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UPDATE 2-Stillwater warns of credit concerns, shares tumble

(Adds details on palladium prices, background on Norilsk offer, updates share price to close)

COLUMBUS, Mont., Feb 18 (Reuters) - Stillwater Mining Co. , the only U.S. producer of palladium and platinum, on Tuesday posted a fourth-quarter loss because of higher costs at a key mine and a production shortfall at another, and warned of credit concerns this year.

Stillwater, which last month said U.S. regulators had requested more information regarding its agreement to sell a majority stake to Russia's Norilsk Nickel, reported a net loss of $600,000, or 1 cent a share. That compares with a profit of $4.9 million, or 12 cents a share, a year earlier.

The warning about its credit problems, as well as a forecast of lower production from its Stillwater Mine, sent company shares tumbling nearly 30 percent to a six-year low of $2.92 in late afternoon trading.

That is about 40 percent of what Norilsk offered per share last November. The deal, which has yet to be approved by U.S. regulators, is expected to close by the end of the second quarter, the company said.

Columbus, Montana-based Stillwater, which is also struggling with low palladium prices, cautioned that liquidity remains a "concern" and it is not likely to be in compliance with its covenants under a credit facility at March 31.

The company said it may not be able to access additional borrowings under its revolving credit facility and is working with its lead banks to obtain amendments or waivers.

Prices for palladium, which is used mainly to make catalytic converters in automobiles, have fallen well off their record highs of January 2001 as automobile companies built stockpiles and developed technologies using less palladium and more platinum and other metals in their catalytic converters.

Without access to additional capital and with palladium prices low, Stillwater said it does not believe its cash will be sufficient to maintain its projected liquidity requirements through 2003.

Production at the company's Stillwater Mine near Nye, Montana, fell 17 percent in the fourth quarter. Production per day at the mine will be down 8 percent this year from year-ago levels.

As a result of production cutbacks, Stillwater may be unable to meet minimum output requirements under a new bank credit agreement negotiated last year, it said.

Industry analysts had cautioned when the Norilsk deal was first announced that they expected it to face heightened scrutiny by U.S. antitrust enforcers because of palladium's importance to the auto industry.

The company posted fourth-quarter revenue of $58.6 million, down from $59.3 million a year-ago.

Its stock closed down $1.15 to $3.00 on the New York Stock Exchange.