preparing, auditing, analyzing, or evaluating financial statements presenting a level of accounting complexity comparable to what is encountered in connection with the company’s financial statements. The regulations further require that such qualifications to have been acquired through specified means of experience or education. While the board has confidence in the ability and the effectiveness of its audit committee, the board has determined that no current audit committee member qualifies as an audit committee financial expert. The board believes that the current members of the audit committee are qualified to carry out the duties and responsibilities of the audit committee. In the event of a vacancy on the board, the board desires to fill it with a person satisfying the requirements for an audit committee financial expert, assuming that such individual satisfies such other criteria that the board believes are important for an individual to make a meaningful contribution to the deliberations of the board as a whole.

Code of Ethics

     The company has adopted a code of ethics that requires honest and ethical conduct that requires honest and ethical conduct; avoidance of conflicts of interest; compliance with applicable governmental laws, rules and regulations; full, fair, accurate, timely, and understandable disclosure in reports and documents that filed with the SEC and in other public communications made; and

81

accountability for adherence to the code. The code of Ethics can be accessed via the company’s internet website is http://www.stillwatermining.com. Printed copies will be provided upon request.

Corporate Governance

     The company’s corporate governance principles, corporate governance and nominating committee charter and compensation committee charter can be accessed via the company’s internet website is http://www.stillwatermining.com

ITEM 11
EXECUTIVE COMPENSATION

     Reference is made to the information set forth under the caption “Executive Compensation” in the company’s Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

     Reference is made to the information set forth under the caption “Security Ownership of Principal Stockholders and Management” in the company’s Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Reference is made to the information set forth under the caption “Certain Relationships and Related Transactions” in the company’s Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES

     Reference is made to the information set forth under the caption “Principal Accounting Fees and Services” in the company’s Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

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PART IV

ITEM 15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

(a) Documents filed as part of this Form 10-K

1.   Financial Statements and Supplementary Data

	Page
Report of Management		49
Report of the Audit Committee of the Board of Directors		50
Report of Independent Accountants		51
Balance Sheets		52
Statements of Operations and Comprehensive Income		53
Statements of Cash Flows		54
Statements of Changes in Stockholders’ Equity		55
Notes to Financial Statements		56

2.   Financial Statement Schedules (not applicable)

(b) Reports on Form 8-K

     The company filed a Form 8-K on March 21, 2003 reporting:

1.	Consent and Amendment No. 5 to Credit Agreement, dated as of March 20, 2003, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc.
2.	Press Release issued on March 20, 2003 regarding the amendment to the company’s credit agreement.
3.	Exhibits required by item 601 of Regulation S-K: See list of exhibits below.

     The company filed a Form 8-K on June 23, 2003 reporting:

4.	Stockholders Agreement, dated as of June 23, 2003, among Stillwater Mining Company, MMC Norilsk Nickel and Norimet Ltd.
5.	Registration Rights Agreement, dated as of June 23, 2003 among Stillwater Mining Company and Norimet Ltd.
6.	Press Release issued on June 23, 2003 regarding closing of stock purchase transaction with MMC Norilsk Nickel and Norimet Ltd.

     The company filed a Form 8-K on October 28, 2003 reporting:

7.   Press Release issued on October 27, 2003 regarding third quarter earnings.

     The company filed a Form 8-K on February 27, 2004 reporting:

8.   Press Release issued on February 27, 2004 regarding 2003 quarter and year-end results.

     The company filed a Form 8-K/A on March 12, 2004 reporting:

