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Montana's Stillwater Buying Toronto Metals Company

Stillwater Mining is buying Marathon PGM Corp. for $118 million to gain control of the Canadian company's precious metals reserve and other properties.

BILLINGS, Mont. (AP) -- Stillwater Mining Co. is buying Marathon PGM Corp. for $118 million to gain control of the Canadian company's Ontario precious metals reserve and other properties, the companies announced Tuesday.

Stillwater said the acquisition of Marathon would allow it to increase its platinum and palladium production by about 40 percent within three years.

That's equal to about 1,250 pounds annually of the precious metals used in jewelry, industrial processes and to make catalytic converters for vehicles.

Columbus-based Stillwater is the only U.S. producer of platinum group metals, from two mines in southern Montana's Beartooth Mountains.

Marathon is headquartered in Toronto. It has been developing the Marathon PGM-Cu project near the town of Marathon, Ontario, for the last several years.

The deal is expected to be completed by the end of November pending regulatory and shareholder approvals.

Developing an open-pit mine and processing facility at the Marathon site will cost about $400 million, Stillwater CEO Frank McAllister said Tuesday in a conference call with investors.

Production would begin within three years. The mine is expected to operate for at least 12 years based on platinum and palladium reserve estimates of more than 3 million ounces, or about 94 tons.

McAllister noted that the deal comes amid strong prices for platinum group metals and the depletion of overseas inventories.

"The timing of the Marathon transaction is ideal for Stillwater, and it positions the company to benefit from the convergence of these market factors," he said.

The Marathon reserve also contains an estimated 500 million pounds of copper that will be mined as a byproduct. Sales of copper and trace amounts of gold and silver at the site would offset almost all production costs, McAllister said.

Through the acquisition, Stillwater also gains control over a second Ontario project, Marathon's Geordie Lake property, and an emerging platinum resource in Manitoba known as the Bird River property.

Stillwater shares fell 70 cents, or 4.6 percent, to $14.58 in Tuesday morning trading.

The company is majority owned by Russian metals-industry giant Norislk Nickel. In July, Stillwater reported a second-quarter profit of $14.6 million on revenue of $134.9 million. That compared with a profit of $4.6 million in the second quarter of 2009 on revenue of $94.8 million.