9.   Press Release issued on March 12, 2004 regarding amendment to the 8-K filed February 27, 2004.

(c) Exhibits

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EXHIBITS

Number	Description
2.1	Exchange Agreement for 10,000 shares of common stock, dated October 1, 1993 (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form S-1 (File No. 33-85904) as declared effective by the Commission on December 15, 1994 (the “1994 S-1”)).
3.1	Restated Certificate of Incorporation of Stillwater Mining Company, dated October 23, 2003 (incorporated by reference to Exhibit 3.1 to the Form 10-Q for the quarterly period ended September 30, 2003, filed on October 27, 2003).
3.2	Amended and Restated By-Laws of Stillwater Mining Company, (incorporated by reference to Exhibit 3.2 to the Form 10-K filed on March 15, 2004).
4.1	Form of Indenture, dated April 29, 1996, between Stillwater Mining Company and Colorado National Bank with respect to the company’s 7% Convertible Subordinated Notes Due 2003 (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, dated April 29, 1996).
4.2	Rights Agreement, dated October 26, 1995 (incorporated by reference to Form 8-A, filed on October 30, 1995).
4.3	Amendment No. 1, dated as of November 20, 2002, to the Rights Agreement between Stillwater Mining Company and Computershare Trust Company, Inc. (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, dated November 21, 2002).
10.1	1998 Equity Incentive Plan (incorporated by reference to Appendix A to the Proxy statement, dated April 6, 1998).
10.2	Mining and Processing Agreement, dated March 16, 1984 regarding the Mouat family; and Compromise of Issues Relating to the Mining and Processing Agreement (incorporated by reference to Exhibit 10.8 to the 1994 S-1).
10.3	Conveyance of Royalty Interest and Agreement between Stillwater Mining Company and Manville Mining Company, dated October 1, 1993 (incorporated by reference to Exhibit 10.9 to the 1994 S-1).
10.4	Agreement for Electric Service between the Montana Power Company and Stillwater Mining Company, dated June 1, 1996 (incorporated by reference to Exhibit 10.8.1 of the Registrant’s 1996 10-K).
10.5	Equipment Lease Agreement between Stillwater Mining Company and Senstar Capital Corporation, dated October 5, 1995. (incorporated by reference to Exhibit 10.17 of the Registrant’s 1995 10-K).
10.6	Purchase Agreement between Stillwater Mining Company and Senstar Capital Corporation, dated October 5, 1995 (incorporated by reference to Exhibit 10.17.1 of the Registrant’s 1995 10-K).
10.7	Purchase Agreement between Stillwater Mining Company and The Westaim Corporation, dated October 14, 1996 (incorporated by reference to Exhibit 10.16 of the Registrant’s 1996 10-K).
10.8	PGM Concentrate Refining Agreement between Stillwater Mining Company and Union Miniere, dated May 8, 1996. (incorporated by reference to Exhibit 10.15 of the Registrant’s 1998 10-K).
10.9	Articles of Agreement between Stillwater Mining Company and Paper, Allied Industrial, Chemical and Energy Workers International Union, dated July 1, 1999 (incorporated by reference to Exhibit 10.10 of the Registrant’s 1999 10-K).
10.10	Palladium Sales Agreement, made as of August 13, 1998, among Stillwater Mining Company and Ford Motor Company (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, dated July 21, 1998).
10.11	Palladium and Platinum Sales Agreement, made as of August 17, 1998, among Stillwater Mining Company and General Motors Corporation (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, dated July 21, 1998).
10.12	Palladium and Platinum Sales Agreement, made as of August 27, 1998, among Stillwater Mining Company and Mitsubishi Corporation (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.4 to the Form 8-K, dated July 21, 1998).
10.13	Employment Agreement between Francis R. McAllister and Stillwater Mining Company, dated July 23, 2001 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30, 2001).
10.14	Employment agreement between John R. Stark and Stillwater Mining Company dated July 23, 2001 (incorporated by reference to Exhibit 10.18 to the Form 10-K for the year ended December 31, 2001).
10.15	Credit Agreement, dated February 23, 2001, between Stillwater Mining Company and TD Securities (USA), Ltd. (incorporated by reference to Exhibit 10.19 of the Registrant’s 2000 10-K).
10.16	First Amendment Agreement to Palladium Sales Agreement between Stillwater Mining Company and Ford Motor

84

Number	Description
	Company, dated October 27, 2000 (incorporated by reference to Exhibit 10.20 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.17	Second Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated March 27, 2001 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended March 31, 2001) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.18	First Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated November 20, 2000 (incorporated by reference to Exhibit 10.21 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.19	Refining Agreement between Stillwater Mining Company and Catalyst and Chemicals Division of Johnson Matthey Inc. dated July 27, 2000 (incorporated by reference to Exhibit 10.22 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.20	Second Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated February 14, 2001 (incorporated by reference to Exhibit 10.24 of the Registrant’s 2001 10-K).
10.21	First Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company, Mitsubishi Corporation and Mitsubishi International Corporation, dated April 1, 2001 (incorporated by reference to Exhibit 10.2 to the Form 10-Q, for the quarterly period ended March 31, 2001) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.22	Second Amendment Agreement to Palladium, Platinum and Rhodium Sales Agreement between Stillwater Mining Company and Mitsubishi International Corporation, dated November 30, 2001(incorporated by reference to Exhibit 10.26 of the Registrant’s 2001 10-K).
10.23	Waiver, Consent and Amendment No. 1 to Credit Agreement, dated as of June 27, 2001, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K, dated December 10, 2001).
10.24	Amendment No. 2 to Credit Agreement, dated as of November 30, 2001, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, dated December 10, 2001).
10.25	Retail Electricity Supply Contract between PPL EnergyPlus, LLC and Stillwater Mining Company dated December 11, 2001 (incorporated by reference to Exhibit 10.29 of the Registrant’s 2001 10-K).
10.26	Waiver, Consent and Amendment No. 3 to credit agreement dated as of January 28, 2002 by and among Stillwater Mining Company and Toronto Dominion (Texas) Inc. (incorporated by reference to exhibit 10.1 of the registrants Form 10-Q for the quarterly period ended March 31, 2002).
10.27	Limited Waiver to Credit Agreement, dated as of September 30, 2002, made by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.28	Amendment No. 4 to Credit Agreement, dated as of October 25, 2002, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.29	Stock Purchase Agreement between Stillwater Mining Company and entities listed on Exhibit A, dated January 30, 2002. (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-3/A (File No.333-75404) as declared effective by the Commission on June 7, 2002).
10.30	Third Amendment to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated March 13, 2002 (incorporated by reference to Exhibit 10.33 of the Registrant’s 2002 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.31	Employment Agreement between Terrell I. Ackerman and Stillwater Mining Company dated May 8, 2002 (incorporated by reference to Exhibit 10.34 of the Registrant’s 2002 10-K).
10.32	Limited Waiver to Credit Agreement, dated as of December 31, 2002, made by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.36 of the Registrant’s 2002 10-K).
10.33	Amendment No. 5 to Credit Agreement, dated as of March 20, 2003, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, dated March 21, 2003).

85

Number	Description
10.34	Amended and Restated General Employee Stock Plan, dated October 23, 2003 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30, 2003).
10.35	Employment Agreement between Stephen A. Lang and Stillwater Mining Company dated September 1, 2003 (incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarterly period ended September 30, 2003).
10.36	Stock Purchase Agreement between Stillwater Mining Company and MMC Norilsk Nickel and Norimet Ltd. dated June 23, 2003. (incorporated by reference to Exhibit 10.1 to the Form 8-K, dated June 23, 2003)
10.37	Registration Rights Agreement, Stillwater Mining Company and Norimet Ltd. dated June 23, 2003. (incorporated by reference to Exhibit 10.2 to the Form 8-K dated June 23, 2003)
10.38	Palladium Sales Agreement, made as of February 1, 2004, among Stillwater Mining Company and Mitsubishi Corporation (incorporated by reference to Exhibit 10.38 to the Form 10-K filed on March 15, 2004(portions of this agreement have been omitted pursuant to a confidential treatment request) (filed herewith).
10.39	Palladium Sales Agreement, made as of March 3, 2004, among Stillwater Mining Company and Engelhard Corporation (incorporated by reference to Exhibit 10.39 to the Form 10-K filed on March 15, 2004(portions of this agreement have been omitted pursuant to a confidential treatment request) (filed herewith).
10.40	Employment Agreement between Gregory A. Wing and Stillwater Mining Company dated as of March 22, 2004 (incorporated by reference to Exhibit 10.40 to the Form 10-K filed on March 15, 2004).
10.41	Articles of Agreement between Stillwater Mining Company (East Boulder) Paper, Allied Industrial, Chemical and Energy Workers International Union, ratified July 2002 (incorporated by reference to Exhibit 10.41 to the Form 10-K filed on March 15, 2004).
23.1	Consent of KPMG LLP (filed herewith).
23.2	Consent of Behre Dolbear & Company, Inc. (incorporated by reference to Exhibit 10.41 to the Form 10-K filed on March 15, 2004).
31.1	Rule 13a-14(a)/15d-14(a) Certification – Chief Executive Officer, dated March 31, 2005
31.2	Rule 13a-14(a)/15d-14(a) Certification – Vice President and Chief Financial Officer, dated March 31, 2005
32.1	Section 1350 Certification, dated March 31, 2005
32.2	Section 1350 Certification, dated March 31, 2005

86

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STILLWATER MINING COMPANY
	(“Registrant”)
Dated: March 31, 2005	By:	/s/ Francis R. McAllister
		Francis R. McAllister
		Chairman and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant, in the capacities, and on the dates, indicated.

Signature and Title	Date
/s/ Francis R. McAllister	March 31, 2005
Francis R. McAllister
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Gregory A. Wing	March 31, 2005
Gregory A. Wing
Vice President and Chief Financial Officer
/s/ Craig L. Fuller	March 31, 2005
Craig L. Fuller, Director
/s/ Patrick M. James	March 31, 2005
Patrick M. James, Director
/s/ Steven S. Lucas	March 31, 2005
Steven S. Lucas, Director
/s/ Joseph P. Mazurek	March 31, 2005
Joseph P. Mazurek, Director
/s/ Sheryl K. Pressler	March 31, 2005
Sheryl K. Pressler, Director
/s/ Donald Riegle Jr.	March 31, 2005
Donald Riegle Jr., Director
/s/ Todd D. Schafer	March 31, 2005
Todd D. Schafer, Director
/s/ Jack E. Thompson	March 31, 2005
Jack E. Thompson, Director

87

Index to Exhibits

Number	Description
2.1	Exchange Agreement for 10,000 shares of common stock, dated October 1, 1993 (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form S-1 (File No. 33-85904) as declared effective by the Commission on December 15, 1994 (the “1994 S-1”)).
3.1	Restated Certificate of Incorporation of Stillwater Mining Company, dated October 23, 2003 (incorporated by reference to Exhibit 3.1 to the Form 10-Q for the quarterly period ended September 30, 2003, filed on October 27, 2003).
3.2	Amended and Restated By-Laws of Stillwater Mining Company, (incorporated by reference to Exhibit 3.2 to the Form 10-K filed on March 15, 2004).
4.1	Form of Indenture, dated April 29, 1996, between Stillwater Mining Company and Colorado National Bank with respect to the company’s 7% Convertible Subordinated Notes Due 2003 (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, dated April 29, 1996).
4.2	Rights Agreement, dated October 26, 1995 (incorporated by reference to Form 8-A, filed on October 30, 1995).
4.3	Amendment No. 1, dated as of November 20, 2002, to the Rights Agreement between Stillwater Mining Company and Computershare Trust Company, Inc. (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, dated November 21, 2002).
10.1	1998 Equity Incentive Plan (incorporated by reference to Appendix A to the Proxy statement, dated April 6, 1998).
10.2	Mining and Processing Agreement, dated March 16, 1984 regarding the Mouat family; and Compromise of Issues Relating to the Mining and Processing Agreement (incorporated by reference to Exhibit 10.8 to the 1994 S-1).
10.3	Conveyance of Royalty Interest and Agreement between Stillwater Mining Company and Manville Mining Company, dated October 1, 1993 (incorporated by reference to Exhibit 10.9 to the 1994 S-1).
10.4	Agreement for Electric Service between the Montana Power Company and Stillwater Mining Company, dated June 1, 1996 (incorporated by reference to Exhibit 10.8.1 of the Registrant’s 1996 10-K).
10.5	Equipment Lease Agreement between Stillwater Mining Company and Senstar Capital Corporation, dated October 5, 1995. (incorporated by reference to Exhibit 10.17 of the Registrant’s 1995 10-K).
10.6	Purchase Agreement between Stillwater Mining Company and Senstar Capital Corporation, dated October 5, 1995 (incorporated by reference to Exhibit 10.17.1 of the Registrant’s 1995 10-K).
10.7	Purchase Agreement between Stillwater Mining Company and The Westaim Corporation, dated October 14, 1996 (incorporated by reference to Exhibit 10.16 of the Registrant’s 1996 10-K).
10.8	PGM Concentrate Refining Agreement between Stillwater Mining Company and Union Miniere, dated May 8, 1996. (incorporated by reference to Exhibit 10.15 of the Registrant’s 1998 10-K).
10.9	Articles of Agreement between Stillwater Mining Company and Paper, Allied Industrial, Chemical and Energy Workers International Union, dated July 1, 1999 (incorporated by reference to Exhibit 10.10 of the Registrant’s 1999 10-K).
10.10	Palladium Sales Agreement, made as of August 13, 1998, among Stillwater Mining Company and Ford Motor Company (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, dated July 21, 1998).
10.11	Palladium and Platinum Sales Agreement, made as of August 17, 1998, among Stillwater Mining Company and General Motors Corporation (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, dated July 21, 1998).
10.12	Palladium and Platinum Sales Agreement, made as of August 27, 1998, among Stillwater Mining Company and Mitsubishi Corporation (portions of the agreement have been omitted pursuant to a confidential treatment request) (incorporated by reference to Exhibit 10.4 to the Form 8-K, dated July 21, 1998).
10.13	Employment Agreement between Francis R. McAllister and Stillwater Mining Company, dated July 23, 2001 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30, 2001).
10.14	Employment agreement between John R. Stark and Stillwater Mining Company dated July 23, 2001 (incorporated by reference to Exhibit 10.18 to the Form 10-K for the year ended December 31, 2001).
10.15	Credit Agreement, dated February 23, 2001, between Stillwater Mining Company and TD Securities (USA), Ltd. (incorporated by reference to Exhibit 10.19 of the Registrant’s 2000 10-K).
10.16	First Amendment Agreement to Palladium Sales Agreement between Stillwater Mining Company and Ford Motor

Number	Description
	Company, dated October 27, 2000 (incorporated by reference to Exhibit 10.20 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.17	Second Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated March 27, 2001 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended March 31, 2001) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.18	First Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated November 20, 2000 (incorporated by reference to Exhibit 10.21 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.19	Refining Agreement between Stillwater Mining Company and Catalyst and Chemicals Division of Johnson Matthey Inc. dated July 27, 2000 (incorporated by reference to Exhibit 10.22 of the Registrant’s 2000 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.20	Second Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company and General Motors Corporation, dated February 14, 2001 (incorporated by reference to Exhibit 10.24 of the Registrant’s 2001 10-K).
10.21	First Amendment Agreement to Palladium and Platinum Sales Agreement between Stillwater Mining Company, Mitsubishi Corporation and Mitsubishi International Corporation, dated April 1, 2001 (incorporated by reference to Exhibit 10.2 to the Form 10-Q, for the quarterly period ended March 31, 2001) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.22	Second Amendment Agreement to Palladium, Platinum and Rhodium Sales Agreement between Stillwater Mining Company and Mitsubishi International Corporation, dated November 30, 2001(incorporated by reference to Exhibit 10.26 of the Registrant’s 2001 10-K).
10.23	Waiver, Consent and Amendment No. 1 to Credit Agreement, dated as of June 27, 2001, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K, dated December 10, 2001).
10.24	Amendment No. 2 to Credit Agreement, dated as of November 30, 2001, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, dated December 10, 2001).
10.25	Retail Electricity Supply Contract between PPL EnergyPlus, LLC and Stillwater Mining Company dated December 11, 2001 (incorporated by reference to Exhibit 10.29 of the Registrant’s 2001 10-K).
10.26	Waiver, Consent and Amendment No. 3 to credit agreement dated as of January 28, 2002 by and among Stillwater Mining Company and Toronto Dominion (Texas) Inc. (incorporated by reference to exhibit 10.1 of the registrants Form 10-Q for the quarterly period ended March 31, 2002).
10.27	Limited Waiver to Credit Agreement, dated as of September 30, 2002, made by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.28	Amendment No. 4 to Credit Agreement, dated as of October 25, 2002, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.29	Stock Purchase Agreement between Stillwater Mining Company and entities listed on Exhibit A, dated January 30, 2002. (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-3/A (File No.333-75404) as declared effective by the Commission on June 7, 2002).
10.30	Third Amendment to Palladium and Platinum Sales Agreement between Stillwater Mining Company and Ford Motor Company, dated March 13, 2002 (incorporated by reference to Exhibit 10.33 of the Registrant’s 2002 10-K) (portions of the agreement have been omitted pursuant to a confidential treatment request).
10.31	Employment Agreement between Terrell I. Ackerman and Stillwater Mining Company dated May 8, 2002 (incorporated by reference to Exhibit 10.34 of the Registrant’s 2002 10-K).
10.32	Limited Waiver to Credit Agreement, dated as of December 31, 2002, made by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.36 of the Registrant’s 2002 10-K).
10.33	Amendment No. 5 to Credit Agreement, dated as of March 20, 2003, by and among Stillwater Mining Company and Toronto Dominion (Texas), Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K, dated March 21, 2003).

Number	Description
10.34	Amended and Restated General Employee Stock Plan, dated October 23, 2003 (incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 30, 2003).
10.35	Employment Agreement between Stephen A. Lang and Stillwater Mining Company dated September 1, 2003 (incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarterly period ended September 30, 2003).
10.36	Stock Purchase Agreement between Stillwater Mining Company and MMC Norilsk Nickel and Norimet Ltd. dated June 23, 2003. (incorporated by reference to Exhibit 10.1 to the Form 8-K, dated June 23, 2003)
10.37	Registration Rights Agreement, Stillwater Mining Company and Norimet Ltd. dated June 23, 2003. (incorporated by reference to Exhibit 10.2 to the Form 8-K dated June 23, 2003)
10.38	Palladium Sales Agreement, made as of February 1, 2004, among Stillwater Mining Company and Mitsubishi Corporation (incorporated by reference to Exhibit 10.38 to the Form 10-K filed on March 15, 2004(portions of this agreement have been omitted pursuant to a confidential treatment request) (filed herewith).
10.39	Palladium Sales Agreement, made as of March 3, 2004, among Stillwater Mining Company and Engelhard Corporation (incorporated by reference to Exhibit 10.39 to the Form 10-K filed on March 15, 2004(portions of this agreement have been omitted pursuant to a confidential treatment request) (filed herewith).
10.40	Employment Agreement between Gregory A. Wing and Stillwater Mining Company dated as of March 22, 2004 (incorporated by reference to Exhibit 10.40 to the Form 10-K filed on March 15, 2004).
10.41	Articles of Agreement between Stillwater Mining Company (East Boulder) Paper, Allied Industrial, Chemical and Energy Workers International Union, ratified July 2002 (incorporated by reference to Exhibit 10.41 to the Form 10-K filed on March 15, 2004).
23.1	Consent of KPMG LLP (filed herewith).
23.2	Consent of Behre Dolbear & Company, Inc. (incorporated by reference to Exhibit 10.41 to the Form 10-K filed on March 15, 2004).
31.1	Rule 13a-14(a)/15d-14(a) Certification – Chief Executive Officer, dated March 31, 2005
31.2	Rule 13a-14(a)/15d-14(a) Certification – Vice President and Chief Financial Officer, dated March 31, 2005
32.1	Section 1350 Certification, dated March 31, 2005
32.2	Section 1350 Certification, dated March 31, 2005

EX-23.1

                        Independent Accountants' Consent



The Board of Directors and Stockholders
Stillwater Mining Company:

We consent to incorporation by reference in the registration statements (Nos.
333-75404, 333-12455, 333-12419 and 333-58251) on Form S-3 and in the
registration statements (Nos. 333-76314, 333-66364, 33-97358 and 333-70861) on
Form S-8 of Stillwater Mining Company of our report dated February 24, 2004,
with respect to the consolidated balance sheets of Stillwater Mining Company and
subsidiary as of December 31, 2003 and 2002 and the related consolidated
statements of operations and comprehensive income, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2003, which report appears in the December 31, 2003 annual report
on Form 10-KA of Stillwater Mining Company. Our report refers to the adoption of
the provisions of Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations, effective January 1, 2003.



/s/ KPMG LLP

Billings, Montana
March 30, 2005

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Francis R. McAllister, certify that;

1.	I have reviewed this Amendment No. 1 to Annual Report on Form 10-K of Stillwater Mining Company (Stillwater);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Stillwater as of, and for, the periods presented in this report;
4.	Stillwater’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Stillwater and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Stillwater, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of Stillwater’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in the report any change in Stillwater’s internal control over financial reporting that occurred during Stillwater’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, Stillwater’s internal control over financial reporting; and

5.   Stillwater’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Stillwater’s auditors and the audit committee of Stillwater’s Board of Directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which could adversely affect Stillwater’s ability to record, process, summarize and report financial data and have identified for Stillwater’s auditors any material weaknesses in internal controls; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in Stillwater’s internal controls.

Dated: March 31, 2005	/s/ FRANCIS R. McALLISTER
	Francis R. McAllister
	Chairman and Chief Executive Officer

88

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Gregory A. Wing, certify that;

1.	I have reviewed this Amendment No. 1 to Annual Report on Form 10-K of Stillwater Mining Company (Stillwater);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Stillwater as of, and for, the periods presented in this report;
4.	Stillwater’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Stillwater and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Stillwater, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of Stillwater’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in the report any change in Stillwater’s internal control over financial reporting that occurred during Stillwater’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, Stillwater’s internal control over financial reporting; and

5.   Stillwater’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Stillwater’s auditors and the audit committee of Stillwater’s Board of Directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which could adversely affect Stillwater’s ability to record, process, summarize and report financial data and have identified for Stillwater’s auditors any material weaknesses in internal controls; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in Stillwater’s internal controls.

Dated: March 31, 2005	/s/ Gregory A. Wing
	Gregory A. Wing
	Vice President and Chief Financial Officer

89

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
OF STILLWATER MINING COMPANY
PURSUANT TO 18 U.S.C. § 1350

Pursuant to 18 U.S.C. § 1350 and in connection with the accompanying Amendment No. 1 to Annual Report on Form 10-K for the period ended December 31, 2003 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the “Report”), I, Francis R. McAllister, Chief Executive Office of Stillwater Mining Company (the “Company”) hereby certify that, to my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 31, 2005,

/s/ Francis R. McAllister

Francis R. McAllister

Chairman and Chief Executive Officer

The above certification is furnished solely to accompany the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-Q/A or as a separate disclosure statement.

90

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF
PRINCIPAL ACCOUNTING OFFICER
OF STILLWATER MINING COMPANY
PURSUANT TO 18 U.S.C. § 1350

Pursuant to 18 U.S.C. § 1350 and in connection with the accompanying Amendment No. 1 to Annual Report on Form 10-K for the period ended December 31, 2003 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory A. Wing, Vice President and Chief Financial Officer of Stillwater Mining Company (the “Company”) hereby certify that, to my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 31, 2005,

/s/ Gregory A. Wing

Gregory A. Wing

Vice President and Chief Financial Officer

The above certification is furnished solely to accompany the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-Q/A or as a separate disclosure statement.

91